Please see Tax Expert TomK's advice here/below:

There will be a few steps to follow to report your stipend correctly because of the form 1099-MISC. First, you would have to report 1099-MISC and make adjustments for the IRS matching purposes. Then, you would report the stipend correctly using steps below.   

REPORT 1099-MISC

IF box 3 reports your stipend, report the form as follows:

• Open (continue) your return if it's not already open.
• In the Search box (top right-hand corner), type “1099-misc’
• Click on the Magnifying Glass icon.
• Click on “Jump to 1099-misc” link highlighted in Blue.
• Answer the Step-by-step instructions.

And then make an adjustment using the steps below:

1. Federal taxes
2. Wages and Income
3. Scroll down to Less Common Income
4. Select Miscellaneous Income.
5. Select “Other reportable income”, click ‘Yes’ and you will be prompted to enter Description and amount. Please be sure to write a short explanation and enter the amount as a negative number.   At this point, the form 1040 will show full amount as taxable AND as a negative adjustment on line 21. The end result: form is reported but not taxable.

If box 7 reports the stipend, you would have to report it as self-employed income, then enter the same amount as your "business" expense.  This will ensure that form 1099-MISC is reported for matching purposes, but the amount is not taxable as self-employment income. 

Go to:

1.   Federal Taxes

2.   Wages and Income

3. Self-Employment, Select Income and Expenses - follow the interview questions; you would report the stipend as if you own a business; once general questions are answered, you would enter the stipend as an expense (you can create your own description). The end result: form 1099-MISC is reported, but the income is not self-employment income--because it shouldn’t be.

I did exactly what you said and turbo tax is still making me report this as my own business in schedule c. How do I get around this? 

If the amount was reported in box 7 of your Form 1099-MISC, then it will be reported on Schedule C (as mentioned in the answer above).  There is not an option to get around it unless you want to hear from the IRS for not reporting the Form 1099-MISC. 

In order to avoid paying self-employment tax or income tax on the amount you need to enter a business expense that is equal to the income amount reported.  Go to the miscellaneous expense section and enter 'adjustment for stipend' as the description and the box 7 amount as the amount.  

The end result is that you will not get a letter from the IRS for not reporting the information on the Form 1099-MISC, but you are not paying taxes on the amount either.

@tiarg