Self-employment tax on a summer REU?

[entomom]

<p>That’s good your DSs was reported on an W2, that makes it pretty straightforward income. My D2s college said up front that they weren’t going to withhold anything, which is OK since she was unlikely to earn enough to have to file. It’s the 1099-M and, particularly designating as ‘nonemployee compensation’, that is the problematic part. I did find this in my searching:</p>

<p><a href=“http://www.pugetsound.edu/about/offices-services/office-of-finance/faculty-student-grants/summer-research-awards/tax-implications/”>http://www.pugetsound.edu/about/offices-services/office-of-finance/faculty-student-grants/summer-research-awards/tax-implications/&lt;/a&gt;&lt;/p&gt;

<p>

Taxable fellowships are generally not considered income from self-employment and are not subject to self-employment tax. Tax court<em>case No.</em>15829-92 supports this, in the event your tax accountant or the IRS should question you about this.

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<p>Even though she doesn’t have to file taxes since her total income is below the limit for dependents (and assuming that she doesn’t owe self-employment tax),on the advice of my accountant, I’m going to have her file and put the REU money on line 21 and document as 'internship income, not subject to self-employment tax". That way at least when the IRS sees that she got a 1099 from 2013, there will be a tax return that shows that amount.</p>

<p>I guess what bothers me the most is that for as large a program as this is, neither NSF or any of the colleges are willing to give concrete information about how students should file and why.</p>