Minor received 1099-MISC for Internship

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vtjon
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Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 12:24 pm

There are several posts around this topic but I'm not sure the best route with the 2018 tax law changes.

I am helping my 17 yr old niece prepare her tax return. In 2018, she received approximately $1,300 in W-2 income with $20 withheld and a 1099-MISC for $1,250 in Box 7. The 1099-MISC was for an internship arranged through her high school and the payer was an academic institution. This internship was at a private company though. In no way was she an independent contractor as she was told when to be there and she had to write a report at the end. I have worked through the entries in TurboTax and placed the 1099-MISC income as "Other Income" which created a tax liability of $90 (less then $20 withheld, $70 net). It seems this is related to the changes in the standard deduction/personal exemptions. If I were to input it as Schedule C income, the SE tax would be a lot more.

Is this the correct way to file it? Should she have to pay $90? It seems we have to file so we don't get caught in the IRS mis-match. As a separate aside, we filed her return in February and only included the W-2 income because the 1099-MISC was never received. We will file an amended return with the corrected info.

miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 12:36 pm

vtjon wrote:
Sun Apr 14, 2019 12:24 pm
There are several posts around this topic but I'm not sure the best route with the 2018 tax law changes.

I am helping my 17 yr old niece prepare her tax return. In 2018, she received approximately $1,300 in W-2 income with $20 withheld and a 1099-MISC for $1,250 in Box 7. The 1099-MISC was for an internship arranged through her high school and the payer was an academic institution. This internship was at a private company though. In no way was she an independent contractor as she was told when to be there and she had to write a report at the end. I have worked through the entries in TurboTax and placed the 1099-MISC income as "Other Income" which created a tax liability of $90 (less then $20 withheld, $70 net). It seems this is related to the changes in the standard deduction/personal exemptions. If I were to input it as Schedule C income, the SE tax would be a lot more.

Is this the correct way to file it? Should she have to pay $90? It seems we have to file so we don't get caught in the IRS mis-match. As a separate aside, we filed her return in February and only included the W-2 income because the 1099-MISC was never received. We will file an amended return with the corrected info.
From you wrote, it sounds like the payer deemed her to be an independent contractor so I believe that goes on Schedule C. She should pay her portion plus the employers portion of social security tax (12.4%) on this earned income.

I'm pretty sure (not 100%) that the "other income" in TurboTax is for unearned income. This isn't that. This money is earned income so it should go under Schedule C.

jebmke
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Re: Minor received 1099-MISC for Internship

Post by jebmke » Sun Apr 14, 2019 1:05 pm

The 1099-Misc income goes on Schedule C. SE tax applies.
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8foot7
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Re: Minor received 1099-MISC for Internship

Post by 8foot7 » Sun Apr 14, 2019 1:10 pm

Do you disagree that she was paid at all, or you disagree that it was a 1099 IC situation vs. an employee that would receive a W-2? If you disagree with the 1099, then you can deduct on Schedule C the amount of the 1099 and then attach an explanation. A 1099-MISC from an internship absolutely belongs under Schedule C.

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vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 1:18 pm

This was not earned income as she did not "intend to earn a profit" and was for primarily education. Once it was classified as this, Turbo Tax included it as Other Income on the 1040. I do not intend to report it as Schedule C. If the IRS wishes to audit, we would definitely entertain that and they can go after the employer. They told her when to be there, gave her all of her equipment and she had to "request" time off. She got a single check for the full amount at the end of the internship once she completed the necessary writings/reflections.

I am mainly trying to figure out if the $90 tax calculation is correct and if there is anyway to offset that.

miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 1:22 pm

vtjon wrote:
Sun Apr 14, 2019 1:18 pm
This was not earned income as she did not "intend to earn a profit" and was for primarily education. Once it was classified as this, Turbo Tax included it as Other Income on the 1040. I do not intend to report it as Schedule C. If the IRS wishes to audit, we would definitely entertain that and they can go after the employer. They told her when to be there, gave her all of her equipment and she had to "request" time off. She got a single check for the full amount at the end of the internship once she completed the necessary writings/reflections.

I am mainly trying to figure out if the $90 tax calculation is correct and if there is anyway to offset that.
Earned income is when you give your time and someone gives you money in return. What your niece did is earned income.

