1099-NEC Form Prize Money

Forum|Forum|1 year ago
March 25, 2025
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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?

Best answer by KrisD15

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)