1099-NEC Form Prize Money

[beni1]

I entered a traveling scholarship contest and won some prize money. They sent me a 1099-NEC form. When the software asks me "What type of income is on your 1099-NEC?", it gives me the following options: 

- Self employment income

- Farm income

- Hobby

- Lawsuit settlement

- Medicaid waiver payments that qualify as difficulty of care

- Income that should've been reported on a W-2

There are no other options. What would be best to choose in this situation given that it is prize money that was given? 

[KrisD15 · Accepted solution]

Choose HOBBY.

I'm seeing this type of question for tax year 2024, and I attribute it to the fact that Form 1099-NEC was resurrected a few years ago to stipulate Self-Employment income as well as the fact that scholarships can be considered as Earned Income for an IRA contribution. 

Scholarships, as well as prizes, should be reported on Form 1099-MISC.

Regardless, if you select HOBBY, the income will be reported on Schedule 1 (same as a scholarship but a different line) and treated the same as a scholarship, as far as eligible for IRA as Earned income and not subject to Self-Employment Tax (FICA) 

[beni1]

This is really helpful! Thank you for explaining!