<p>S graduated college in May '13, did a summer internship in another state, where he received a 1099 Misc for the $1400. stipend, earnings on line 7, non employee income. Had expenses like airfare and meals, travel. Saw other threads on here where others have suggested and tried filing this as other income on 1040 line 21. Just worried it will trigger an IRS audit. As IRS advised, we asked the internship organization if they could change the 1099 Misc to show income on line 3 but they said they could not. Their accountant advised filing and using Schedule C and taking business deductions of travel and other expenses. Since this is not our accountant,(don't have one) wondering what deductions are acceptable.</p>
<p>After summer internship returned to home state and started a job in September, earning $4970 by end of 2013.</p>
<p>So we are proceeding to file, and putting the 1099 Misc on Schedule C. Need clarity about permitted expenses/deductions when going this route. Any help is so appreciated!</p>
<p>Did you take him as a dependent for 2013? If not, he’ll get his $6100 standard deduction, plus the $3900 personal exemption, $10,000 total, so the total amount is well under his limit and he won’t owe any taxes.</p>
<p>I did take him as a dependent. was told by an accountant we just checked with to file a 1040, put the 1099 Misc line 7 non employee income on schedule C and include his expenses as deductions, this will place the amount below $400 and there would be no SE tax.</p>
<p>Glad that since the amount was small, that worked out for you. Many REUs are for 4-5k plus possible travel and food allowances, so that solution unfortunately doesn’t work.</p>
<p>The problem I have with using Schedule C for REU income is that it doesn’t fit the description given by the IRS:</p>
<p>thanks entomom, yes, the total stipend was $1400, with housing provided, but with transportation and meals the expenses bring the total “profit” below $400. </p>
<p>we were told that even though it doesn’t fit the description that the IRS is familiar with using schedule C for internships, and still filing as if one was an independent contractor. it is weird filling out the return with the questions about a business. the accountant that the organization used told us he could have completed the 1099s using line 3 or 7 but it was to the organization’s advantage to go with line 7. </p>
<p>as you know this transfers the headache to the student/intern.</p>
<p>Meals are not a business expense. Everybody needs to eat.</p>
<p>When you put the stipend on line 7 where it belongs, together with the wages, you will only have income of $6,370. Subtract the standard deduction of $6,100 and you have taxable income of $270. At his tax rate that leaves a tax of $27 which would be better than putting the entire $1400 on schedule C and taxing it for self employment. Once you take into account that meals are not a business expense.</p>
<p>Yes, meals can be a business expense, if the taxpayer is living away from the “tax home” during the internship, and meals are not provided. They are only partially deductible, and require receipts unless you use per diem amounts. IRS Publication 463 explains travel and meal expenses</p>
<p>thanks, CTScoutmom, that’s what the accountant we just consulted with said, he can deduct meals and transportation. We are using the per diem as he did not maintain receipts. </p>
<p>3bm103, I am taking my s as a dependent on my return. so don’t think that would work. thanks for your input.</p>
If you take him as a dependent, he still gets the standard deduction of $6,100. What he doesn’t get is his own personal exemption of $3,900 because you get that. It most definitely will work.</p>