@ellyragone
@DavidD66
The problem is that the payer does not always use the correct rules or know the correct tax laws. I would not rely on the fact that a 1099 NEC was issued to be definitive proof that the stipend was considered compensation for employment, rather than an educational fellowship. You will have to determine based on your own facts and circumstances, whether this was “education” or “work.”
Someone else who has expertise in this area is @Hal_Al
I believe that in the 1099 interview, there should be a list of special circumstances, and one of the items on the list is educational fellowship. That should render the income taxable as “other income“ rather than as self-employment income. You can also bypass entering the 1099 NEC completely and walk through the interview for educational expenses. You will start by indicating that you do not have a 1098T, but then you can enter a stipend or fellowship “not reported on a 1098.”
if you don’t report the income as self-employment, it is always possible that the IRS will send a letter, asking the tax payer to include a schedule SE, and pay the self-employment tax. The taxpayer would reply with a description of the facts and circumstances that make it educational, along with any useful proof, such as emails, or a course record, or a course transcript that proves the activity was educational.
