Fees Paid to Informers. A payment made to an informer as an award, fee, or reward for information about criminal activity is not required to be reported if the payment is made by a federal, state or local government agency, or by a non-profit organization exempt from tax under 501(c)(3) that makes the payment to further the charitable purpose of lessening the burdens of government.
Wow. We are now paying so many confidential informants (wooops, I mean… “cooperating individuals”) that the issue of whether they must be 1099’d is addressed on the first page of the instructions.
[Update: since initial posting, Greenfield elaborates, "A Nation Of Rats"]