<p>Tuition and fees scholarships covered all but $700 in tuition and fees. Books and qualified materials totaled another $700. This makes the total that can be used for the AOC $1,400.</p>
<p>Summer internship income is $2000. The department secretary tells me that this is classified as a scholarship. However, it did not appear on Happykid's 1098. </p>
<p>If it can be classified as self-employment, Happykid owes about $200 in SE taxes, and another $75 in state taxes, and we can claim all of the AOC which reduces our taxes by the full $1,400. Yes, her work was supervised, but the level of independence was similar to many "contractor" jobs out there.</p>
<p>If the income really is scholarship money, how much of her expenses qualify? Does she take this out of her taxes somewhere, or do we? Do we still get to claim the AOC if we are willing to have her pay whatever taxes are due on her total income?</p>
<p>What questions do I need to ask when I speak with the Financial Aid office and/or the college payroll office about this?</p>
<p>Happymom…what kind of tax form did your daughter receive from her internship employer? Was it a W-2 (sounds like it was not), a 1099, or nothing at all.</p>
<p>If she received a W-2, it was probably considered wages.</p>
<p>If she received a 1099, she was considered a contractor.</p>
<p>If she got nothing from the internship employer (she should have gotten SOMETHING)…then I would call and inquire.</p>
<p>Someone else will have to really answer this…but I believe if this is considered a scholarship, any amount above the qualified expenses is considered the same as income for tax purposes. BUT your daughter does get the standard deduction…was this $2000 her only earnings or does she have other income as well.</p>
<p>If it’s reported on a 1099 it would go on line 7 of the 1040 as scholarship income. It would be taxable only to the extent that it, along with any other earned income she’d have, exceeds the standard deduction amount. Not subject to self employment tax.</p>
<p>No documentation whatsoever yet. She’s emailed the person who she was told is in charge of this, and I got the phone number and office number from the department secretary yesterday. This morning I dropped Happykid at school with a list of questions and instructions to tell Ms. X that I’m happy to speak with her about this if it is over the kid’s head as a first-time tax filer. I have my fingers crossed for a quick response.</p>
<p>Happykid had other income in 2011, but the grand total is still less than her standard deduction. Only self-employment will be owed to the feds (and yes, I did almost cry when I realized that her big-paying Nutcracker gig in December was paid as a contractor), and a bit of general income tax to the state of MD.</p>
<p>Thanks for the clarifications. I will just be so glad to get this done, so I can update the FAFSA for the two transfer applications out there. Next year will be it (I hope) for FAFSA, but I fear I am in for the long haul for the tax business.</p>
<p>Good news! Per the college finance office, this income classifies as “other” and falls in the same category as a fellowship or research grant. Which means that it can be spent as Happykid sees fit, and now I will be able to find out which line to report it on. Still no news about a 1099 or other documentation, but since I have the figures I can complete the tax forms tomorrow. Whew!</p>