Unearned income is when you get something that didn't require your time, such as winning the lottery. Other examples of unearned income can include scholarship awards or the like. Dividends and capital gains are also examples of unearned income.

Not reporting it as schedule C is not being honest in filing taxes....are you willing to be dishonest in filing your niece's taxes? She received earned income, she owes social security taxes on it. If you are displeased that the academic institution paid her via a 1099-MISC versus a W-2, that would be something to take up with them. But your opinion that the academic institution didn't classify her right doesn't change your obligation to report income properly on your niece's tax return.

(There are benefits to paying her paying social security tax. For one, she will earn credit toward the 10 years worth of work history to qualify for social security retirement. Second, it'll add to her social security income and when she retires this will be returned to her in the form of social security benefits.)
Last edited by miamivice on Sun Apr 14, 2019 1:32 pm, edited 1 time in total.

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vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 1:32 pm

We might have to agree to disagree. I see on the original "internship contract", it was termed a stipend which is probably a more accurate representation of it. I found some Turbo Tax guidance on how to handle this situation with a stipend. I'll have to review it.

miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 1:33 pm

vtjon wrote:
Sun Apr 14, 2019 1:32 pm
We might have to agree to disagree. I see on the original "internship contract", it was termed a stipend which is probably a more accurate representation of it. I found some Turbo Tax guidance on how to handle this situation with a stipend. I'll have to review it.
A stipend is a form of earned income.

EDIT: I Googled and see there is an exception in some situations as to stipend recipients paying FICA tax. No idea if this applies to your niece.

https://www.irs.gov/pub/irs-regs/td_9167.pdf

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neurosphere
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Re: Minor received 1099-MISC for Internship

Post by neurosphere » Sun Apr 14, 2019 1:37 pm

vtjon wrote:
Sun Apr 14, 2019 1:32 pm
We might have to agree to disagree. I see on the original "internship contract", it was termed a stipend which is probably a more accurate representation of it. I found some Turbo Tax guidance on how to handle this situation with a stipend. I'll have to review it.
Stipends which are in addition to any tuition and fees are earned income. The same goes for scholarships and fellowships.
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Re: Minor received 1099-MISC for Internship

Post by mrc » Sun Apr 14, 2019 1:39 pm

Perhaps this note on the turbotax website will help: 1099-MISC for a stipend payment - where do I put it?
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vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 1:41 pm

mrc wrote:
Sun Apr 14, 2019 1:39 pm
Perhaps this note on the turbotax website will help: 1099-MISC for a stipend payment - where do I put it?
Yes, this is what I'm thinking about following. I'm going to work through it TurboTax and see what happens. At least this will prevent any mismatches.

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Tycoon
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Re: Minor received 1099-MISC for Internship

Post by Tycoon » Sun Apr 14, 2019 1:43 pm

Been there and done that. It's earned income. Save yourself, and your niece, the grief and pay the SE tax.
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miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 1:43 pm

vtjon wrote:
Sun Apr 14, 2019 1:41 pm
mrc wrote:
Sun Apr 14, 2019 1:39 pm
Perhaps this note on the turbotax website will help: 1099-MISC for a stipend payment - where do I put it?
Yes, this is what I'm thinking about following. I'm going to work through it TurboTax and see what happens. At least this will prevent any mismatches.
That might work is the stipend she received was for her presence only and she didn't actually do any work to earn the money. Not sure if that is the case with your niece.

I don't agree with his answer if it is box 7 (claim a business expense for the full amount of the stipend.) That doesn't pass the sniff test in my opinion.

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vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 1:59 pm

miamivice wrote:
Sun Apr 14, 2019 1:43 pm
vtjon wrote:
Sun Apr 14, 2019 1:41 pm
mrc wrote:
Sun Apr 14, 2019 1:39 pm
Perhaps this note on the turbotax website will help: 1099-MISC for a stipend payment - where do I put it?
Yes, this is what I'm thinking about following. I'm going to work through it TurboTax and see what happens. At least this will prevent any mismatches.
That might work is the stipend she received was for her presence only and she didn't actually do any work to earn the money. Not sure if that is the case with your niece.

