Unfortunately, the tuition stipend was given to you in exchange for future services that you will provide, so the amount most likely represents self-employment income. And if it was reflected in Box 7 of the 1099-Misc, your employer is reporting it as self-employment income, and the IRS will be looking for you to report it that way as well.

However, there are many special rules in this area, so you want to be very, very certain that there aren't any loopholes that might apply to you and your situation which might help reduce your tax hit on this stipend.

I've looked up your second issue for a few different clients over the years. Even if there is a chance you would need to pay back your employer if you stopped working for them, the stipend is considered income when you either receive the money or the money is spent on your behalf, and not when the repayment obligation expires. One exception that comes to mind is if your employer is treating the stipend payments as a loan, is charging you interest, and has drafted a loan document. In that case, you report income as the loan is forgiven.

What happens if you get stuck paying back your employer because you take a new job? There are specific rules of what you should do in the event you need to repay your employer for income previously reported as taxable by you.

Zip Code: cpa@mdtaxes.com

If you are really interested in what happens if you have to repay the money you have previously reported as income, look up "Claim of Right" in IRS Publication 525: Taxable and Non-Taxable Income.

"Tax Simplification" will take on a whole new meaning for you! Good luck and I hope you don't find yourself having to file a Claim of Right.

Zip Code: garyd@davisandbrandel.com