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How to Enter 1099-MISC Fellowship Stipend Income into TurboTax

February 17, 2016 by Emily

This year, TurboTax recognized the fact that some graduate students receive 1099-MISC forms for their fellowship income and does not force you into a self-employment trap. Great! Unfortunately, TurboTax does not report the income as fellowship income but rather “Other” income. If you follow the steps that TurboTax suggests for 1099-MISC fellowship income, 1) you’ll have to pay $35 to upgrade the software and 2) your income will be reported in line 21 of the 1040 instead of line 7 with “SCH” next to it.

If your 1099-MISC box 3 income is from a fellowship or training grant, you will need to enter the 1099-MISC information into TurboTax piecemeal to report it as a fellowship/scholarship. Entering your 1099-MISC information into TurboTax will take two general steps: 1) entering the income from Box 3 (step 1) and 2) entering the tax withheld from Boxes 4 and 16 (steps 2 to 4).

1. First, follow the steps for entering undocumented fellowship/scholarship income into TurboTax to enter the income reported in Box 3 of your 1099-MISC.

2. Go to the ‘Federal Taxes’ and ‘Deductions & Credits’ tabs. Click ‘Check for other tax breaks’ and ‘Jump to the full list.’ Next to ‘Estimates and Other Taxes Paid,’ click ‘Show more’ and then press ‘Start’ next to ‘Other Income Taxes.’

3. On the ‘Income taxes paid’ page, scroll down to ‘Other Income Taxes Paid in 2015’ and then press ‘Start’ next to ‘Withholding not already entered on a W-2 or 1099.’

4. Enter the tax withheld from Boxes 4 and 16 of your 1099-MISC into the first Other Withholding fields and press ‘Continue.’

That’s it!

Check: Under tabs ‘My Account’ and ‘Tools,’ click ‘View Tax Summary’ and then ‘Preview My 1040’ to verify that the income you entered was added to the correct line on your tax return.

Parent post: Grad Student TurboTax Guide: 2015 Edition

We at Personal Finance for PhDs are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

How to Enter Undocumented Fellowship Stipend and Scholarship Income into TurboTax

February 17, 2016 by Emily

Please note that this post was published for tax year 2015.

Entering undocumented fellowship income into TurboTax is slightly unintuitive, but the steps below will show you how.

1. Under the ‘Federal Taxes’ and ‘Deductions & Credits’ tab, press ‘Continue.’

2. On the ‘Let’s check for tax breaks’ page, select ‘Jump to the full list.’ Scroll down to ‘Education’ and press ‘Show more.’ Select ‘Start’ for ‘Expenses and Scholarships (Form 1098-T).’

3. Counter-intuitively, to enter undocumented fellowship income, select ‘Yes’ on the section regarding higher education expenses.

4. Enter your proper personal information on the next three screens.

5. To enter undocumented fellowship income, say that you did not receive a 1098-T (but if you did receive one for other scholarship and fellowship information, say yes and enter the information from the form).

By default, universities are supposed to issue each student a 1098-T. TurboTax wants you to verify that you qualify for an exception to that rule. The most likely reason that a grad student receiving a stipend would not receive a 1098-T is that he had more scholarship/fellowship income than qualified education expenses.

6. Click through the next several screens, entering your proper information. (I’m skipping the expenses section for now because I’m focusing on the fellowship stipend income. However, if you have any relevant education expenses you should enter them at this point at this point.)

7. Finally, we arrive at the Scholarships and Financial Aid page – click ‘Continue.’

8. On the next screen, say ‘Yes,’ enter the amount of your undocumented fellowship/scholarship information under ‘Other Scholarships/Grants/Fellowships,’ and press ‘Continue.’

9. Enter your proper information on the next screen.

10. Next, TurboTax asks what you used this fellowship/scholarship information for. The hypothetical grad student didn’t pay room and board, etc. with this fellowship, so his answer is ‘No.’ If you did, just enter your information here. (For what it’s worth, I also answered ‘Yes’ at this stage to test it out, and it didn’t affect the outcome.)

11. Enter your proper information on the next three screens.

12. Next, TurboTax gives you the option to enter the information for another student.

13. TurboTax concludes that you can’t claim an education deduction or credit, which is what we expected as our intention was to report additional income.

That’s it!

Check: Under tabs ‘My Account’ and ‘Tools,’ click ‘View Tax Summary’ and then ‘Preview My 1040’ to verify that the income you entered was added to the correct line on your tax return.

Parent post: Grad Student TurboTax Guide: 2016 Edition

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

How to Enter 1098-T Fellowship Stipend and Scholarship Income and Qualified Education Expenses into Turbotax

February 17, 2016 by Emily

Entering 1098-T information – scholarships, fellowships, and qualified education expenses – into TurboTax is very straightforward. The software should prompt you through the process fully under the ‘Deductions and credits’ section, or you can follow the steps below.