I don't agree with his answer if it is box 7 (claim a business expense for the full amount of the stipend.) That doesn't pass the sniff test in my opinion.
I do agree that claiming it as a business expense is odd but does deal with the reporting requirement. This effectively increases her earned income which also raises the standard deduction. Since we have to file it on paper, we may go with this along with a written explanation. If the IRS comes back that SE should be due, it'll be a good experience for my niece and we counter that maybe she should have been a W2. I also might be trying too hard here but it is the principle of the matter. I think it might be more clear cut if she was actually a college student.

miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 2:02 pm

vtjon wrote:
Sun Apr 14, 2019 1:59 pm
miamivice wrote:
Sun Apr 14, 2019 1:43 pm
vtjon wrote:
Sun Apr 14, 2019 1:41 pm
mrc wrote:
Sun Apr 14, 2019 1:39 pm
Perhaps this note on the turbotax website will help: 1099-MISC for a stipend payment - where do I put it?
Yes, this is what I'm thinking about following. I'm going to work through it TurboTax and see what happens. At least this will prevent any mismatches.
That might work is the stipend she received was for her presence only and she didn't actually do any work to earn the money. Not sure if that is the case with your niece.

I don't agree with his answer if it is box 7 (claim a business expense for the full amount of the stipend.) That doesn't pass the sniff test in my opinion.
I do agree that claiming it as a business expense is odd but does deal with the reporting requirement. This effectively increases her earned income which also raises the standard deduction. Since we have to file it on paper, we may go with this along with a written explanation. If the IRS comes back that SE should be due, it'll be a good experience for my niece and we counter that maybe she should have been a W2. I also might be trying too hard here but it is the principle of the matter. I think it might be more clear cut if she was actually a college student.
If they come back that SE should be due, she'll have to pay penalties and interest in addition to the taxes. Is that the experience you're hoping your niece will have?

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vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 2:07 pm

miamivice wrote:
Sun Apr 14, 2019 2:02 pm
If they come back that SE should be due, she'll have to pay penalties and interest in addition to the taxes. Is that the experience you're hoping your niece will have?
Sure, if that's what it takes because it would then be a case of misclassificaiton by the employer that she was an indepdent contractor. Again, I know we likely disagree. But, I'm not going to unecessarily make a kid pay $150 of her income just avoid having to deal with the IRS.

libralibra
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Re: Minor received 1099-MISC for Internship

Post by libralibra » Sun Apr 14, 2019 3:22 pm

vtjon wrote:
Sun Apr 14, 2019 1:18 pm
This was not earned income as she did not "intend to earn a profit" and was for primarily education. Once it was classified as this, Turbo Tax included it as Other Income on the 1040. I do not intend to report it as Schedule C. If the IRS wishes to audit, we would definitely entertain that and they can go after the employer. They told her when to be there, gave her all of her equipment and she had to "request" time off. She got a single check for the full amount at the end of the internship once she completed the necessary writings/reflections.

I am mainly trying to figure out if the $90 tax calculation is correct and if there is anyway to offset that.
I'm not sure why telling her "when to be there" etc has any effect on being an independent contractor. We've hired contract employees and they work with the regular emps in the same office during the same hours doing the same job.

If you do try to file this as unearned income, then the $90 is right. Because of kiddie tax, her standard deduction would be $1300+350, leaving $1250-350 as taxable at 10%.

(btw, one benefit of claiming this an self-employment income is that she could put much more into a roth for last year)

pdavi21
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Re: Minor received 1099-MISC for Internship

Post by pdavi21 » Sun Apr 14, 2019 3:38 pm

I was exempt from Social Security in College (working for college). I would look into that to see if it applies to her.

Turbotax says this, "Students working for the same school they’re enrolled at may be temporarily exempt from paying Social Security taxes. However, only students who obtain employment because of their enrollment qualify. In other words, if you work full-time in the registrar’s office of a university, and take advantage of the tuition-free enrollment the university offers its employees, you don’t qualify. If you attend school full-time, and the university offers you a part-time job that’s contingent on your continued enrollment, you do qualify. That only applies to the wages you earn at the university, not wages you earn from other employers."

