1099-Misc for Scholarship Award, how to defray taxes?
I received a $1000 scholarship award from a textbook company in Dec. 2008 after submitting an essay in their scholarship competition. The money was awarded as I am going on to obtain a Masters degree in a healthcare-related field.
Initially, I received a 1099-Misc from them with the amount reported in Box 7 (Nonemployee Compensation). Given that no services were performed, I contacted them and was reissued a new 1099-Misc with the amount in Box 3 (Other Income) instead. Unfortunately, I am still finding that I will have to pay around $250 in taxes on the original $1000 award. The check was sent to me and cashed in Dec. 2008. My Masters program begins June 2009. I intend to use the entire $1000 amount to pay for tuition.
Is there a way that I can defray the taxes given that I will be a degree-seeking student and plan to use the money for my tuition expenses? How does the fact that the award and the tuition on which it will be spent occur in 2 different calendar years affect things? Ditto for the fact that I was not enrolled in the program when I received the award, but that I will be by the time I spend it? I have read all the IRS publications on the subject, but cannot make sense of this given the variables involved!
Thanks in advance for any help you can provide...