<p>Yes, I recognize that reporting in box 7 generally indicates an independent contractor, otherwise this conversation wouldn’t be necessary. However, included in the IRS description of the 1099 Misc form includes for box 7 (my italics):</p>
<p><a href=“http://www.irs.gov/instructions/i1099msc/ar02.html#d0e900”>http://www.irs.gov/instructions/i1099msc/ar02.html#d0e900</a></p>
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<p>The way I read it, there are exceptions to the box 7 = independent contractor rule. And it also sounds like the REUs submitted these stipends incorrectly in box 7, they should have put them in box 3 since these students are conducting the research with strong supervision which doesn’t fit under the definition of independent contractor.</p>