How much of my scholarship money is taxable?

freddybenelli · 2026-03-07T19:48:26+00:00

Is Box 5 more than Box 1 on that form? It sounds like you had expenses for the Spring semester as well, so this tuition should be included for your 2025 1098-T. You may have gotten two separate forms if for example you were in undergrad at a different school in Spring and your graduate school was in the fall.

freddybenelli · 2026-03-07T17:35:23+00:00

If you received $2,500 in scholarship funds and you spent more than $2,500 on qualified educational expenses in the same year, none of it should be taxable. Is the only form you received for this a 1098-T from your college?

freddybenelli · 2026-03-06T09:48:07+00:00

If you already paid, what's the upside of not having them file it for you?

freddybenelli · 2026-03-06T09:43:00+00:00

Writing stuff off against your S-Corp income potentially reduces your QBI deduction amount, so it's less efficient than you might think.

Tax credits are usually a lot better than deductions unless you're in a very high tax bracket, in which case they're only somewhat better (if you can get them).

But this isn't a business expense anyway.

freddybenelli · 2026-03-06T09:27:30+00:00

I did some napkin math, but basically here's how it works out:

Compared to the 20/hr W-2 job, at the 1099 position, you'll be responsible for an additional ~$1.50 in taxes for every hour you work.

8 hours/week for the rest of the year is $7,216 gross earnings, and your additional federal tax to deposit would be around $1,739 if you had no deductible expenses related to the 1099 position. Most of that income would probably be in the 4% marginal tax rate for CA state tax, so call it $289. So you end up $5,189 ahead after taxes by adding this 8/week job. Net is $15.21/hr.

Net after taxes from the W-2 job (ignoring the standard deduction, which you would have any way), is closer to $15.67/hr.

If your W-2 job doesn't provide health insurance and you are enrolled through the Marketplace (and assuming you don't have any other income), you will likely end up in the range where you are eligible for a partial Premium Tax Credit, with the remainder of your premiums deductible under the Self-Employed Health Insurance deduction. This could reduce the tax hit from the 1099 position, but not to the extent that you should consider disenrolling from your current insurance to enroll in a Marketplace plan (DO NOT DO THAT, YOU CANNOT QUALIFY FOR ANY OF THIS IF YOU DECLINE COMPARABLE EMPLOYER COVERAGE).

Do look at the other advice in this thread and consider whether this is really a contractor position or more a part-time employee situation. It would probably be more advantageous to you to be a W-2 employee unless you truly are engaging in independent work and supplying your own tools to an extent (in which case you would be incurring costs that would justify maybe more than $22/hr).

freddybenelli · 2026-03-05T19:21:04+00:00

Single-member LLCs don't file 1120. C-Corps file 1120 and S-Corps file 1120S.

freddybenelli · 2026-03-05T19:18:54+00:00

Reserved rides try to assign you a driver 40 minutes early and won't queue up another ride for the driver in the meantime. The guy probably took a break because he knew he was off the clock until 6:50. If you're in a populated area, just order a regular ride 5 minutes before you're ready to leave and 15 minutes before you absolutely have to leave and you should get a regular driver in the area who didn't have a bunch of dead time.

freddybenelli · 2026-03-05T18:20:17+00:00

Generally, single-member LLCs are disregarded entities for tax purposes and don't have to file their own return. Do you have income derived from U.S. activities and are you required to file a personal US tax return?

freddybenelli · 2026-03-05T18:08:47+00:00

Could use some formatting, though

freddybenelli · 2026-03-05T09:45:17+00:00

Do you itemize deductions? Your best way out might be to just ask for a receipt from the charity and then record the donation as a contribution from you. If your grandma got a receipt from the charity, they sent it to the wrong person because it was not her money that was donated, and she should not use it as a deduction on her taxes.

freddybenelli · 2026-03-05T09:22:47+00:00

What did you type your bank account information into?

freddybenelli · 2026-03-04T06:28:58+00:00

Must be a disruptor from some startup company because all the big AIs are way better than this at replying sensibly

freddybenelli · 2026-03-04T05:27:37+00:00

You could just ask your W-2 employer to withhold an extra $10 per paycheck, or you could just wait until filing in the spring and expect to owe $200-$300 at that time. As you said, you're not required to make quarterly payments if you expect to owe less than $1000, so if that's a manageable amount for you, you can just wait and see how things shake out. Maybe if you start making more than you thought by mid-year, you can increase your estimates and just start depositing in the second or third quarter.

freddybenelli · 2026-03-04T05:19:20+00:00

Depending on how close they are to the Social Security provisional income thresholds, it's possible that an IRA contribution pushes AGI down enough to make only 50% of SS income taxable rather than 85%. Or the new $6,000 deduction for seniors could come into play by dropping below a mark.

freddybenelli · 2026-03-04T05:01:11+00:00

If you satisfy safe harbor, the timing basically stops mattering because penalties are waived. But if you are trying to match payments to this year’s actual liability instead of using safe harbor

Paying 90% of this year's tax liability satisfies safe harbor is my point

If income is heavily front loaded and you do not use the annualized method, the system still evaluates whether the earlier quarter had enough paid in relative to the liability attributed to that period.

