02-10-2014 10:05 AM
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?
02-10-2014 10:16 AM
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?
02-16-2014 06:45 PM
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.
02-16-2014 07:31 PM
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.
03-31-2014 08:36 AM
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.
03-31-2014 09:39 AM
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.
02-11-2016 08:26 AM
The Form # is 8615. The instructions for this form consider taxable scholarship income to be unearned income.
The taxable portion of any grants or scholarships are generally those amounts received that are above the cost of tuition and books.
If you pay your child's tuition with scholarship or grant income and include that amount in your income or your child's income, then you will be able to get a credit for your tuition. This will increase your child's unearned income causing them to pay a higher percentage on that income, however, you will get a dollar for dollar credit off of the amount of tax you owe and possibly getting you a refund. Often the credit is much higher than the amount of tax your child will have to pay. I think we had to pay $500 in taxes for a child and got back $2500. This is definately worth the time spent researching and figuring out what you can do. Resources: instruction for for 8615, Publication 970 found on the IRS website.