I received a grant/contract from the Department of Education under their Small Business Innovation Research program. This year it was labeled as a grant. Last year it was considered to be a contract. I'm not sure what the difference is. I have a small company sole proprietorship that received the grant/ contract. Most often these are awarded to 25-100 employee companies which are not sole proprietorships. The money is supposed to be used to develop the business, pay for expenses, pay for development of products that will improve science education. But as it stands now they are sending me a 1099-misc 7.non employee compensation form for the money I've received so far which the IRS tells me is considered income or profit. The money is not for me personally, so it is not personal income. Nor is it profit for the business. It's more like a business loan that does not need to be paid back. Is there some tax exemption for govt contracts/grants through this program SBIR? When the Small Business Association gives a grant award is it taxable or considered profit? Ideally I would like the money to go into a business entity, then draw a salary from it, but I do not want it to be considered income for the business, or profit. This was not the intent of the dept of education. Thank you,
Dan
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