It’s that time of year. Not Fourth of July. Not Thanksgiving. Not St. Patrick’s Day. It is time to gather data and …
Prepare your IRS Form 1099 for taxes!
Here is everything you NEED to know about IRS Form 1099.
WHO do I send a 1099 to?
Nonprofit organizations, churches, colleges and universities need to get ready to prepare IRS Form 1099-miscellaneous for the tax season. The federal government has conveniently prepared a document entitled instructions to Form 1099-MISC. This provides the ins-and-outs of preparing this form. It gives you the “nitty gritty”, however, this article includes some of the regulations in a simpler-to-understand format.
Your organization uses Form 1099-miscellaneous to report payments you have given to independent contractors (To further understand how contractors are different from employees, click to read THIS post) and miscellaneous employees over the last year. This includes monies the organization paid as prizes, awards, money paid to landlords, and other random payees.
Who Receives a Form 1099-MISC?
If your organization paid a non-employee more than $600 as compensation for services during a one-year period, you need to report the earnings on Form 1099-misc.
You provide a 1099 to the following :
Deceased employees. Report accrued wages, vacation pay, and other compensation paid after the year of death for any employees who died during the year.
Directors who receive directors’ fees and other remuneration, including payments made after retirement.
Independent contractors.
Individuals.
Limited liability companies, so long as they are single-member disregarded entities or have elected to be taxed as a partnership.
Lawyers and other providers of legal services regardless of their business form, including law firms. Report attorneys’ fees of $600 or more paid in the course of your business. Report any other payments of $600 or more made to an attorney such as a settlement agreement.
Partnerships, including limited partnerships and professional partnerships.
Sole proprietorships.
Your organization does NOT need to send Form 1099-misc to the following;
C corporation.
S corporation.
Professional corporation (except for law firms; see above) and payments for medical or health care services.
Limited liability company that has elected to be taxed as a C corporation.
Limited liability company that has elected to be taxed as an S corporation.
Tax-exempt organization.
Employees to whom you paid business travel allowances.
Form 1099-MISC is prepared on a cash basis.
IRS Form W-9
Now, let’s take a look at IRS Form W-9. You will use information provided by your independent contractors W-9 to help complete the Form 1099-misc. Each contractor should complete a Form W-9 before your organization makes one payment to the contractor.
The W-9 shows taxes that you need to withhold. If your organization does not withhold the appropriate sum, the IRS can hold your organization liable for the amount you should have paid.
Credit Card, Debit Card, or Third-Party Payment Services
If your organization uses a credit card, debit card, or third-party payment service to pay vendors, the IRS does not require you to include these payments on Form 1099-misc. The payments will be reported on Form 1099-K by your payment service processor.
When you have questions about preparing your IRS Form 1099, contact TBFoster Accounting to get your answers. We have ideas to share and solutions to management and organizational questions. Keep in touch with our blog. If you have questions about IRS Forms any other not-for-profit industry topics, contact our not-for-profit team leader at trent@tbfosteraccounting.com.
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