Taxable fellowship not being included as income for IRA purposes

Forum|Forum|2 years ago
February 4, 2024
2 replies
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Starting a 2023 1040 using TurboTax Desktop for Windows.

PhD student (degree candidate) with a taxable fellowship in 2023 which will not be reported on a W-2.

Student did not receive a 1098-T because university not required to provide one in this situation.

Student has already made $6500 contribution for 2023 to a previously existing Roth IRA.

TurboTax Desktop generates Form 5329 - penalty for excess contributions to a Roth IRA.

TurboTax Desktop is not considering the Schedule 1 Line 8r amount as compensation for IRA purposes (as allowed according to Pub590A).

Advice please?!

TurboTax Home & Biz Windows

Best answer by Hal_Al

I just tried it. It worked correctly. But, there appears to be new (2022) screen in the IRA contributions section, titled "How much of the taxable scholarship was for graduate or post doctoral studies?" Be sure you filled in an amount there (usually all of the taxable scholarship).

Hal_Al

Employee

TurboTax (TT) needs to see that he has taxable scholarship and that he is a grad student. That is usually handled at the 1098-T screen.

First verify that the scholarship is on line 8r of Schedule 1. Then verify that you checked the grad student box. To get to the grad student box, Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary". Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to “Education Information”. Go thru the interview

If you did not enter the taxable scholarship in the educational expenses section, delete your entry.

Then, In TurboTax (TT), re-enter at:

Federal Taxes Tab (Personal for H&B version)

Deductions & Credits

-Scroll down to:

--Education

--Education Expenses and Scholarships

Apples82Author

I have entered the taxable fellowship correctly as you described. Graduate student information entered, etc.

When I look at Forms, I see the correct taxable amount recorded on Schedule 1, line 8r. The 1040 is calculated correctly except that a penalty is then assessed on Form 5329.

Appears to be a bug and won't be able to use TurboTax after all?

Hal_AlAnswer

Employee

Apples82Author

THANK YOU!!

I missed the new IRA contribution question because I had entered my IRA contribution amount weeks ago when I purchased this year's software. I was back in TT last night simply to add a 1099-DIV that had arrived in yesterday's mail. That's when I noticed the addition of Form 5329.