I think you are toast because,
1) this exemption might only be for college
2) even so, she wasn't working for the school she was enrolled at.
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mariezzz
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Re: Minor received 1099-MISC for Internship

Post by mariezzz » Sun Apr 14, 2019 4:06 pm

This may be of use:
https://www.dol.gov/whd/regs/compliance/whdfs71.pdf

And some others:

https://justworks.com/blog/so-you-want- ... nternships
Employers sometimes think of stipends when it comes to interns, and want to provide a weekly stipend rather than regular wages. This arrangement would generally not work. If your company is participating in an unpaid educational internship program, however, you may be able to provide an expense reimbursement stipend under limited circumstances, including the following:

If the unpaid educational internship program allows stipends; and
The program meets all the requirements under applicable federal and state law for the unpaid educational internships; and
The stipend reimburses expenses (like food or travel) rather than pays for work performed
And this: https://www.quicken.com/what-stipend
To receive a stipend, the job must focus on training rather than employment, says the University of Washington. The training must be predominantly for the benefit of the student, not the employer, and the student can't be entitled to a job at the end of training; the student also can't displace regular employees. Finally, the student and the employer both acknowledge that the student isn't entitled to wages for training time.
And this: https://canons.sog.unc.edu/internships- ... dards-act/ - note the discussion for difference in legality of not paying private sector vs public sector interns.
The U.S. Department of Labor and the federal courts have set forth a six-part test for the use of unpaid interns by private employers. DOL’s latest articulation of this test may found herein the Wage and Hour Division’s Fact Sheet #71. Under this test, the use of unpaid interns by private employers is unlawful unless the internship arrangement meets the following requirements:

... (see link for criteria)
If any one of the above criteria are not met, then the intern is an employee must be paid minimum wage. Very few internship arrangements meet this test as most employers desire to gain some benefit from bringing an intern into the organization and many feel they must offer some form of compensation (remember, a “stipend” is just “wages” by another name).
A public employer may not pay “interns” a stipend that amounts to less than the minimum wage. If a public employer wishes to pay an intern a stipend, then the intern becomes a temporary employee, subject to minimum wage and all of the other applicable requirements of the FLSA.
This may be relevant, but that would depend on who issued the 1099 (I don't think it would apply if the corporation issued it.)
https://www.orau.gov/DOE-SCGSR/Forms/Ta ... ipends.pdf

Edit to add:
It may be relevant which box on the 1099 the stipend was reported in (box 3 vs 7); see https://ttlc.intuit.com/questions/44104 ... -1099-misc but I'd do additional research on this if you think it matters.
Last edited by mariezzz on Sun Apr 14, 2019 4:34 pm, edited 1 time in total.

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CAsage
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Re: Minor received 1099-MISC for Internship

Post by CAsage » Sun Apr 14, 2019 4:32 pm

It does not necessarily have to be paid out of "her" money - you could pay it. And then also open a Roth IRA for her, if you make it in time, for the earnings (less than gross due to SE). Lots of people work as contractors and still get told when to show up! Employees may get benefits
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OnTrack2020
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Re: Minor received 1099-MISC for Internship

Post by OnTrack2020 » Sun Apr 14, 2019 5:05 pm

libralibra wrote:
Sun Apr 14, 2019 3:22 pm
vtjon wrote:
Sun Apr 14, 2019 1:18 pm
This was not earned income as she did not "intend to earn a profit" and was for primarily education. Once it was classified as this, Turbo Tax included it as Other Income on the 1040. I do not intend to report it as Schedule C. If the IRS wishes to audit, we would definitely entertain that and they can go after the employer. They told her when to be there, gave her all of her equipment and she had to "request" time off. She got a single check for the full amount at the end of the internship once she completed the necessary writings/reflections.

I am mainly trying to figure out if the $90 tax calculation is correct and if there is anyway to offset that.
I'm not sure why telling her "when to be there" etc has any effect on being an independent contractor. We've hired contract employees and they work with the regular emps in the same office during the same hours doing the same job.

If you do try to file this as unearned income, then the $90 is right. Because of kiddie tax, her standard deduction would be $1300+350, leaving $1250-350 as taxable at 10%.

