What's different here
- Payee classes multiply. Honoraria and speaker fees (1099-NEC), prizes and awards to non-employees (1099-MISC box 3), research-participant payments (reportable above the threshold, often paid in gift cards nobody tracks), grants to individuals (often reportable), payments to foreign scholars (1042-S with treaty analysis), and ordinary vendors. Classification at intake decides the form.
- Federal funds bring SAM.gov. Anyone paid with federal grant or contract money must be checked against SAM.gov exclusions before award and at renewal; 2 CFR 180 makes the institution responsible. State procurement adds state debarment lists.
- Foreign visitors are the hardest cases. Visiting researchers, foreign students paid for services, and international speakers need W-8s, U.S.-source determination, treaty analysis (Form 8233 for individuals claiming a treaty exemption on personal services) and 1042-S reporting. A foreign scholar on a CP2100 means a 1099 was filed where a 1042-S belonged.
- Public-entity procurement rules often require a W-9 before a purchase order can issue, which is helpful; the gap is small payments made by department credit cards or petty cash that bypass procurement entirely.
- Government payers get CP2100s too, and the penalty regime under IRC 6721IRC 6721Internal Revenue Code, Cornell LII applies to governmental entities with no small-business cap.
Universities file a disproportionate share of all three.
The forms an institution files
| Form | What it covers here | Threshold (2026 payments) | To the IRS | The trap in this sector |
|---|---|---|---|---|
| 1099-NEC | Guest lecturers, consultants, student contractors, honoraria for services | $2,000 ($600 for 2025 payments) | January 31 (next business day if a weekend); no automatic extension | An honorarium is NEC if it pays for a lecture or service, box 3 if it is a prize or award with no services; the department usually cannot tell you which. |
| 1099-MISC box 3 | Research subject payments, prizes, awards, scholarship amounts not for tuition paid to non-degree candidates | $2,000 | February 28 on paper, March 31 electronically; recipient copy January 31 | Gift cards and participant incentives count; the TIN is collected by the study team or not at all. |
| 1099-G | State and local governments: unemployment compensation, state tax refunds, taxable grants, agricultural payments | $10 (refunds), $600 (grants) | February 28 on paper, March 31 electronically; recipient copy January 31 | Government payers get CP2100s like anyone else; the IRS has no sovereign exception for TIN penalties. |
| 1042-S | Foreign visiting scholars, students with taxable scholarships, foreign vendors, royalties to foreign licensors | None | March 15, with Form 1042 | A visa holder is a nonresident alien until the substantial presence test is met; a W-9 from one is the wrong form and the 30 percent withholding is the institution's liability. |
| 8233 | Treaty exemption claims by foreign individuals performing services | Per claim | Filed with the IRS within 5 days of receipt | The NTA's 2025 report found one-to-three-month processing and FIFA-event confusion; the claim is accepted by the payer, not approved by the IRS. |
| 1098-T | Tuition statements (universities) | Any amount | February 28 on paper, March 31 electronically; recipient copy January 31 | Student TINs are solicited under their own rule (Reg. 1.6050S-1)Treas. Reg. 1.6050S-1Treasury regulations, Cornell LII and the penalty waiver is by solicitation proof, as CCA 200101031 says of the charity's Form 8282. |
Government units also file Forms 1099 for purchased services and, for cash over $10,000, Form 8300 (court clerks and public hospitals most often). Public universities file under a single EIN for dozens of departments, which is why a W-9 collected by one department and a 1099 filed by another is the pattern behind most of their notices.
Where an institution's notices come from
- Decentralized intake. Departments create suppliers in the ERP from an invoice or an honorarium request; the W-9 arrives, if at all, after the check. The solicitation rules are the dates central AP has to be able to prove.
- The wrong certificate. A foreign postdoc gives a W-9 because the department asked for one; the payment goes out with no withholding, is reported on a 1099 instead of a 1042-S, and the institution owes the 30 percent (Park, below). The foreign vendor guide and chapter 3 guide cover the sequence.
- Students. Student workers, student contractors and scholarship recipients overlap, and a student's SSN on file with the registrar is not automatically on the supplier record.
- Research subjects. As in healthcare: many small payments, collected by coordinators, under the threshold individually and over it in aggregate.
- SAM.gov and the 1099 file disagree. A vendor registered in SAM under one legal name and in the ERP under another; the SAM record is usually the right one, because the vendor had to match it to the IRS to register.
The checks that sit on top of the TIN
| Check | Source | Applies to | Why |
|---|---|---|---|
| Exclusion | SAM.gov exclusions | Any vendor paid with federal funds; subrecipients | 2 CFR 180: no award to an excluded party |
| Sanctions | OFAC SDN and consolidated lists | All payees, including foreign scholars and licensors | A blocked payment is reportable |
| Residency status | Substantial presence test; visa and entry dates | Every foreign individual before the first payment | Determines W-9 or W-8 and whether chapter 3 applies |
| Treaty eligibility | Treaty article, Form 8233 or W-8BEN with a U.S. TIN | Foreign scholars, students, performers | No TIN, no treaty rate |
| Procurement registration | State vendor registration; e-procurement portal | Public institutions | The registration name is what the W-9 must match |
The screening guide covers the lists; the treaty rate lookup and W-8 selector cover the foreign side.
