I am going to a conference representing my union local. I assumed it would be mostly at my expense but I received a stipend for part of it. I was just told that I need to fill out a 1099 but to hold on to my receipts to write off my expenses against the income of the stipend (note: this was not from an accountant). My understanding is that even if this were considered work related my expenses are not, under current tax law, deductible. Is there any reason to believe that no matter what, I will be paying income taxes on the stipend?
You will be owing taxes, but you can deduct expenses.
The stipend is income and money spent to earn that money is fully deductible. Use Schedule C.
Thank you.
If it were truly for work you would not be allowed to collect a stipend from someone else for performing your job. I’ve used the Sched C route when I was reviewing grants for NSF which came with a stipend and teaching a tutorial in my field.
One example I remember looking up is that if I’m working as a tutor, and meeting a student at a coffee shop, the muffin or whatever I buy at the coffee shop counts as a work-related expense and can be deductible.
I didn’t, because 20% of the cost of a muffin isn’t worth the hassle of recording it, especially not when it’s still probably going to be less than the standard deduction. But I could.
I don’t think the standard deduction comes into play. You would deduct the cost on schedule C as a business expense so it would come out of income directly even before you got to deductions v. the standard deduction.
Back in the day, I remember people offering their receipts from things they payed for in cash so someone else could use it to claim a deduction
Right. You can’t deduct things like meals or transportation as regular deductions, but they decrease your business income as reported on Schedule C. My wife is a writer, so we’ve done Schedule Cs for a long time.
Schedule C is for a home business. Would this one-off conference expense really qualify?
I’m not sure, but I don’t see where you’d report the stipend other than on schedule C so deductions against it would go there as well.
I used it for reporting one or two fees a year, and deducting the hotel and meal costs. You just have to invent a name for your “business” - you don’t have to incorporate or anything. I had the example of my wife’s Schedule Cs so it was easy for me. You do need a better grade of tax software - the basic versions don’t seem to do Schedule C. But you might be able to fill out the form by hand even in the cheaper versions.
I guess a Schedule C can be used for reporting “other income,” but wouldn’t that typically be Schedule 1? If you want to deduct expenses on a Schedule C then you need to be operating a business that does regular work and generates a net profit for three out of five years.
Since you are seeking accounting advice, I’ve moved this to IMHO.
I report all my writing income on Schedule C, even when I was working full time elsewhere. I would deduct conference expenses – travel, hotel, etc. – and sometimes took a loss on them. I actually mentioned it to a tax accountant who said taking those expenses were probably more legitimate that other conference deductions. I learned about anthologies and met agents, so it was making me money.
Generating a profit is not all that difficult if you just take reasonable expenses. Nowhere I’ve seen on Schedule C does it say the company must be your major source of income. I’m not an accountant, of course. I’m sure you can list it under other income, but then you can’t take perfectly legitimate expenses against your stipend.
Not saying it does, but if you want to deduct expenses, then my understanding is you need to be a business (as opposed to a hobby), and to be considered a business, there’s a certain threshold of activity that needs to be met, i.e.:
- Your primary purpose for engaging in the activity is for income or profit.
- You are involved in the activity with continuity and regularity.
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Additionally:
“You use Schedule C when you are operating a business. If you are making some side money without the intent of running a business and making business profits then it might count as a hobby. In this case your income and expenses aren’t reported on Schedule C. Instead, you typically report the income on Schedule 1, Part I, Additional Income, Line 8, “Other income.” When your activity is considered a hobby, you need to report all of the income but you can’t use any of your expenses as tax deductions.”
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Are you attending this conference as part of your job and as an employee of the union and the stipend is a per diem is meant to cover meals, travel, and other expenses related to the conference? Then normally I would just assume these are business expense reimbursements that wouldn’t normally be taxed.
I’m not an accountant but over my career I’ve incurred a lot of expenses at a lot of different firms (including several Big-4 accounting firms) and I’ve never had to file anything tax-related.
When I traveled to conferences, I would keep an expense record and when I filed it with the university, they would repay me from my research grant and nothing was reported for tax purposes. This was in Canada, but I doubt it would have been different in the US. I did make a significant profit however since the expenses included a standard per diem and I rarely spent that much. And if I drove, they paid a standard mileage and my small car didn’t use that much. For everything else, hotel, air fares, registration fees, etc., I needed actual receipts. When airlines started using electonic ticketing and I had to turn in receipts that were obviously printed on my printer, it took a while until the accounting office accepted them.
Yeah. I traveled all over the nation teaching new IRS agents, and not a dime was taxable. I got my hotel, airfare, etc repaid, but a per Diem for food, etc.
Practicing CPA here.
If they are going to be giving you a 1099-NEC for the work you did for the union, then normally* that would mean that it would be reported in Schedule C, where you would be able to take expenses that were related to the production of the income. The rest of this will proceed on that “normally” line so as to educate everyone, but I might advise skipping to the * if you just want the answer. This stipend is being offered because you are working for the union, not your employer. The union is paying you directly for your work. They are not paying any of your expenses.
However, you would not be the one filling out the 1099. They would possibly need you to fill out a W-4 in order to know the requisite information to issue you the 1099, but it stretches the imagination that your union wouldn’t already know your address and social security number. I suppose it’s possible that someone in your position in the past formed an S-corp to run the business of attending meetings for them, which would be indicated on the W-4, and that would mean that no 1099 would be necessary, but that’s also a stretch.
You are correct that under current tax law, unreimbursed expenses you incur in your work as an employee are not deductible at all, but in this situation you are an independent contractor for the union, not an employee.
In terms of what is deductible, certainly any travel costs, meaning the cost of transportation and lodging. If you drive your own car, you would be able to take mileage at whatever the 2023 mileage rate is, and that would generally be better than just taking gasoline costs. Meals are currently 50% deductible to the extent that they are done either in conjunction with business discussion, or eaten away from home because you were required to stay the night away from home. I don’t think there would be anything else in your situation.
You will pay income taxes on whatever of the stipend is in excess of your expenses. If you have deductible expenses in excess of the stipend, it will be a deduction against ordinary income.
*However, it sounds like you are not doing this as a for-profit activity as you would have gone on this trip to represent your union at your own expense. If this is the case, then none of your expenses are deductible. Schedule C can only be used if you are intending to make a profit. If you aren’t intending to make a profit, you must report the income that they give you and cannot deduct any expenses, as under current law expenses for not-for-profit activities are not deductible since they’d otherwise be taken as miscellaneous itemized deductions, which are currently suspended. I have long held that this is unconstitutional, but I have no standing to sue.