Whether you’re a calendar year or fiscal year filer, January will prompt a number of organizational due-dates for your nonprofit. One of these that you’re likely to face, as a small organization without much in the way of payroll, are filing requirements for 1099 and 1096 forms. You’ve probably received a 1099 yourself at some point, but as an organization – do you need to send 1099s?
What is a 1099?
A 1099 form is used to report certain non-salary income to earners of that income and to the IRS for tax purposes. There are all kinds of different income categories and different form types under the 1099 umbrella. For most small nonprofit organizations, it’s nonemployee compensation and the 1099-MISC form that we need to focus on.
In general, you are required to provide a 1099-MISC form to human beings not on payroll that you paid $600 or more in compensation during the prior calendar year. 1099 forms need to be provided to the people you paid by Jan 31, with an additional 1096 summary form sent to the IRS by February 28.
In most cases, the income that we’re reporting is called nonemployee compensation, which is basically income paid to a human being that compensates them for work performed for your organization. Nonemployee means that this person is not an employee of the organization and doesn’t have their income already reported on a W-2 payroll form. Most commonly this is a contractor or independent professional. Nonemployee compensation is reported in box 7 on the 1099 and 1096 forms.
Collecting Info with a W-9
To complete filing of 1099 and 1096, you’ll need certain information from your contractors. That’s what form W-9 is for. It should be filled out by anyone doing work for your organization, even if you’re not sure that they’ll get a 1099 at year-end. You can download a W-9 form here.
How to Complete 1099
Once you have W-9s for all of your contractors, you’re ready to fill out 1099s and complete your 1096. There are several e-file services available for this, and you can even fill them out by hand. Spend a little time on Google to figure out what method works best for you. In all cases, the basic process is:
1) Run a financial report to determine total compensation paid to each contractor.
2) Fill out a blank 1099 form for each contractor. Personal information goes in the upper left, nonemployee compensation goes in box 7. There are multiple duplicates that need to be filled out too.
3) Send 2 copies to the recipient. You’ll also have copies to send to the IRS and to the state.
4) Complete form 1096, which summarizes all 1099 forms submitted. This completed form, along with the 1099 copies from step 3, will be sent to the IRS. Also, depending on what state you’re in, there may be an additional summary form that needs to be submitted to the state taxation authority.
Running a Contractor Summary with Tiny Opera House
If you’re a Tiny Opera House user, this video will walk you through preparing the financial summary for your contractors.
1099 and 1096 filing are some of the more tedious requirements of running a nonprofit organization. But after you’ve gone through the process once, you’ll see that it’s not really that bad. And Tiny Opera House is here to help if you need it.
Note: This article is intended to provide basic information and prompt further research. There are some nuanced areas, like in the definition of who should receive a 1099 and specific filing requirements by state, that we aren’t able to cover in a blog post. For more detailed information, consult a professional tax preparer and review IRS instructions.