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Member
JamesWinston
Posts: 2
Registered: ‎02-10-2014

Is scholarship income considered unearned income when completing Form 4615?

My scholarship income is being included in Unearned Income when having to complete Form 8615 to figure the Kiddie Tax.  I have used H&R Block for over 30 years and this is the first time I have needed help,but it has taken hours to get to a place to hopefully get some help.

I think the program has a flaw but the tech support agent said if the program indicated a certain amount then that was always correct.  The then said he did not have the expertise to answer tax questions and said not errors had been reported.  That is what I was trying to report.  I purchased TurboTax to just see how it dealt with Scholarshiip income.  It did not include Scholaarship Income as unearned income and that is the way H&R Block has handled it for the past 3 years.

 

It puts it on line 7 of the 1040 and then writes Scholarship beside the amount.  Both programs does that as in previous years.  But that is where they differ, H&R Block then adds that to interest icome as unearned income.

 

Also, why is income reported on a !099-Miis Form under NonEmpoloyee compensastion considered Unearned Income?

Associate
ArkelaC
Posts: 16
Registered: ‎01-27-2014

Re: Is scholarship income considered unearned income when completing Form 4615?

1099 is an income form used to report wages for a variety of general contract work as if you were self employed under someone meaning you indeed earned your income however taxes were not taken out and now is the time to reportn wages on nonemployee compensation.

   I would also reccomend you thoroughly making sure you have answered all questions correctly concerning school. Failure to answer questions correctly can indeed result in income items on the same line. Did you recieve addittional loans  for school?

Member
garyd
Posts: 2
Registered: ‎02-16-2014

Re: Is scholarship income considered unearned income when completing Form 4615?

I just noticed this, too (on 8615) and found that the program did the same thing last year (2012). I also found a trail that said people called HRB and were told this was their interpretation. It's not in the IRS publication and other software didn't treat it that way last year. So I'm upset- will need to refile last year's taxes AND switch software for this year if I can't get around it... bummer. Hope we get resolution.

Member
garyd
Posts: 2
Registered: ‎02-16-2014

Re: Is scholarship income considered unearned income when completing Form 4615?

The IRS instructions for 8615 do say to include taxable portions of scholarships in UNEARNED income. The HRB help screen also calls taxable scholarship income "unearned". Looks like they are right.

Member
srmann02
Posts: 1
Registered: ‎03-31-2014

Re: Is scholarship income considered unearned income when completing Form 4615?

From Publication 501:

 

"In this table, unearned income includes taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust. Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income."

 

So excess scholarship is EARNED income.

 

 

Associate
GaryF
Posts: 397
Registered: ‎03-17-2013

Re: Is scholarship income considered unearned income when completing Form 4615?

Hi, srmann02,

 

The item you're quoting is specifically for determining whether or not there's a filing requirement for dependents, and indirectly, for determining the standard deduction for dependents.  However, the rules for Form 8615 are different.  For the 8615, if the scholarship is reported to the recipient on a W-2, it's earned.  If it's not reported on a W-2, it's unearned.  There are several other places where the rules for earned vs. unearned income are different.