<p>Hi Folks - I am hoping that molliebatmit might be able to chime in here ! :D </p>
<p>My son completed a 2013 NSF REU Summer internship; it is required by the Honors Program at USC (Columbia, SC).
His stipend was reported on a 1099-MISC in box 7, which designates him as an Independent Contractor where he has to pay self-employment taxes in addition to income tax.</p>
<p>I tried to have the 1099 changed to a W-2, requiring him to pay only income taxes but that backfired.</p>
<p>So here are the questions:</p>
<p>1) Do I file an SS-8 to contest his status as an independent contractor and just treat this income as 'unearned or regular income' and pay regular taxes ?</p>
<p>2) Do I ignore that this is in box 7 and treat it as if it was reported in box 3, because this stipend is not supposed to be taxable as it was required by his honors college?</p>
<p>3) Do I leave it in box 7 and treat him as an independent contractor, paying ALL of the required taxes ? I guess I could write off his meals and expenses ?</p>
<p>Note: He must file taxes because he worked in a lab while on campus, and made enough money to meet the minimum filing requirements. (with his scholarships, REU and the lab work - The work in the lab was reported on a W-2.)</p>
<p>Another Note: The REU summer internship was at UNC and they are just throwing up their hands, claiming the 1099-MISC box 7 is correct.</p>
<p>I am surprised they did not give him a 1099-G which is what NIH hands out. The taxable grant does not require the self employment taxes, only to declare it as other income.</p>
<p>I feel your pain, same situation with my D2, she was at UIdaho and they were equally as unhelpful. They said it was reported in box 7 because she was not a university employee, and just told me to talk to a tax expert. Here’s my recent thread:</p>
<p>The problem I had was that all the free e-filing programs (TurboTax & Tax Act) would not accept an amount in box 7 of the 1099-M without making it self-employment. While I agree that the amount is taxable (hers included the stipend, food and travel allowance), I did some searching on the web and talked to my accountant and decided that she was not an independent contractor as defined by the IRS and therefore should not be paying self-employment tax:</p>
<p>The REU website describes the students as “interns” and states that they conduct “mentor-guided research” “under the close guidance of faculty mentors”, which IMO does not fit into the IRS definition of an independent contractor who has control over how the work is done.</p>
<p>My solution was to use the Federal filable forms, I put the 1099-M amount on line 21, Other Income. In the description, I put, “Internship income; not subject to self-employment tax”.</p>
<p>I really blame NFS and the colleges. NSF seems to be giving little to no instruction to the colleges in how to deal with this as there seems to be no uniformity in how stipends are reported. And the colleges really should be able to give the kids instruction rather than just leaving them to figure it out.</p>
<p>She just got accepted to another REU for this coming summer…</p>
<p>p.s. Don’t know if it will help or not in case of audit, I made a file so that I have all of the relevant information that I gave above for future reference.</p>
<p>Thanks for the long response concerning the 1099-MISC box 7 SNAFU. I was going to file my son’s taxes in the exact manner that you described, but I expect that the IRS will question this when they receive a copy of his 1099-MISC from UNC. I guess I’ll deal with it if/when that happens.</p>
<p>Good luck to the both of us! Unfortunately it’ll be a year or two before the IRS gets around to this and takes action if they deem necessary. And of course, trying to file responsibly is not enough if they disagree.</p>
<p>NIH issues 1099-G and lists it as taxable grant which seems to go on line 21. Not sure why different agencies provide different types of 1099s for similarly funded work.</p>
<p>such helpful information here. my d also received a 1099 Misc for an internship with a non profit program she worked at last summer. will also try the method of filing you have both determined makes sense given the options. </p>
<p>reading the back of the 1099 Misc form states;</p>
<p>"if you are not an employee but the amount in this box is not self employment income,(for example it is income from a sporadic activity, or a hobby) report it on form 1040, line 21 or form 1040 NR line 21.</p>
<p>this seems to be recommending this method, doesn’t it??</p>
<p>I’m a CPA. When the situation is similar to above, I do enter the amount on line 21 - other income. It hasn’t been questioned in 25 years and I hope that continues :)</p>
<p>I usually use TTFreedom to file taxes for my kids, the problem with these programs is that they ask you which box the amount was reported in and then directly takes you to fill out self-employment information. These dumbed down programs don’t let you deal with exceptions to the norm. I ended up using the Fed fillable form, which can be e-filed:</p>
<p>thanks so much entomom, maybe I will have my d use the Fed fillable. </p>
<p>Sryrstress, that’s great to hear, just wondering, so do you think we can enter the income on line 21, (I was able to with Taxact) even though it says “enter amount that is in box 3 or 8” doesn’t list box 7 as an option. I played with it and entered it, then viewed the 1040 and it did place the income on line 21.</p>
<p>I never expected this much info in such a short time. I think I’ll pass on filling out the SS-8 as I heard it creates problems for the issuer of the 1099-MISC, even though they were no help to us. </p>
<p>what is the SS-8?<br>
we have the same situation here. I guess I’ll also suggest putting the income on line 21, but as myturnnow asked, TT and Taxact only ask if it was the amount in box three or eight? will completing it that way mess up the return?</p>
<ol>
<li><p>It could take time, I want to file and be able to move on to FAFSA & Profile now.</p></li>
<li><p>It determines if the person was an employee or an independent contractor. I’ve already been told by the REU college that my D2 wasn’t an employee and that that’s why they put the amount into box 7. What I’m saying in filing is that she is not an independent contractor subject to self-employment tax either.</p></li>
</ol>
<p>I was told that the IRS will automatically see box 7 as ‘Independent Contractor’ and throw a flag if we don’t pay self employment taxes. The SS-8 is supposed to contest that but it looks like a long process. I think I will go the other way and just put it on 1040 line 21, as Stipend. I’ve already asked them to reissue the 1099-MISC with the number in Box 3, ubt they refused.</p>
<p>Yes, I recognize that reporting in box 7 generally indicates an independent contractor, otherwise this conversation wouldn’t be necessary. However, included in the IRS description of the 1099 Misc form includes for box 7 (my italics):</p>
<p>The way I read it, there are exceptions to the box 7 = independent contractor rule. And it also sounds like the REUs submitted these stipends incorrectly in box 7, they should have put them in box 3 since these students are conducting the research with strong supervision which doesn’t fit under the definition of independent contractor.</p>
<p>As I reported on the DRT thread, the data that was transferred via the DRT was not the same information that I filed for my D1. That’s because, as I found out today when I checked on her refund, the IRS changed her return after accepting it, from a small refund to a several hundred dollar payment. Now they are sending a letter later in the month, and I have to wait until then to see if I can actually talk to them and if they will reconsider. My assumption is that the change is because of the stipend money, as her only other sources of income were a few hundred in WS and a few dollars of interest, and no other complicating factors.</p>
<p>Hopefully I can get this all cleared up in time to file Fed and State taxes as well as redoing FA by April 15.</p>
<p>Line 21. Which is where it belongs since it was reported on the 1099M. The problem arises in not accompanying this with self-employment information/taxes that they are looking for. At least that’s what I’m assuming. I tried calling the IRS number, but they don’t give any more information than they do on the Where’s my refund webpage. Hopefully the letter will provide a number that I can call and talk to a real person.</p>
<p>Thanks - I think I am just going to go ahead with the 1040 Line 21, and not tell Turbotax anything about the 1099M. I will just report it as Misc income.</p>
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