Scholarship recipient, 1099 misc or w2 or don't report.

by Zhen Wu
(Norwich, CT)

Our church setup a scholarship to support seminary students last year. The student helped us to lead youth program in the summer but that's not the condition to receive scholarship.


How should Church report it to IRS?

The instruction on 1099 form said:

Do not use Form 1099-MISC to report scholarship or fellowship grants. Scholarship or fellowship grants that are taxable to the recipient because they are paid for teaching, research, or other services as a condition for receiving the grant are considered wages and must be reported on Form W-2.

Other taxable scholarship or fellowship payments (to a degree or nondegree candidate) do not have to be reported by you to the IRS on any form. See Notice 87-31, 1987-1 C.B. 475, and Regulations section 1.6041-3(n) for more information.

Should we report the scholarship on W-2? It can be considered as the “other” scholarship because the recipient is not paid for teaching, research, or other services as a condition for receiving the grant?

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