I did not agree that simply getting a 1099-NEC means the income must be reported on schedule C, so I filed for an extension and did some more research. I am updating as an FYI for others.
According to the IRS (tax topic 421, https://www.irs.gov/taxtopics/tc421) amounts received as scholarship or fellowship grants are taxable if received for services, but then the IRS states
- If filing Form 1040 or Form 1040-SR, include the taxable portion in the total amount reported on the "Wages, salaries, tips" line of your tax return. If the taxable amount wasn't reported on Form W-2, enter "SCH" along with the taxable amount in the space to the left of the "Wages, salaries, tips" line.
It is clear from this that the IRS expects that some students will receive 1099-NEC for this income but does not expect them to report it on schedule C. Reporting it as wage income (as directed by the IRS) means that students below the personal exemption threshold will not owe tax on it.
