1099 Misc Americorps

[Terry O]

Client received a 1099 Misc from Americorps for $1000 - -but he never received the money. It was sent directly to the school for tuition.

I know I am having a moment, but was there a way to zero it out on Line 21 ??

April 15th can NOT come soon enough!

Thank You

[Lion EA]

Education Credit or Deduction?

[Terry O]

Thanks Tax Guru - -but I realize I my instincts were corrrect - - -and it is taxable - -and there will be no ed credit or deduction - - -

[Lion EA]

He "paid" tuition via money he pays tax on. Why can't he take an Ed Credit or Deduction? (I agree that his income is taxable, maybe even SE.) Is he a dependent?

[Terry D EA]

I once again agree with Lion. This income may be subject to SE, but even if it isn't and it is apparent the funds were spent on eduction. Other than the question of dependency, he should be able to use one of the education credits.

[Gail in Virginia]

Or he could take the tuition and fees deduction, and it would effectively zero out the income reported, subject to the question of qualification for the deduction. But if he pays taxes on the money, it is his money as far as the tuition payment it seems to me.

[Pacun]

If he uses tuition and fees deduction, he will zero his federal taxable income but he will still have to pay SE taxes. How about saying something like on Schedule C.... "I got a 1099 for $$$ and I am going to report it on Schedule C. In order to make that amount of $$$, I was required to spend and pay $$$ to this institution and therefore, my net income subject to SE taxes is zero".

[Terry D EA]

If this income is reported on line 21, it would not be subject to SE tax. But, if this was earned income for providing some type of service, and the funds earned were sent to the educational institution then the total amount is subject to SE tax. There would be zero tax liability but a small amount owed due to SE. Still should be able to use the Education Credits depending on the question of dependency.

[jainen]

>>If.... But.... <<

Anybody interested in what Americorps has to say?

"The Segal AmeriCorps Education Award, unlike most other forms of scholarships and fellowships, is subject to federal tax in the year the payment is made. It is considered taxable income regardless of whether it’s used for current educational expenses or to repay a qualified student loan.... IRS Publication 970, Tax Benefits for Education explains tax benefits that may be available to members who are using education awards to pay for current educational expenses or to repay qualified student loans."

So Line 21, and education credits/deduction in the ordinary way.

[Terry O]

Thanks Jainen! that's where I went - -right AFTER I posted this question - -thanks to all for their input!