Different accounting and tax rules apply to nonprofit organizations compared to for-profit businesses, but a nonprofit still has to issue 1099 forms. A Form 1099 must be issued to every non-employee, vendor or independent contractor who has provided services to the nonprofit totaling more than $600 during the previous tax year.
What Is the Form 1099?
While there are different versions of Form 1099s, the one that most nonprofits should be aware of is Form 1099-MISC. This must be issued whenever $600 or more is paid to a non-employee for services. For example, this could be fees paid to consultants, contractors or temporary laborers. The sum of $600 includes all payments for the service over the course of an entire tax year, and should include the costs of parts or supplies related to the service.
A Form 1099-MISC is also required for the payment of rents, prizes and awards, legal fees and medical and health care payments.
Generally, Form 1099s need to be issued only to individuals, sole proprietors and partnerships. However, they should be issued to corporations in respect to legal fees or medical and health care payments of $600 or more.
Read More: When to Issue a 1099 Form
Issuing a Form 1099
Information required to issue a Form 1099 is the service provider's legal name, address and taxpayer identification number (TIN). For most self-employed vendors and small business owners, the TIN is their Social Security number. The nonprofit can ask for this information at the time of payment. However, the information can also be obtained via a Form W-9, which the recipient is legally obliged to complete, sign and return.
Completing the Form 1099
Every Form 1099 issued by a nonprofit organization must fit into a certain classification, with different categories for specific types of payments, such as rent, royalties, crop insurance proceeds and fishing boat proceeds. The form contains numerous boxes, but most typically remain blank. It’s important to follow the directions provided with the form and state the type of payment related to this Form 1099.
An account number is required for every Form 1099 issued, even if several Form 1099s are for the same vendor. If the nonprofit has only one account number with a vendor but the vendor has provided more than one service, a different account number must be created for each Form 1099.
Deadlines for Form 1099
A nonprofit has until Jan. 31 following a tax year to issue a Form 1099 to each individual or business that has received payments amounting to at least $600 over the previous year. Deadlines for filing Forms 1099s vary, depending on the particular form. For instance, copies of all 1099-MISC forms that are issued should be sent to the Internal Revenue Service by Feb. 28 if filed by mail, or March 31 if filed electronically. However, if you are reporting nonemployee compensation (NEC) payments in box 7 on Form 1099-MISC, it must be filed on or before Jan. 31, whether you file by mail or electronically.
If more than 250 Form 1099s (or other information returns, like W-2s) are issued, they must be filed electronically.
There may be serious penalties for issuing forms late, so it is important to stick to IRS deadlines.
Employees of a Nonprofit
Employees of a nonprofit organization do not need to be issued a Form 1099-MISC. The same applies to any non-employee who has provided a one-off service for the nonprofit that does not amount to $600. For instance, if a carpenter is hired to build storage for the nonprofit’s office and he charges $400, there is no need for a Form 1099-MISC. Generally, the Form 1099-MISC is needed for non-employees with which the nonprofit has an ongoing working relationship.
Other Types of 1099s
Other types of Form 1099s include Form 1099-INT, which reports interest collected. A nonprofit may need to issue this if it issues low-interest loans. If a nonprofit cancels debt, the Form 1099-C must be issued. Other types of Form 1099 generally apply to for-profit businesses only.
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