Today TaxMama® hears from a couple of people in the TaxQuips Forum, with similar questions. The second one combines both person’s concerns. “My wife is a graduate student who received a few research grants this year. Some of them want to give the money directly to her instead of through the university, and have asked for a W9. This money will be used entirely for lab equipment, field work, etc., None of it will be used for personal income to her. How is this handled? Do we include it in our income? Are the lab supplies and travel and such deductible as education expenses (my guess is not)? Or would I be able to set this up as a business and handle the income and expenses that way?”
Dear Beagle and JMG,
In order to get the grant, you must submit a proposal involving doing certain research or performing certain actions. Clearly, personal services are involved in order to merit the grant. So, yes, it does go on Schedule C.
Your wife would report ALL the income. She can report it on Schedule C. She can claim a deduction for the directly-related expenses. She can deduct the reimbursed expenses – since they will be included in her 1099-MISC.
Track all her income AND all her expenses. Read IRS Publication 334 to learn more about allowable expenses.
And if she pays anyone, have her be sure to get a signed Form W-9 from them when she engages their services – OR put them on payroll if they are her employees.
And for the answer to the question about employee business expenses, please read the reply in the TaxQuips Forum.
And remember, you can find answers to all kinds of questions about research grants and scholarships and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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