Tax Question 1099-Misc Box 7 for a dependent child summer research stipend:
We are filing married jointly and are claiming our daughter as a dependent who is a full time college student and is supported by us. Summer of 2017, she earned $4500 as a stipend through Amgen Scholar’s program to conduct science research at a University. She worked full time for 10 weeks, 40+ hours a week. She was given room but no meals or moving expense. She has no other income. She got a 1099-Misc with box 7 filled as $4500.
We are filing our tax claiming her as a dependent.
How should she file her 1099-Misc box 7?
Federal: She will be marking in her Federal return that she is a dependent of us and that she is being claimed as a dependent in our return.
Should she file under Schedule C as self-employment income or under miscellaneous income in Line 21 in 1040? Do we then have to worry about additional Kiddie Tax?
Could she deduct her daily meals for 10 weeks, moving expenses in either of these cases? There are lots of similar questions from others but no clear answer.
you/ she doesn’t need to file as she earned less than $6350
Earned Income Only
A dependent whose gross income is only earned income must file a return if the gross income is MORE than the amount listed in the following table.
Marital Status Amount
Single
Under 65 and not blind $6,350
Either 65 or older or blind $7,900
65 or older and blind $9,450
Married*
Under 65 and not blind $6,350
Either 65 or older or blind $7,600
Will the summer research stipend with 1099-Misc with the amount in box 7 be considered earned income? Then she doesn’t have to file if less than $6350.
But if it is considered unearned income, then the limit is $1050.
Will this be considered earned or unearned income?
From the instructions on the back of Form 1099-MISC:
Box 7. Shows nonemployee compensation. If you are in the trade or business of catching fish, box 7 may show cash you received for the sale of fish. If the amount in this box is SE income, report it on Schedule C or F (Form 1040), and complete Schedule SE (Form 1040). You received this form instead of Form W-2 because the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax. If you believe you are an employee and cannot get the payer to correct this form, report the amount from box 7 on Form 1040, line 7 (or Form 1040NR, line 8). You must also complete Form 8919 and attach it to your return. If you are not an employee but the amount in this box is not SE income (for example, it is income from a sporadic activity or a hobby), report it on Form 1040, line 21 (or Form 1040NR, line 21).
I have no clue as to whether or not I did it correctly when I dealt with this a few years ago but I filed a schedule C (and paid her SS/Medicare costs); it was cheaper to do it that way than to pay the kiddie tax in our case.
I did not see any way to get it classified as “earned income” even though philosophically, I thought it was. Best of luck to you if you figure it out!
I don’t understand this statement. In OP’s case, it was reported on a 1099-MISC in box 7, which is for nonemployee compensation; compensation is earned income. The payments were made for conducting science research; payment for services is earned income. In your case, if you reported the income on schedule C and paid the full FICA tax, that’s you treating the payments received as earned income. Income properly reported on a 1099-MISC form would not be subject to kiddie tax treatment.
@donnaleighg, we were having the same problem. Trying to see which one would be lower between Schedule C and misc income with kiddie tax.
Someone posted this in another forum and I am just copy/pasting their advice below: – I am not a tax professional and I am not sure which way is exactly the right one.
Stipend reporting is a clear mess. This is really is a form of taxable scholarship and should be reported on Form 1040 Line 7 as wages. However, the school’s don’t want to recognize them as employees and thus don’t issue a Form W-2.
The problem is that universities report this on a Form 1099-MISC Box 7 non-employee compensation even though the 1099-MISC instructions clearly state that research stipends should be reported as W-2 wages. The first thing is that you most definitely do not want to report it as self-employment income that gets subject to 15.3% SE tax.
The best advice I have seen to avoid a 1099-MISC matching problem is to report it on Schedule C, Part 1 Income, Line 1, but then report the full amount as an expense on Schedule C, Part V Other Expenses “Stipend”, Line 48 and Part II Expenses Line 27a, zeroing it out. Now you still need to report it on Form 1040 Line 7.
The Form 1040 Instructions for Line 7 state; Scholarship and fellowship grants not reported on Form W-2. Also, enter “SCH” and the amount on the dotted line next to line 7. However, if you were a degree candidate, include on line 7 only the amounts you used for expenses other than tuition and course-related expenses. For example, amounts used for room, board, and travel must be reported on line 7.
Now the tricky part. If you are doing this manually it is pretty easy. If you are using tax software it might be a little tedious to enter all the Schedule C information required. Just make sure the only dollar entries are on Lines 1, 27a and 48 as described. Make sure Line 31 and Form 1040 Line 12 are $0. The Form 1040 Line 7 entry might be a little challenging. You probably have to go to the deduction and/or credits section to find out where you can enter taxable scholarships and grants.
If it’s self-employment income over approximately $400 and FICA wasn’t withheld (as was the case here), it needs to be reported so that FICA can be collected.
I did a similar internship program (without room) for $4030 in box 3 (other income) and filed it as self-employment income with schedule C. In my case, filing it as unearned income would result in a higher tax under the kiddie tax rules, and my sister, with similar income, got a request to pay letter when she put hers on line 21.
That’s a really big thread. In order to not waste my time going through the whole thing, did I suggest in any post on that thread that any income properly reported on a 1099-MISC could be reported as unearned income? If I did, please tell me what the post # is so I can go take a look at it.
I don’t think you did. 4kidsdad did in post #227, and calmom agreed in post #234, but both posts were talking about Box 3. For this OP, the info in posts 222 and 234 of the thread are most relevant. Also, the IRS billed my sister with income tax for unearned income a few years ago - in the same scenario when she would not pay SE tax and tried to file it as “other income” (line 21), claiming the full standard deduction (instead of reduced for unearned).