SmartParent wrote:New to this SMART Scholarship and am investigating the tax implications to the student.
Is the stipend treated as taxable portion of a scholarship or as income? If scholarship, is it then subject to the "kiddie tax" where the student is taxed at the parents higher tax rate?
If scholarship, I understand that it cannot be used by the student as support to avoid being claimed as a dependent and therefore subject to the "kiddie tax."
Does anyone have experience with this topic?
Guest123 wrote:Typically, scholars have to file separately since parents won't usually be providing more than half of the support (the stipend and scholarship is usually greater than parental support)... But yes, the stipend is considered income for the scholar.
Scholarships.
A scholarship received by a
child who is a student isn't taken into account in
determining whether the child provided more
than half of his or her own support.
Guest wrote:It's 1099MISC income. That means it's not a scholarship and it's not earned income. No self employment tax. No qualifying for earned income credit. Taxed at whatever rate the filer is taxed at. Just like winning a lotto.
For Form 8615, “unearned income” includes all taxable
income other than earned income as defined later.
Unearned income includes taxable interest, ordinary
dividends, capital gains (including capital gain
distributions), rents, royalties, etc. It also includes taxable
social security benefits, pension and annuity income,
taxable scholarship and fellowship grants not reported on
Form W-2, unemployment compensation, alimony, and
income (other than earned income) received as the
beneficiary of a trust.
You are advised of the following:
ASEE must report all stipend, internship support, health insurance and book allowance payments
made to Recruitment Participants under the SMART Scholarship Program. At year end, ASEE
will provide participants and the Internal Revenue Service (IRS) with the informational Form
1099-MISC recording the amount paid to the participant during the tax year. ASEE does not
withhold taxes from participant payments. Under current laws and regulations, participants are
responsible for submitting quarterly estimates of income taxes to the IRS and paying the amounts
due. Participants may have a similar liability with respect to state and/or local taxes depending
upon the state and/or locality where the participant resides.
You are considered an independent contractor, and not self-employed, and are not employed by
either the United States Government or ASEE. If you have further tax questions, please contact
the IRS, as ASEE is prohibited from giving tax advice.
kbl2017 wrote:SMART income - "You are considered an independent contractor, and not self-employed, and are not employed by
either the United States Government or ASEE."
Here's info on the kiddie tax stuff too from the irs https://www.irs.gov/taxtopics/tc553.htm ... tc553.html
Your child should probably not be field as a dependent and wouldn't be subject to "kiddie tax". As they will be receiving their own money for things like housing and food and will be able to support themselves. Our living stipend portion (28-38k a year depending on the degree) is not a scholarship. That is what will be taxed. The scholarship portion itself can be ignored in discussion of income it isn't reported and is paid directly to the school.
SmartParent wrote:kbl2017 wrote:SMART income - "You are considered an independent contractor, and not self-employed, and are not employed by
either the United States Government or ASEE."
Here's info on the kiddie tax stuff too from the irs https://www.irs.gov/taxtopics/tc553.htm ... tc553.html
Your child should probably not be field as a dependent and wouldn't be subject to "kiddie tax". As they will be receiving their own money for things like housing and food and will be able to support themselves. Our living stipend portion (28-38k a year depending on the degree) is not a scholarship. That is what will be taxed. The scholarship portion itself can be ignored in discussion of income it isn't reported and is paid directly to the school.
My current thinking is that for this year she will be a dependent since she attended in the spring and received the scholarship and stipend starting this fall so she did not supply over half her support (given the rule that scholarships do not count towards support.) The stipend is taxable and will probably fall under the "kiddie tax" this year since she will be a dependent and the stipend appears to be unearned income.
However for the following year for which she will be supported by the scholarship and stipend for the whole year, she can probably be considered not a dependent and therefore not subject to the "kiddie tax." The nuance is whether the stipend is considered as part of a scholarship for the purposes of determining support. It seems odd, but it appears that IRS rules are such that if it is part of a scholarship related living stipend, she can't consider it her contribution to her support. So one might need to be careful to ensure that she supplies over 50% of her support. If she can't have credit for the stipend funds, that may be difficult but not impossible. However, that interpretation makes no sense to me but I can't find anything to support a more logical interpretation.
TaxesTaxes wrote:I think you're interpreting it correctly, but I would most definitely consult a tax professional before making any final decisions. This is my first year with the scholarship, and plan to file as an independent because my parent did not provide 50% of my income this year. I would also make sure you really are providing 50% of her total income for the full year before claiming her as a dependent -.. It might even be cheaper to just let her file as an independent. But again, I'd consult a tax professional about this. They're opinion on the matter will outweigh anything we post on this forum (unless a tax profession does post on the forum lol).
SmartParent wrote:kbl2017 wrote:SMART income - "You are considered an independent contractor, and not self-employed, and are not employed by
either the United States Government or ASEE."
Here's info on the kiddie tax stuff too from the irs https://www.irs.gov/taxtopics/tc553.htm ... tc553.html
Your child should probably not be field as a dependent and wouldn't be subject to "kiddie tax". As they will be receiving their own money for things like housing and food and will be able to support themselves. Our living stipend portion (28-38k a year depending on the degree) is not a scholarship. That is what will be taxed. The scholarship portion itself can be ignored in discussion of income it isn't reported and is paid directly to the school.
My current thinking is that for this year she will be a dependent since she attended in the spring and received the scholarship and stipend starting this fall so she did not supply over half her support (given the rule that scholarships do not count towards support.) The stipend is taxable and will probably fall under the "kiddie tax" this year since she will be a dependent and the stipend appears to be unearned income.
However for the following year for which she will be supported by the scholarship and stipend for the whole year, she can probably be considered not a dependent and therefore not subject to the "kiddie tax." The nuance is whether the stipend is considered as part of a scholarship for the purposes of determining support. It seems odd, but it appears that IRS rules are such that if it is part of a scholarship related living stipend, she can't consider it her contribution to her support. So one might need to be careful to ensure that she supplies over 50% of her support. If she can't have credit for the stipend funds, that may be difficult but not impossible. However, that interpretation makes no sense to me but I can't find anything to support a more logical interpretation.
kbl2017 wrote:Additionally, I think that our stipend is considered taxable fellowship income. It won't require us to pay medicare or social security because it's not in relation to wadges and is not in return for working. Which they make very clear in all our paperwork.
scheffc wrote:kbl2017 wrote:Additionally, I think that our stipend is considered taxable fellowship income. It won't require us to pay medicare or social security because it's not in relation to wadges and is not in return for working. Which they make very clear in all our paperwork.
Is there anywhere specific you read this that you can point me to? Trying to figure out this tax mess.
Thanks!
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