(btw, one benefit of claiming this an self-employment income is that she could put much more into a roth for last year)
These sound like temporary employees, not an independent contractor.

middistancerunner
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Re: Minor received 1099-MISC for Internship

Post by middistancerunner » Sun Apr 14, 2019 5:27 pm

You might find this thread helpful, especially the recent posts:

viewtopic.php?f=2&t=159791

Academic scholarship/fellowship income is often paid on a 1099-MISC, and that may explain why they did it this way. It sometimes ends up in Box 7.

If her internship meets this definition, she wouldn't owe SE tax.

Also note that if you feel this definition applies, she may **not** put the earnings into a Roth IRA, as it doesn't count as earned income for that purpose.

Topic Author
vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 7:17 pm

mariezzz wrote:
Sun Apr 14, 2019 4:06 pm
And this: https://www.quicken.com/what-stipend
To receive a stipend, the job must focus on training rather than employment, says the University of Washington. The training must be predominantly for the benefit of the student, not the employer, and the student can't be entitled to a job at the end of training; the student also can't displace regular employees. Finally, the student and the employer both acknowledge that the student isn't entitled to wages for training time.
The interesting part about this entire situtation is the organization that issued the 1099 and paid the stipend was a "school" (similar to Governors' School but slightly different). The student did the internship at a private sector business that agreed to provide the training. No money exchanged hands between the business and the student. As I mentioned before, the "internship contract" explictly said that the organization was "reimbursing" the intern with this stipend. I have gone the path that this is a taxable scholarship. I have completed a Schedule C-EZ and expensed it out per the TurboTax post earlier. As such, this shows an earned income and a higher standard deduction. This in effect doesn't change her tax liability as it doesn't trigger SE tax. I know some will disagree with this plan. I'll report back if there is an audit! We aren't planning to do a Roth IRA in this situation though her W2 earning would allow her some room.

miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 7:26 pm

vtjon wrote:
Sun Apr 14, 2019 7:17 pm
mariezzz wrote:
Sun Apr 14, 2019 4:06 pm
And this: https://www.quicken.com/what-stipend
To receive a stipend, the job must focus on training rather than employment, says the University of Washington. The training must be predominantly for the benefit of the student, not the employer, and the student can't be entitled to a job at the end of training; the student also can't displace regular employees. Finally, the student and the employer both acknowledge that the student isn't entitled to wages for training time.
The interesting part about this entire situtation is the organization that issued the 1099 and paid the stipend was a "school" (similar to Governors' School but slightly different). The student did the internship at a private sector business that agreed to provide the training. No money exchanged hands between the business and the student. As I mentioned before, the "internship contract" explictly said that the organization was "reimbursing" the intern with this stipend. I have gone the path that this is a taxable scholarship. I have completed a Schedule C-EZ and expensed it out per the TurboTax post earlier. As such, this shows an earned income and a higher standard deduction. This in effect doesn't change her tax liability as it doesn't trigger SE tax. I know some will disagree with this plan. I'll report back if there is an audit! We aren't planning to do a Roth IRA in this situation though her W2 earning would allow her some room.
What was the nature of the expense that precisely matched her income?

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vtjon
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Re: Minor received 1099-MISC for Internship

Post by vtjon » Sun Apr 14, 2019 7:48 pm

miamivice wrote:
Sun Apr 14, 2019 7:26 pm
vtjon wrote:
Sun Apr 14, 2019 7:17 pm
mariezzz wrote:
Sun Apr 14, 2019 4:06 pm
And this: https://www.quicken.com/what-stipend
To receive a stipend, the job must focus on training rather than employment, says the University of Washington. The training must be predominantly for the benefit of the student, not the employer, and the student can't be entitled to a job at the end of training; the student also can't displace regular employees. Finally, the student and the employer both acknowledge that the student isn't entitled to wages for training time.
The interesting part about this entire situtation is the organization that issued the 1099 and paid the stipend was a "school" (similar to Governors' School but slightly different). The student did the internship at a private sector business that agreed to provide the training. No money exchanged hands between the business and the student. As I mentioned before, the "internship contract" explictly said that the organization was "reimbursing" the intern with this stipend. I have gone the path that this is a taxable scholarship. I have completed a Schedule C-EZ and expensed it out per the TurboTax post earlier. As such, this shows an earned income and a higher standard deduction. This in effect doesn't change her tax liability as it doesn't trigger SE tax. I know some will disagree with this plan. I'll report back if there is an audit! We aren't planning to do a Roth IRA in this situation though her W2 earning would allow her some room.
What was the nature of the expense that precisely matched her income?
I followed the explanation as listed here:
https://ttlc.intuit.com/questions/37849 ... o-i-put-it