1. Under ‘Setup,’ choose ‘College expenses/tuition’ and then press ‘Continue.’

2. Choose the ‘Federal Taxes’ and ‘Deductions and credits’ tabs and then press ‘Continue.’

3. Then, press ‘Start’ to enter your 1098-T information.

4. Select ‘yes’ to enter your higher education expenses.

5. Click through the next four screens, entering your proper educational information, and concluding with reaffirming that you want to enter your 1098-T into the software.

6. Now, replicate your 1098-T information exactly in the software. In this example, I am using both the fellowship and scholarship income and the qualified education expenses for the hypothetical grad student. If the fellowship stipend were not reported on the 1098-T, the amount in Box 5 would be only slightly larger than the amount in Box 2.

7. Click through the next four screens, entering your proper educational information. I selected that the income the hypothetical student reported on the 1098-T is not duplicated elsewhere on the tax return, like on a W-2 or 1099-MISC.

8. The next section is where you need to enter additional qualified education expenses such as required textbooks. The hypothetical grad student doesn’t have any, but you might.

9. In this step, TurboTax verifies that you entered your scholarship income (Box 5 on the 1098-T) correctly.

10. Sometimes universities bill qualified education expenses in a different semester from when they post the scholarships to pay for them. TurboTax asks in the next step if that is the case for your 1098-T, because the bill and scholarships can be pulled into the same tax year. The hypothetical student’s 1098-T doesn’t have this issue, but consider if yours does (e.g., the amount in Box 2 is approximately double that in Box 5 or vice versa).

11. TurboTax asks if you used your scholarship income for room and board and other non-qualified education expenses. The hypothetical student did not, but your answer could easily be yes. (I tried answering this both ways, and the result was the same for my example.)

12. Click through the next three screens, entering your proper educational information.

13. TurboTax pauses for a summary page in case you have more student information to add.

14. TurboTax concludes that the hypothetical student can’t claim an education tax deduction or benefit. That is what we expected because the purpose of this 1098-T was to enter net non-compensatory pay rather than get a tax break.

That’s it!

Check: Under tabs ‘My Account’ and ‘Tools,’ click ‘View Tax Summary’ and ‘Preview my 1040’ to verify that the income you entered was added to the correct line on your tax return. In this example, TurboTax generated a 1040A.

Parent post: Grad Student TurboTax Guide: 2015 Edition

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

How to Enter W-2 Stipend Income into TurboTax

February 17, 2016 by Emily

Entering your W-2 stipend information into TurboTax is very straightforward. The software will naturally prompt you to enter the information if you tell it you received a W-2, so you can follow its lead in this case.

Alternatively, follow the steps below:

1. Under the ‘Federal Taxes’ and ‘Wages & Income” tabs, click ‘Continue.’

2. Under ‘Wages and Salaries,’ click ‘Show More’ and ‘Start.’

3. Select ‘Work on my W-2 now’ and ‘Continue.’

4. In the next several screens, you will replicate the information printed on your W-2 in TurboTax. I have entered our hypothetical grad student’s income into the correct boxes.

Check: Under tabs ‘My Account’ and ‘Tools,’ click ‘View Tax Summary’ and then ‘Preview My 1040’ to verify that the income you entered was added to the correct line on your tax return.

Parent post: Grad Student TurboTax Guide: 2015 Edition

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

Can a Graduate Student Have a Side Income?

February 8, 2016 by Emily

Graduate students receiving stipends are often interested in supplementing their stipends with some kind of outside work, yet unsure if such work is permissible or advisable. The short answer is yes, of course, as an autonomous individual you can generate an income outside of your pay as a graduate student. The better question is ‘What are the possible repercussions – both negative and positive – for developing a side income during graduate school?’

Further reading:

Is outside work/income explicitly disallowed in your contract or the terms of your funding?

Graduate student stipends come from one of two broad sources at any given time: an assistantship or a fellowship.

Some universities require students serving as research assistants or teaching assistants to sign an employment contract. If you signed such a contact, check it through carefully for prohibitions against outside work/incomes. If outside work is explicitly disallowed and you work anyway, you are putting your assistantship at risk.

When you accept fellowship funding, you likely agree to some kind of terms. Check through the terms for the funding carefully to see if outside work is disallowed either by the funding source or your university.

It may be worthwhile to figure out what exactly is considered outside work for the purposes of the contract/funding terms. It is unlikely, for example, that rental income would be considered a violation, and there may be other exceptions for passive or self-employment income as well.

Video Series: How to Increase Your Income as a Graduate Student

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Is outside work ‘frowned upon?’

