Guest wrote:tdavis4 wrote:So I'll just pay it on my ISP and not my monthly stipend.
I haven't gotten ISP yet, but if it comes in the same box as the stipend on the 1099-misc you don't pay self-employment tax on it. Maybe another current scholar can comment on this. I think the other person that posted reclassified that pay mainly to utilize a Roth benefit.
Correct. You are only allowed to put "earned income" into an IRA (either Roth or traditional). If your only income all year is found in a box 3 of a 1099-MISC, as it was in my case, you technically are not allowed to put any money into retirement. Box 3 is not considered "earned income" by the IRS.
Really it will depend a lot on your CPA. If you have an ultra-conservative CPA, they're probably going to try and get you to pay self-employment taxes on the entire SMART scholarship. They do this because the IRS places the burden of the characterization of the income on the scholar, not ASEE. And CPAs are very wary of income listed in Box 3 as there's a drastically shorter list of acceptable sources for that income. Box 7, on the other hand (where you definitely must pay self-employment) is a catch-all box used to basically place income not classified in the other boxes of the 1099-MISC.
If your CPA tries to get you to pay over $10k in taxes, find a new CPA. Heck, even TurboTax asks you like, 3 times "Are you
SURE this money shouldn't go in Box 7? Are you
positive you did no work to receive this money?" if you try and enter a 1099-MISC with the income into Box 3. It's CYA (Cover your behind) on the part of Intuit and whatever CPA you're using.