<p>We claim our daughter as a dependent for our taxes. She files 1040-EZ because her only income was scholarships and grants, plus a small amount for being a practice patient at the local med school. She reported the amount of the scholarship/grant that exceeded tuition and legit expenses, plus the 1099 for the med school.</p>
<p>My tax person just looked at her tax form because the IRS was questioning why she didn’t pay SE taxes on the med school money. And then she questioned the entire return.</p>
<p>Did I screw up by having her report the scholarship/grant while we have her as a dependent? There was no Hope or Lifetime credit because of the excess s/g. I thought that I was doing it correctly, but tax person says not.</p>
<p>Sounds like you did it right. Scholarships/grants in excess of tuition, mandatory fees and required books and supplies are taxable to the student regardless of dependency. She should have checked the box that she was claimed as a dependent on someone elses return. What is the tax person questioning about that?</p>
<p>As for the 1099, I’m not an expert but receiving a 1099 instead of a W-2 for work means you are essentially self employed. No FICA or medicare was withheld.</p>
<p>If the income reported on the 1099 was $400 or more, she would owe self-employment taxes. In that case she would need to file Schedules C (or C-EZ) and SE, and would not be eligible to file a 1040-EZ.</p>
<p>All of the information is at [Internal</a> Revenue Service](<a href=“http://www.irs.gov%5DInternal”>http://www.irs.gov) She can file a 1040x (and accompanying schedules) with all of the corrections, pay the bill(s), and everything will be OK. Once her federal taxes are straightened out, go back and take a look at her state taxes. They might need to be adjusted as well.</p>
<p>The money she earned from the med school is not necessarily self employemnt income. If they claim it is “non employee compensation” then maybe, but even then, she is not engaged in a trade or business so it wouldn’t be. If it was reported as "other income’ then she just needs to explain that to the IRS.</p>
<p>The grants and scholarships should be reported on line 1 of the 1040 EZ with the notation of “sch” to the left of it. And yes, it is reported on her return even though she is your dependent.</p>
<p>We got her out of the SE taxes because, though it was a bit over $400, we wrote it off as independent contractor, less than $650 and only for one year (according to the IRS if she was engaged in the “business” for more than one year it would be considered income and thus subject to SE). My screw-up was listing the 1099 on line one of schedule EZ instead of listing it as other income. That pulled up the audit.</p>
<p>I was glad to be able to point out to the tax person that I reported the scholarship information correctly!</p>
<p>looks like my son is in a similar situation. He had a summer job through the medical school to research and write a healthcare proposal for prisoners. He received grant $ and a 1099-MISC with the $ listed in box 7 non-employee compensation. The check was from the Dept of Health, a 501-3 (?) non profit.</p>
<p>He still qualifies as our dependent and is used to filing a 1040EZ when his income is high enough. He didn’t expect to file this year. This was a one time summer research project.</p>
<p>We were told he needs to fill out a sch C or Sch C-EZ and SE and won’t be eligible to file 1040EZ. </p>
<p>Did the IRS tell you to put it as other income on the 1040EZ since your daughter isn’t engaged in a trade or business?</p>
<p>The IRS never contacted us again, so they must have decided that she did not owe self-employment taxes. </p>
<p>She was different from your son, as she did not have a job with the med school. It was just about 25 hours total that was spent playing patient.</p>
<p>jerzgrlmom, I just replied to your thread about your son’s situation but will repeat info here. From what you have indicated, earnings in box 7, i your son will have to file a 1040 along with schedules C and SE</p>
<p>thank you hoosiermom. I told him to do that using TurboTax or something to lead him through it. Someone told us he would be in trouble because he didn’t send in estimated tax last fall but I don’t think that’s a problem.</p>
<p>Everytime I think I know how to do something, we get something new thrown at us. I will be glad when we’re done with college costs & FA (not complaining though, without FA they wouldn’t have had these opportunities). With 3 kids, it seems like we’ve been doing this forever. I can’t even remember what it was like when we only had our own expenses/taxes to deal with.</p>