Sometimes outside work has not been explicitly disallowed in a contract or no contract has been signed. In this case, evaluate the culture of your department to decide if developing an outside income will somehow get you in trouble, and if so how much trouble. The adage that it’s better to ask for forgiveness than permission may apply here. If any student caught with outside income is immediately dismissed from the program or put on some kind of probation, the benefits of a side income may not be worth the risk. However, if students seem to be allowed a reasonable work-life balance, the time commitment for a side income would probably go unnoticed.

(For international students) Is outside work explicitly disallowed by your visa?

F-1 visas issued to graduate students allow them to work up to 20 hours per week for their universities (e.g., as research assistants or teaching assistants), but not to have any other type of outside work (with the exception of work approved under the Curricular Practical Training or Optional Practical Training programs). This type of visa permits passive income, though what exactly constitutes passive income is not well defined. If you are an F-1 visa holder, developing a non-passive side income may jeopardize your visa.

What are the exceptions to the above rules?

While “No way!” may be the first-pass answer you receive when you ask if outside work is permitted by your program, there are often exceptions.

Career-advancing side jobs such as short-term fellowships and internships are encouraged in many fields, and these positions are sometimes far more lucrative than grad student stipends over the same period. Grad students sometimes consult within their academic areas of expertise with their advisors’ blessings and sometimes alongside their advisors. One of my grad school classmates co-founded a company prior to applying for her PhD (she pursued the PhD to better serve as the company’s CSO), and her ongoing involvement running the company was well known and respected among the faculty.

These are just a few examples of ways that outside work may be viewed by your department and advisor as aiding your progress through graduate school and career development rather than detracting from it. Even if your department doesn’t allow outside ‘jobs,’ it may be receptive to certain types of employment opportunities that are sufficiently educational.

Can you generate a side income without appreciably taking away from your degree progress?

You are already undertaking an enormous opportunity cost by pursuing a graduate degree. Despite the benefits you will likely experience by having a side income, make sure that they are not outweighed by the side income’s subtle costs. The main cost to watch out for is your progression through your program slowing. If your side work is taking time, energy, or creativity away from your primary job of being a grad student, you may want to forgo it in favor of focusing more completely on your work. In contrast, some grad students may consciously or subconsciously have a limit to the number of hours they are willing to work on their research, yet have additional time and energy available for other activities.

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How would your advisor react to learning of your side income, and how likely is it that he/she will find out?

Your advisor’s attitude toward outside work or income probably matters more than any other person’s. If your advisor has high expectations of time spent working on your dissertation or RA and is generally a strict or unforgiving person, you likely won’t want to risk getting on his or her bad side by developing a side income. Red flags for that situation are an expectation of significant amounts of face-time in the lab or office and other advisees not having outside pursuits like hobbies, an exercise regimen, a social life, or children. On the other hand, if your advisor does value work-life balance and has been satisfied with your progress, a judicious choice of side job will probably go unnoticed or not be objected to.

What are the benefits of having a side income?

For all the potential risks of developing a side income, they can be enormously beneficial to a graduate student’s quality of life and career. The best type of side job, in my opinion, is one that both pays well and advances your career.

The additional income generated by a side job is the most obvious benefit. Grad students are paid so little per hour in their primary work that many types of side jobs come with a better hourly rate. For some grad students, a side income is the main reason they are able to stay out of student loan debt, build an emergency fund, start saving for the future, or take a well-deserved vacation.

A side job can help you learn or practice new skills, gain work experience, and network, all of which increase your post-graduate employability. Many graduate students with side jobs report that the work directly or indirectly helped them land their first post-PhD jobs in “alternative career” positions.

Finally, a side job done well or a side income that steadily brings in earnings generates a sense of accomplishment. It seems that every graduate student goes through one or more periods of projects falling apart or low motivation during her degree. Having something to do outside of your research that you feel competent in or that has a tangible positive outcome can be quite beneficial for your mental health.

Further reading:

Can you develop a passive income stream?

If you have concerns about your advisor or department’s approval of a side job or want to work completely on your own schedule, a passive income stream may be the perfect solution. With passive income, you put in capital (usually time) up front, and then collect the income in perpetuity without any ongoing work. There isn’t much to object to about that!

If you are/were a grad student with a side income, please share it in our Side Income Series!

Vote with Your Feet, Prospective Graduate Students

November 9, 2015 by Emily

When I was applying to and interviewing for grad school, I told myself that the only factor I would consider when selecting a school was the advisor with whom I would work. I wanted to do high-quality research in my sub-discipline of interest and wouldn’t let the reputation of the program, the city, or anything else get in the way of working with the best advisor (for me) possible.

Thankfully, my preferences with respect to the non-research factors crept into my decision-making subconsciously when I compared the programs I’d been accepted to. Ultimately, I decided that two potential advisors at different universities would be equally excellent for me to work with, and I allowed the cities the universities were in to break the tie. Namely, one city had better weather… and my then-boyfriend-now-husband was already enrolled in a PhD program there.

