Any organization that meets the filing requirements is required to complete 1099s, regardless of tax-exempt status. Form 1099 is a required IRS report that documents the amount of certain types of income paid to an individual. Most commonly, these are sent to people who provided a paid service for your organization, such as a contractor or vendor. Generally, 1099s are required if the amount paid exceeds $600 in a year, although there are some exceptions for other forms of income.
If you aren’t sure whether you should issue a 1099, we recommend consulting with a CPA or trusted professional for tax or accounting advice.
When Are 1099s Due?
1099s need to be mailed by January 31 each year. You can purchase the necessary forms at office supply stores, and then use Aplos Accounting to make it easy to print your report. These are then mailed to the contractor or vendor.
Your nonprofit organization will also need to file a 1096 with the government, which is basically a list of all the 1099s you sent out. Typically, when you buy a pack of 1099s from the store, it will come with the 1096 and instructions for filing it. The filing deadline for 1096 forms is also January 31.
Which 1099 Form Do You Need To File?
There are many different types of 1099 forms. These variants are based on the income source, but here are some of the more common ones:
The IRS made significant changes for 1099 reporting for the 2020 tax year. Beginning in January, 2021, the 1099-NEC form will now be used for reporting nonemployee compensation (NEC) payments. Previously, this was noted in a box on the 1099-MISC form.
Nonemployee compensation is one of the most common types of payments made by nonprofits and churches that will need to be reported on a 1099. Generally, you must issue a 1099-NEC if all the following conditions are met:
- You made the payment to someone who is not your employee.
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
- You made the payment to an individual, partnership, estate, or, in some cases, a corporation.
- You made payments to the payee of at least $600 during the year.
Review the full IRS guidelines for 1099-NEC instructions on qualified payments or consult your accountant for advice.
Prior to the 2020 tax year, the 1099-MISC was frequently used by nonprofits and churches. However, since the new 1099-NEC form accounts for the nonemployee compensation, there will be some organizations that won’t use the 1099-MISC form as much going forward. Learn more about the changes for the 2020 tax year on the IRS website.
Organizations will need to fill out a form 1099-MISC if they paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest, or if $600 or more per year is paid in the following circumstances:
- Prizes and awards
- Other types of payments not covered by another information reporting document
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Any fishing boat proceeds
- Medical and healthcare payments
- Crop insurance proceeds
- Payments to an attorney
- Section 409A deferrals
- Nonqualified deferred compensation
Still not sure which 1099 form you should issue? We recommend consulting with a CPA or trusted professional for tax or accounting advice.