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The definition of what is not earned income seems to want scholarship, fellowship income to be earned as an employee. So I wonder if it'd be prudent to investigate the nature of the employment, or if it really doesn't matter, and claim the credit as self-employed.

The rationale she was given by an adminstrator was that if the payment were reported on a w-2 then they would need to also withhold FICA, even though graduate stipends are also reported on w-2's w/o FICA withholding. NIH just found it easier to get around not withholding FICA by putting the income on a 1099. I don't think FICA is the criterion for whether income is earned or not, because the graduate stipend on a w-2 is earned, even though FICA is not withheld.

It's all very puzzling, and it would be easier to avoid the whole issue if I did have a flexible spending/medical savings acct but I don't.
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