How to Report Educational Reimbursements via a 1099-MISC

Question

Hello!

Last year, I completed a degree-required educational internship in which I received stipends to reimburse my educational expenses.

I received a 1099-MISC that reports that total reimbursement amount in Box 3, "other income," and again in Box 18, "State income."

Since that amount was an educational reimbursement, how much of is it taxable, and how should I file it?

Taylor · Answer

Hello DJ_Myles,

Generally, scholarships and grants aren't taxable if used for qualifying tuition, which would be entered in FreeTaxUSA under the Deductions/Credits College Tuition section.

To report the stipend income on Schedule 1 line 8r, it will be entered under "Taxable Scholarships or Grants" on the Other Sources of Income screen. Just below that entry it will ask you if the scholarship/fellowship grants entered are from stipend payments.

DJ_Myles · Answer

I researched some solutions online from other tax experts helping out people with similar issues, and I think I figured out a solution. I'd appreciate it if you could check my work, though, as I want to make sure I'm doing this right.

The educational internship stipends qualify as taxable scholarship income - however, because they were reported on a 1099-MISC, there were a few steps I needed to take to report that income correctly.

Since the stipends are educational income, I inputted the full stipend amount indicated in Box 3 of my 1099-MISC in the Taxable Scholarships or Grants section. This amount is reported on Line 8r of my 1040 form.

However, since 1099-MISC income is usually reported on Line 8z of the 1040 and not Line 8r, the IRS computers might not match the amount listed on Line 8r with my 1099-MISC.

To surmount this, I inputted the information from my 1099-MISC step-by-step in the corresponding 1099-MISC section of the FreeTaxUSA software. This amount appears on Line 8z of my Form 1040 and is automatically reported as "1099MISC."

Then, in the Other Reportable Income section of FreeTaxUSA, I entered the full stipend amount indicated in Box 3 of my 1099-MISC as a negative number, and I gave it the description "1099-MISC REPORTED AS SCHOLARSHIP INCOME." This negative adjustment also appears on Line 8z.

The end result is that my educational stipends are correctly reported as taxable educational income on Line 8r of my 1040. The two amounts on Line 8z cancel out, so I do not have to pay additional taxes, and the description of "1099-MISC REPORTED AS SCHOLARSHIP INCOME" indicates to the IRS that my 1099-MISC form corresponds to the amount on Line 8r.

Does this process look correct to you?