The Unofficial SMART Scholarship Forum

https://www.irs.gov/taxtopics/tc451
You do not report Roth IRA contributions to the IRS.

You would report IRA contributions to the IRS, but for SMART scholars, the Roth IRA is the better investment (IRA is only better if you expect to be in a lower tax bracket when you retire than the tax bracket you are now. That is unlikely to be true.)

Some tax software will ask you anyway, but they aren't going to tell the IRS what you say.

[quote]Interesting! My understanding previously was that fellowship income is considered "unearned income" and didn't qualify as "taxable compensation," (obviously taxable, but less obviously compensation) but it looks like that assumption was wrong.[/quote]

Until a year ago, it was. This is a very new development, and I think that's why some tax software don't account for it. It's a very niche situation to begin with, so other than having you check a "this is a graduate stipend/fellowship" box, I'm not sure how they would account for it. I wound up using TaxSlayer and it just didn't ask haha

Interesting! My understanding previously was that fellowship income is considered "unearned income" and didn't qualify as "taxable compensation," (obviously taxable, but less obviously compensation) but it looks like that assumption was wrong.

https://www.irs.gov/taxtopics/tc451
"In certain cases, other amounts may be treated as compensation for purposes of contributing to an IRA, including certain alimony and separate maintenance payments received, certain amounts received to aid in the pursuit of graduate and postdoctoral studies, and certain difficulty of care payments received."

https://www.investopedia.com/roth-ira-contributions-with-no-job-4770755
"Some scholarships and fellowships are taxable—especially those that pay for room and board, or that include a stipend for living expenses. IRS Publication 970 covers this in detail. But what’s important is that you’re paying income taxes on these funds.
 When you do so, you can usually use that income to justify a Roth IRA contribution. "

Thanks for the reply. I'll try to bug support about it and see if there's a workaround. If not, I guess I'll use something else.

Well our stipends are reported to the IRS on a 1099 and are absolutely declared taxable, so I would advise all recipients to classify them the same way the IRS does haha.

I'm in Phase III so I don't have this problem, but I think you're correct. The downside is that it applies to taxable fellowship income. Therefore you would have to admit that your stipend is taxable...I don't know the current state of how recipients are classifying their stipends.

Has anybody had any issues reporting IRA contributions as they file their taxes? Credit Karma Tax is flagging my contribution as excess. I presume this is because we file a 1099-MISC, but I think stipends are supposed to be allowable income for IRA contributions as of last year (H.R. 1865 and the Graduate Student Savings Act). Has anybody successfully filed a return with IRA contributions without getting an excess contribution penalty? What software/service did you use?