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 6721 applies to governmental entities with no small-business cap.
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.