Excess scholarships as earned income

Forum|Forum|5 years ago
April 3, 2021
2 replies
13 views

My client has excess scholarships above qualified expenses. when I try to enter that in the miscellaneous income screen I get an critical diagnostic asking for parents information. From my understanding it adds to earned income and should be reported on the line for the W-2

ProConnect Tax

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Best answer by TaxGuyBill

I agree with Susan.

For some weird reason the IRS says that for purposes of the Standard Deduction that taxable scholarships can be considered as Earned Income. But for the Kiddie Tax (and pretty much everything else), it is Unearned Income.

sjrcpa

Level 15

Yes it gets reported on the wages line, but it counts as unearned income for kiddie tax.

The more I know the more I don’t know.

P

pfdcpaAuthor

Level 3

Thank you for your help

sjrcpa

Level 15

You're welcome.

The more I know the more I don’t know.

T

TaxGuyBillAnswer

Level 15

I agree with Susan.

For some weird reason the IRS says that for purposes of the Standard Deduction that taxable scholarships can be considered as Earned Income. But for the Kiddie Tax (and pretty much everything else), it is Unearned Income.

P

pfdcpaAuthor

Level 3

Thank you for your help. That seems to fix my problem

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