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My son wanted to do his own taxes this year - he gets a full scholarship for college, and has a few hundred $$ of dividend income as well. I have used Turbo Tax Premier to do his taxes in the past due to the dividends. So he used that product as well, but for the first time, it charged him Self Employment tax on his scholarship. (the scholarship covers room and board, but only tuition is allowed as an education expense, so he pays income tax on the difference) It never charged SE Tax when I did his taxes for him his first 2 years of college.

Does anybody know if this could be a bug in Turbo Tax, or whether any of the tax changes this year included a new ruling on Self Employment Tax on Scholarships?
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Does anybody know if this could be a bug in Turbo Tax, or whether any of the tax changes this year included a new ruling on Self Employment Tax on Scholarships?

Carole, let's see what's behind Door # 3. Ah, input error. Maybe, but a definite third possibility. We can eliminate a change in the law since there wasn't one, and I doubt it's a bug, but I'm not yet willing to blame GIGO.

The missing piece of information is whether he got a W-2 or 1099-MISC for the taxable portion. If not it should be shown on line 7 of the 1040. See Chapter 1 of Pub 970.

As to where in the process he told TT it was subject to S/E tax, beats me. The first thing to check is any input forms, looking for errant check boxes that would lead the software astray. If that doesn't clear it up, have him walk back through the process with an aide standing over his shoulder.

Phil
Rule Your Retirement Home Fool
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