The Unofficial SMART Scholarship Forum

Annual reminder for all the Phase I scholars out there as tax season approaches: SMART fellowship stipends are not subject to self-employment tax. Self-employment tax is really expensive so make sure you aren't paying taxes you don't owe! Paying a tax professional to do your taxes for you is far cheaper than paying self-employment tax!

If you are doing your taxes yourself, I believe (as an engineer with no expertise in tax preparation and who is not a tax professional) for most tax software programs, you should not enter the 1099-Misc., but instead report your income from SMART fellowship stipends as outside scholarship income, so that you do not erroneously pay taxes you don't owe. Do make sure you report the income, though. SMART fellowship stipends are taxable income.

(There was some past advice a few years ago on this forum recommending some Turbo Tax forum that wanted you to do some weird accounting with a Schedule C. Please don't do that: SMART scholars who follow that advice get audited and have to file an amended return. It is not fun.)

Best I can figure, it's scholarship income. But of course that comes with the standard disclaimer that I'm not a tax professional.

What type of income type is it then?

You can file an amended return. I would anticipate it taking several months for the IRS to process it, but you should ultimately get a refund.

(As a side note, it's worth considering hiring a professional for help with this. I do my own taxes, and I got audited, and I personally know another scholar experienced the same thing, so I suspect it's a common experience among SMART participants. Ultimately, I was able to navigate through the audit on my own and not pay any more taxes or fees, but it was a stressful experience.)

Hmmm....if I paid self-employment taxes, do you think I could get that money back? I was super mad about that. Wish I had seen this part before.

Phase-I stipend payments are not self-employment income, so you should not be paying self-employment tax on it. Self-employment tax is 15.3%, which is a lot of money, so this is important. If your tax software is trying to make you pay self-employment tax, you should consider hiring a professional to help you with your taxes. Even after their fees, very likely you'll still come out ahead.