Now that I have completed graduate school and corresponded with thousands of students at universities across the US, I realize just how fortunate I was that my decision-making process didn’t completely backfire on me. Yes, your research advisor and the quality of the research produced by your department is an important consideration, but not to the exclusion of other factors affecting your quality of life.

Your stipend and benefits offer will greatly affect your lifestyle during graduate school and possibly your net worth for the rest of your life. Consider the same student accepted to two programs, one of which would force her to live paycheck to paycheck while the other would allow her to save. This disparity in savings ability over even this short period of time can result in a difference of hundreds of thousands or even millions of dollars in retirement due to the power of compound interest.

Further reading: Whether You Save During Graduate School Can Have a $1,000,000 Effect on Your Retirement

If you are a competitive applicant—meaning you’ve been accepted to two or more programs—you have the opportunity to take your financial offers into consideration. While you shouldn’t necessarily accept the largest stipend and benefits offer (after adjusting for cost of living), you should vote with your feet by vocally declining offers that too low to provide you with a reasonable lifestyle.

If you do decline any admissions offers for this reason (perhaps among others), you should let the departments know why. At the same time that you are competing with other applicants for admissions, the departments are competing with one another to attract the best individuals and overall class. Universities pay attention to how well they are doing in comparison with their peer institutions on various metrics, and many of them try to offer stipends and benefits that are in line with their chief competitors. (Some programs even offer unusually high stipends when they are trying to move up in rankings.) The departments pay attention to which programs they they lose students to and why. Giving them the extra information that the lower stipend (relative to the local cost of living) or lack of benefits played into your decision is a great act of service to both the departments and students if they choose to use this information to improve how they treat their current and future students.

Once you have accepted a program’s offer of admissions, you still have the opportunity to advocate for higher pay and better benefits, especially through assembling with other students. However, your strongest position for making your voice heard is often before you accept an offer or upon your rejection of it. Once you have started graduate school, the switching costs become so high that departments practically have you over a barrel. Graduate students rarely negotiate their offer letters, so one of the best actions they can take is to vote with their feet by declining unacceptable offers outright. It’s hard to overstate how much universities depend on graduate students and postdocs to bring in grant money, produce research that raises their prestige, and create their other major product (undergraduate education). This value should be reflected in the pay students receive, and if it’s not, the departments need to hear about it.

Further listening:

There are two practical steps prospective graduate students can take to strengthen their position when accepting or rejecting admissions offers:

1. Apply to a number of programs. I know it’s expensive and time-consuming to add schools to your application list, but that cost pales in comparison to how much going to a poor-paying or unsupportive program will hurt you over the years you are in it. Having multiple admissions offers will give you the best chance of attending a program that will support you as a whole person.

Further reading: The Full Cost of Applying to PhD Programs

2. Thoroughly research the stipend offer letter extended to you by each program you gain admission to as well as the benefits provided by the university and how the benefits have changed over time. While some of that research is available online, you will almost certainly need to talk with multiple current students to get the real scoop. Ask them if they can live comfortably on their stipends and how they define comfortable. Ask them if there are any common financial pain points that students gripe about. Ask them if out-of-pocket fees have increased in the past few years, whether the ACA has changed their health insurance benefits, and about any special considerations you have such as partner benefits, childcare subsidies, or support for students with chronic medical conditions. If the students share their perception of an “us vs. them” attitude on the part of the administration or an administration that is powerless protect students from federal and state funding changes, take that as a major red flag.

Further reading: Before PhD Admissions Season Starts, Discover What a Standard Offer Is in Your Field

When I was applying to grad school, I didn’t know about benefits, unions, how states cutting higher education funding affects grad students, or health insurance subsidies. I had no idea that a good advisor or good department could be housed in a university that has an adversarial relationship with its students. I consider myself very fortunate that I ended up at a university that provided a reasonable stipend and benefits and had a supportive administration just by following my research and weather preferences.

I don’t want you to get ‘unlucky’ in this process simply because of a lack of information or that you only received one admissions offer. I want you to accept an offer that allows you to live a reasonably comfortable lifestyle in graduate school for your own well-being, and I want you to signal to departments whose offers didn’t meet that standard where they are lacking for the benefit of their current and future students. If enough of us vote with our feet by rejecting low offers, the departments and universities will hear us and be forced to change.

Blog

Is outside work/income explicitly disallowed in your contract or the terms of your funding?

Video Series: How to Increase Your Income as a Graduate Student

Is outside work ‘frowned upon?’

(For international students) Is outside work explicitly disallowed by your visa?

What are the exceptions to the above rules?

Can you generate a side income without appreciably taking away from your degree progress?

Increase Your Income

How would your advisor react to learning of your side income, and how likely is it that he/she will find out?

What are the benefits of having a side income?

Can you develop a passive income stream?

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