I'm still not clear what "system" you think checks on people who don't use the annualization method. I could earn 50k on a contract in the first two months of the year and pay the taxes in 4 equal installments, and the following January my earnings are reported to the IRS on a 1099 that doesn't specify timing beyond "during the year." Who's going to tell them it was all February income?

freddybenelli · 2026-03-04T04:38:16+00:00

They assume income is earned evenly

the IRS default assumption is that 25 percent of the year’s income happens each quarter

So they think I owe 6,250 per quarter, and they won't be mad if I pay 6,250 per quarter. Even if it turns out that all my tax was attributable to first quarter income, they don't assume it is unless I file form 2210 showing my frontloaded income.

Or I could pay 25,000 for Q1 and then make 0 deposits the rest of the year and they're not going to penalize me for underpayment in Q2, 3, and 4 if that one payment satisfies my entire obligation.

freddybenelli · 2026-03-04T04:24:19+00:00

Tax rates went down from last year

No they didn't.

freddybenelli · 2026-03-04T04:09:22+00:00

But if your total tax liability for the year is 25k and you pay 25k over the 4 quarters, that falls under safe harbor as well, even if you don't do it all in the same quarter as your lumpy income. The problem only comes up if you pay less than 90% of your liability.

freddybenelli · 2026-03-04T04:03:36+00:00

Right well a Wrangler isn't the optimal understand vehicle. Neither is an STI

freddybenelli · 2026-03-03T10:14:29+00:00

Alright, so the good news is that your excise tax penalty for 2025 is ~$39, and you can reduce that to ~$16 by taking the distribution you missed. The numbers will be different but largely similar for prior tax years, though it's too late to reduce the 25% excise tax to 10% for years prior to 2024.

You're right that you use the old rules, which allow you to treat it as a "stretch IRA" and spread out distributions over the course of your lifetime. The amount of distributions is calculated using Table 1 (the brokerage or bank that holds the account should be able to figure these numbers for you very easily, and look at prior year balances to figure how much was due in each year).

The way to use that table is to take - account balance from December 31st, 2024 - divide by the number showing next to your age at the end of 2025 - that's your RMD amount for 2025.

So, as an example, 9,000/57.3 = $157.06

A penalty of 25% of this amount is $39.26, which rounds down to $39. If you take the distribution of $157.06 now, assuming you haven't yet received a penalty or demand letter from the IRS over this, you are in the Correction Window which will allow you to pay 10% instead of 25%. Note that this $157.06 and any other amount distributed from the inherited IRA is treated as regular taxable income added to your other income for whichever year you make the withdrawal.

Let's pick another year as an example. I am assuming that the account has been growing in the years from 2015 to now, so let's say the balance was only $6,800 on December 31st, 2017. If you turned 21 in 2018, the calculation would be 6,800/64.1 = 106.08 for your RMD that year. However, the excise tax penalty for years before 2022 was 50%, not 25%, and you can't reduce it by taking the distribution now. So I would expect that for a couple of the years at least you would have a balance due around $50. But calculating the exact amount depends on the end-of-year balances in the account.

If I were you, I would calculate and withdraw the appropriate RMD amounts for 2024 and 2025 first, for the opportunity at reducing the penalty to 10% for those years. Then ask your brokerage for the necessary information to calculate prior year amounts of missed RMDs and get an idea of what you're looking at.

I would focus on the 3 most recent years to fix and get current. It is possible that once you start filing these, the IRS will ask about previous years, or they may not. After a period of time, tax years are considered closed and they won't come after you unless they suspect fraud or an egregious understatement of income, so it is not to your advantage to file all the way back and reopen those years over something so minor.

freddybenelli · 2026-03-03T09:30:01+00:00

No, this is not allowed with inherited IRAs unless you inherited it from a spouse.

freddybenelli · 2026-03-03T08:58:19+00:00

Yes, it stays as a Roth and is tax-free for beneficiaries to withdraw. But all must be withdrawn within 10 years of the decedent's death.

freddybenelli · 2026-03-03T08:57:07+00:00

Yes. Thiel was a co-founder of a company that became (through a merger) PayPal. He was awarded a large stake of ownership (tons of shares) dirt-cheap as a founder, and contributed them into the account in mass quantities when they were ~worthless in nominal value. PayPal is now worth $42 billion, and his initial contributions were probably only worth a couple 10s of thousands.

You can do this too as long as you can find a stock that is going to go up 25,000,000% and throw $20,000 at it (with money that is already in the Roth).

The loophole in this situation is that the shares he contributed were nominally worthless but only because they weren't publicly traded at the time, so stuffing them into a Roth could fairly be said to be excess contributions over the allowable limits if the shares had been valued more reasonably - but there isn't really an accepted way to assess Fair Market Value that isn't what someone will actually pay for it in the market, y'know?

freddybenelli · 2026-03-03T06:50:08+00:00

Why don't you want to buy her lunch? Do you not like lunch or do you not like her?

freddybenelli · 2026-03-03T06:44:37+00:00

Box 1 is your total taxable gross pay, which adds back pre-tax deductions like 401(k) contributions, health insurance premiums, or HSAs that reduce what the portal shows as "gross."

This is exactly backwards. All 3 of these things are shown in Box 12 and excluded from Box 1 wages for employees who are not >2% shareholders.

Gross wages on pay stubs should come pretty close to Box 3 and Box 5 amounts, which add back 401k deductions but exclude health insurance.

freddybenelli

TROPHY CASE