One of our colleges within our university is doing a contract with a vendor for tutoring services for some middle school students. The college will be selecting students for the tutoring opportunity through an application process...


Q. (cont.) The tutoring services ordinarily cost $850 per student, but the vendor would be extending a discount to the university for $250 per student. Are we obligated to 1099 report (or 1042-S report, if applicable) the benefit these students are receiving? If so, how is it best reported, on a 1099 or 1042-S? Other income? And would we use the fair market value of $850 or the cost the university incurred? I'm under the assumption it would be the FMV. Thank you in advance.

A. We spoke with IRS reporting specialist Ms. Lewis (#1003078897). She informed me that while you must report the payment you make to the vendor (provided the vendor is not a corporation), you do not need to report anything to the students. You would report the actual payment to the vendor, not the fair market value

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