Table of contents:
Turbo Tax Earned Income Credit – I have updated and expanded this post to include a full section on graduate student funding. Read the complete 2016 Graduate Student Tax Guide, go to step-by-step instructions for entering different types of graduate student income in TurboTax, or skip directly to the equivalent of this post, Entering 1099-MISC Fellowship Income in TurboTax.
This post is a step-by-step guide to show you how to enter the 1099-MISC Box 3 income and the amount you received for your graduate education scholarship into the free version (2014 version) of TurboTax. If you’ve ever tried it before, you know it can be a frustrating process because the straightforward approach just doesn’t work!
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1) I do not have any finance degrees or certifications and I am not a tax professional. I’m a PhD student wrestling with 1099-MISC income and interested enough to devote time to figuring out how to report it. Use your own judgment whether to accept my suggestions or not. These screenshots are from when I was preparing our tax return, so ignore the wrong numbers!
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2) I don’t think it’s a good idea to only use tax software to prepare your taxes – especially free versions with limited capabilities. I think it’s a good idea to invest some time in understanding how to fill out the 1040 and related forms without relying on software. If you have a 1099-MISC Box 3 income and take standard deductions, I’ll bet it’s much easier to prepare taxes by hand than to force tax software to do what you need, because for whatever reason our co-op-scholarship situation doesn’t think tax software exists.
3) This guide does not cover everything on how to prepare a full tax return or how to enter all of your scholarship income. It very narrowly discusses entering 1099-MISC income (or income not reported on any tax forms). For a more complete picture, see the tax section of the university website where I helped create other common types of income for graduate students and how to calculate your net fellowship income earned (all fellowship/scholarship income minus all eligible expenses).
Now to the guide! TurboTax is a very popular tax software, and you can get your return to accurately reflect your 1099-MISC income and withholdings, but there are some pitfalls you should avoid. You will see my emphasis on the pictures in purple.
TurboTax forces you to explain why you received the 1099-MISC Box 3 return (when you fill in the return yourself, it can’t stop you from doing that!).
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Basically, once you tell TurboTax that you want to enter a 1099-MISC Box 3 return, it tries to trick you into admitting that you’re self-employed, which as a graduate student you’re not (almost always). If you specify in any way that it’s self-employed/independent contractor, TurboTax will ask you to upgrade from the free version and then try to file for the taxes you actually owe. I tried a few combinations of true and false answers before abandoning the straightforward strategy.
Enough of not working! Here’s what you can do to successfully enter your 1099-MISC Fellowship Income and Withholding.
You will need to enter some information about your school and yourself. (I didn’t have a 1098-T this year, so I said “no” to that question, and I’m not sure how it would work if you had to enter both a 1098-T and a 1099-MISC.) If you have any expenses for your degree, by all means enter them.
Finally, you will come to the relevant screen! Enter your fellowship income (from box 3 of your 1099-MISC) in the appropriate field by saying “Yes” to receiving the fellowship.
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Now TurboTax knows your income, but unfortunately you have to go somewhere else to enter the tax you withheld (the whole reason you got the 1099-MISC in the first place!). Wouldn’t it be more straightforward if we let you enter the 1099-MISC with box 3?
(Even if you don’t have official tax forms, you may have received fellowship income with no income tax. My university and some external fellowships send a “courtesy letter” in this case that says your income is X but they can’t guide you on how to file your taxes. Tuition, etc. (If that income cannot be offset by qualified education expenses, it is taxable. You can follow Step 1 of this guide to enter the income, but skip Step 2. Any tax withholding is required.)
To tell TurboTax about the income tax you withheld from your fellowship as reported on your 1099-MISC, in the Deductions and Credits section of the main menu, go to Assessments and Other Taxes Paid and click Other Income Taxes.
Go to the last section and select Withholding not already entered on a W-2 or 1099 under Other Income Taxes Paid in 2013.
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According to publication 970 pg. 6, you must report your fellowship income on line 7 of your 1040 (or line 1 of your 1040EZ or line 7 of your 1040A). You should note the letters “SCH” for the scholarship and the amount of the scholarship next to it.
1040 instructions from p. 7 Also, enter “SCH” and the amount on the dotted line next to line 7. However, if you are a graduate student, include on line 7 only the amounts you used for expenses other than tuition and study-related expenses. For example, amounts used for room, board, and travel should be reported on line 7.
The biggest risk in trying to report 1099-MISC Box 3 fellowship income is accidentally claiming you’re self-employed. If you follow the guide above, that won’t happen, but if you’re preparing your taxes yourself or outsourcing the work to someone else, make sure you don’t go down that rabbit hole. If you accidentally say you’re self-employed, you’ll pay more taxes than you owe!
Another way people have found to get 1099-MISC box 3 fellowship income in TurboTax is to report it as gambling income. The numbers will change correctly, but instead of the desired “SCH” label, you will have a “G” label.
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I hope you found this guide useful! Over the next couple of weeks I will be preparing similar guides for TaxACT Free Federal Tax Returns for everyone!
If you find this guide helpful and want to use TurboTax to prepare your tax return, I’d really appreciate it if you could use my link below to sign up for it – the blog will earn a small commission! Thanks!
Did this strategy work for you in entering your 1099-MISC Box 3 Fellowship Income and Withholdings into TurboTax? What alternatives have you used? Have you ever bent the truth to force tax software to come to correct conclusions? / Tax Calculators & Tips / Tax Tips Guides and Videos / IRS Tax Returns / Tax Reform Impact: What You Need to Know for 2019
Congress has passed the largest piece of tax reform legislation in more than three decades. The bill took effect on January 1, 2018, meaning it will affect most taxpayers’ taxes for the 2019 tax year.
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If you’re wondering how you’re affected, don’t worry, we’ve got your back. We’re working to make sure our products are up-to-date and you can use them to file your taxes with complete confidence.
Many are wondering what’s in the bill and how it might affect them. Here’s a recap of some of the key tax provisions in the new tax bill and how they might affect you.
The bill retains the seven tax brackets found in current law, but lowers several tax rates. It also changes the income thresholds to which the rates apply.
The bill eases the burden of the individual alternative minimum tax (AMT) by raising the exempt income from $84,500 to $111,700 and $54,300 (adjusted for inflation) to $71,700 for married filing jointly. For single taxpayers, fewer taxpayers will pay it in 2019.
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The new tax law nearly doubles the standard deduction. Single taxpayers will see the tax increase from $6,350 for 2017 taxes to $12,200 for 2019 taxes (for those you file in 2020).
Married couples filing jointly see an increase from $12,700 to $24,400 for 2019. These increases mean fewer people need to itemize. Today, about 30% of taxpayers are itemized. Under the new law, this percentage is expected to decrease.
For families with children, the child tax credit is doubled from $1,000 to $2,000 per child. Additionally, the withdrawal amount increases from $1,100 to $1,400. The bill also adds
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