I know you disagree with the Schedule C route but there is no other way to deal with the 1099-MISC/Box 7 matching issue.

miamivice
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Re: Minor received 1099-MISC for Internship

Post by miamivice » Sun Apr 14, 2019 8:03 pm

vtjon wrote:
Sun Apr 14, 2019 7:48 pm
miamivice wrote:
Sun Apr 14, 2019 7:26 pm
vtjon wrote:
Sun Apr 14, 2019 7:17 pm
mariezzz wrote:
Sun Apr 14, 2019 4:06 pm
And this: https://www.quicken.com/what-stipend
To receive a stipend, the job must focus on training rather than employment, says the University of Washington. The training must be predominantly for the benefit of the student, not the employer, and the student can't be entitled to a job at the end of training; the student also can't displace regular employees. Finally, the student and the employer both acknowledge that the student isn't entitled to wages for training time.
The interesting part about this entire situtation is the organization that issued the 1099 and paid the stipend was a "school" (similar to Governors' School but slightly different). The student did the internship at a private sector business that agreed to provide the training. No money exchanged hands between the business and the student. As I mentioned before, the "internship contract" explictly said that the organization was "reimbursing" the intern with this stipend. I have gone the path that this is a taxable scholarship. I have completed a Schedule C-EZ and expensed it out per the TurboTax post earlier. As such, this shows an earned income and a higher standard deduction. This in effect doesn't change her tax liability as it doesn't trigger SE tax. I know some will disagree with this plan. I'll report back if there is an audit! We aren't planning to do a Roth IRA in this situation though her W2 earning would allow her some room.
What was the nature of the expense that precisely matched her income?
I followed the explanation as listed here:
https://ttlc.intuit.com/questions/37849 ... o-i-put-it

I know you disagree with the Schedule C route but there is no other way to deal with the 1099-MISC/Box 7 matching issue.
I just don't see what the "business expense" is that your niece incurred in the course of her internship. It smells a lot like falsely claiming a business expense that didn't really exist and hoping the IRS doesn't notice.

trueblueky
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Re: Minor received 1099-MISC for Internship

Post by trueblueky » Sun Apr 14, 2019 8:34 pm

Americorps volunteers receive a living allowance during their year of service. Taxable and subject to FICA. At the end of their service, they receive either an education award or a stipend. The stipend is taxable and subject to FICA. The word "stipend" does not in itself make income unearned, as the federal government's use of the word shows.

If there is a dispute over whether this should have been W2, the agency to contact is Department of Labor.

The IRS has the 1099 Misc, line 7. Its computer checks for mismatches.

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Re: Minor received 1099-MISC for Internship

Post by mariezzz » Mon Apr 15, 2019 2:28 am

mariezzz wrote:
Sun Apr 14, 2019 4:06 pm

This may be relevant, but that would depend on who issued the 1099 (I don't think it would apply if the corporation issued it.)
https://www.orau.gov/DOE-SCGSR/Forms/Ta ... ipends.pdf
From link above ... it may address some concerns which were raised regarding how the OP intends to handle this (and see the paragraph above the one I've quoted).
Stipend payments are not subject to self-employment taxes. To determine self-employment taxability of the ORISE programs, ORAU refers to a 1994 Tax Court case, which held that certain types of fellowships are taxable for income tax purposes but are not subject to self employment tax. ORAU’s position is that although I.R.C. §117(a) states that fellowships for nondegree seeking candidates are subject to income tax, the fellowship is still considered as a grant under I.R.C. §117(a), Spiegelman v. Comm’r, 102 T.C. 394 (1994). Because a grant is not derived in the context of a trade or business, it is excludable from self-employment income and, therefore, not subject to self-employment tax. Id. The amount should be reported as “other income” on the individual income tax return. Ruggiero v. Comm’r., 74 TCM 662 (1997).

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