When issuing a Form 1099 (e.g., 1099-NEC), an organization is generally entitled to “reasonable reliance” on the information provided by a contractor or vendor in the Form W-9, provided the form was completely filled out, properly signed and dated, and not altered to remove required statements. However, an organization cannot rely on Form W-9 information the organization knows or has reason to know is incorrect. In that case, additional steps should be taken to verify the information.

In general, payments made by a nonprofit organization to consultants or contractors who qualify as “United States persons” under the Internal Revenue Code are subject to Form 1099 reporting, including U.S. citizens based abroad. Payments made to foreign persons are generally not subject to Form 1099 reporting but may be subject to withholding and reporting under Form 1042 and 1042-S.

Despite common misconceptions, Treasury Regulations and Internal Revenue Service (IRS) guidance provide that most scholarship payments provided by nonprofit organizations are not required to be reported by the payor on Form 1099 (or Form W-2), regardless of whether the scholarship is a “qualified scholarship” or taxable to the recipient, so long as the primary purpose is to aid the student in pursuing their studies and not as compensation for past, present, or future services.