Controls that fit an institution
- Make the W-9/W-8 the gate for supplier creation in the ERP; verify the pair against IRS records at creation, not at year end.
- Screen every new supplier and grantee against SAM.gov and OFAC, and re-screen at renewal or annually.
- Route foreign-payee setups through a tax office review before the first payment; the sourcing decision cannot be made by AP.
- Sweep supplier records without a TIN every December and log the solicitation; universities keep supplier records for decades, and reasonable cause looks back at the solicitation history.
A worked example: the department-created supplier
A state university files 7,400 Forms 1099 and 2,100 Forms 1042-S for 2026. The CP2100 lists 410 mismatches, 300 of them suppliers created by departments without a W-9 and 110 students and subjects whose SSN was transcribed by hand.
Separately, an IRS foreign vendor examination finds 35 visiting scholars paid $610,000 on W-9s who were nonresident aliens; the 30 percent not withheld, $183,000, is the university's liability under section 1461 unless the scholars' own returns paid it (Form 4669 relief).
The 972CG on the 410 returns is $139,400 at $340, defensible for the 110 transcription errors if the solicitation record exists and not for the 300 department suppliers, which were never solicited.
Annual maximum at the $340 rate: $4,191,500, or $1,397,000 for a filer with average gross receipts of $5 million or less. Section 6722 charges the same amounts again for the payee statements. Returns due in 2027, Rev. Proc. 2025-32. Full tables: the 972CG estimator and the figures page.
Questions universities and agencies ask
Is an honorarium a 1099-NEC or a 1099-MISC?
NEC when it pays for a service (a lecture, a review, a performance), which most honoraria do. Box 3 of the MISC only when it is a prize or award with no services required. Either way the threshold is $2,000 for 2026 payments.
A visiting scholar has a Social Security number. Can we take a W-9?
Only if the scholar is a U.S. person: a citizen, a green card holder or someone who meets the substantial presence test. Many F, J, M and Q visa holders are exempt from counting days for years, so an SSN proves nothing. Determine status first (the foreign vendor guide has the test); a W-9 from a nonresident is the Park problem.
Does a government agency get penalized for missing TINs?
Yes. The 6721 and 6722 penalties and the CP2100 process apply to federal, state and local payers alike; the IRS's own advisers have asked for better training for government filers moving from FIRE to IRIS, not for an exemption.
Research subject payments are under $50 each. Do we need TINs?
You need the TIN once the year's payments to one subject reach the reporting threshold, and you cannot know in advance who will. Collect it at enrollment for any study that could pay a subject that much; many institutions set a lower internal threshold for that reason.
We paid a foreign vendor for software used in the U.S. Is that a 1042-S?
Royalties for the use of intangible property in the United States are U.S.-source and reportable on 1042-S with 30 percent withholding or a treaty rate; a purchase of a copyrighted article is not. The chapter 3 guide explains the distinction and the treaty claims guide the W-8BEN-E lines.
Form 1042 must now be e-filed. We file one a year.
That is the IRSAC's own complaint: the Modernized e-File route needs a schema, testing and either an EFIN or a provider. The EFIN guide and the reject rules guide are the two pages to read before the fall.
What the IRS and the courts have said about institutional payers
- Park v. Commissioner, 136 T.C. 569 (2011), rev'd in part, 722 F.3d 384 (D.C. Cir. 2013) (docket record): a nonresident alien who signed a W-9 certifying U.S. status was still subject to 30 percent withholding and 1042-S reporting; the payer's reliance on the form was protected, and the false form became evidence against the payee.
- Chief Counsel Advice 202547016: the W-2G and 1099 thresholds protect only domestic payees; the moment documentation shows a foreign person, the payment moves to the 1042-S system from the first dollar, treaty permitting otherwise.
- Chief Counsel Advice 200101031: a charity's Form 8282 without the donor's TIN draws an automatic penalty notice, and the waiver is won afterward by proving the solicitation and the refusal; the same path as any 1099 penalty.
- Chief Counsel Advice 201533012: a county clerk forwarding garnished funds to an attorney is a conduit and files no 1099; routing money through an office does not make the office the payer.
- Chief Counsel Advice 201221018 and 200040034: state unclaimed property offices: interest on a decedent's funds is reported under the decedent or the estate, not the claimant, and an office may require the estate EIN before paying.
- Pantano Baptist Church v. Commissioner, T.C. Summary Opinion 2018-3 (docket record): an organization that ignored its CP215 penalty notices and the levy notice lost the right to contest the W-2 penalties at all; the institutional lesson is that a notice routed to the wrong office is still a notice received.
The foreign payee topic of the finder has the chapter 3 rulings. On the oversight side, the NTA's 2025 Annual Report (Most Serious Problem 10) documents Form 8233 and Form 8802 processing delays and the 2025 FIFA Club World Cup experience, and asks the IRS to publish guidance before the 2026 World Cup and 2028 Olympics; the advisory tracker has the entry.