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Are 1099s Required for My Nonprofit?

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Corinne

1099s are an important part of running any entity, and nonprofits are no exception. In fact, tax-exempt organizations have to issue 1099s under the same circumstances that require for-profit businesses to do so. If you are unsure of these situations, read on to learn more about the basics of nonprofit 1099s.

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What Is Form 1099?

Form 1099 is a tax form that one party (the payor) sends to another party (the payee). It reports that the payee completed at least $600 worth of work over the course of a year. The Internal Revenue Service (IRS) requires the corporation to issue a Form 1099 to the payee so that they can report their wages for that calendar year. This form is similar to a W-2 except it is for nonemployee compensation.

Before a vendor begins work for your tax-exempt organization, you must send them a copy of Form W-9. This form collects important information, such as the individual’s Taxpayer Identification Number (TIN), so that you can issue a proper 1099 at the end of the year.

are-1099-required-for-nonprofits-what-isMatthew is ready to get up to speed on 1099s for his nonprofit!

On the flip side, your nonprofit can also be a contractor for a business or another organization. When that is the case, you have to fill out Form W-9 at the beginning of the year and wait for Form 1099 at the end of the year.

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Is Form 1099 a Nonprofit Requirement?

If you meet the following four conditions, you need to issue a 1099:

  • You made a payment to someone who is not your employee.

  • You made a payment for a service.

  • You made a payment to an individual, partner, vendor, company, or estate.

  • You made payments to a single payee that total at least $600 within the span of a year.

In addition to sending this form to any independent contractors, freelancers, or vendors that meet these conditions, you also have to include this information in a section of your nonprofit’s tax form.

Pro Tip: If you are still not sure if you need to file a 501c3 1099, request guidance from a tax attorney or accountant or the IRS website. The penalties for missing or incorrect forms can be costly and time-consuming, so you want to have a clear grasp of the IRS requirements and instructions.

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What Happens if You Do Not File Form 1099?

You have until January 31 of the following year to submit your 1099s. Failure to file may lead to IRS penalties for each statement you do not send. The penalty varies from $50 to $270 per form.

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Final Thoughts

Form 1099 is not mandatory for all nonprofits. If you do not use freelancers or your freelancers do not do work that amounts to over $600, then this is not a required tax form for you.

Form 1099 is just one part of the confusing nonprofit tax code. If you have questions about how 1099s relate to donations, payments, royalties, wages, employees, and more, use our Springly blog as your one-stop shop for guidance.

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FAQ

💡What is Form 1099?

Form 1099 is an IRS tax document that you send to every freelancer you hired over the course of the tax year who did at least $600 of work for you. Find out more. 

🔑 Is Form 1099 required for my organization?

It is required if you pay someone who is not an employee $600 or more in a year. Find out more. 

📝 What happens if I forget to file Form 1099?

Failing to report 1099s can lead to a monetary penalty for each form that you miss. Find out more.

 

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Corinne
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