The IRS Form 1099-MISC must be filed by churches and nonprofit organizations to report payments of $600 or more made to independent contractors for services rendered during the year. The 1099-MISC must be submitted to the recipient and the IRS by January 31st, and it must be accompanied by Form 1096, which summarizes the total payments included on all of the 1099s. Independent contractors who may require 1099 include repairmen, accountants, attorneys, cleaning services, and lawn care services, among others. Churches and nonprofit organizations should obtain a completed and signed W-9 from independent contractors before making payments and keep it on file, even if they do not believe they will be required to send them 1099.
Form 1099-MISC to independent contractors…
NOTE: Starting in January 2019, “employer 1099s face intense scrutiny. A primary reason is that the IRS’ believes that there is a lot of underreporting by independent contractors (ICs) that results in their not paying enough income tax.”
Your church or nonprofit organization should send an IRS Form 1099-MISC to independent contractors…
that you paid amounts $600 or more in rent, services, prizes and awards, and other income payments. (See below for comments from an IRS agent regarding this subject.)
Note: when your church hires someone to perform services such as janitors, secretaries, nursery workers, etc., they are not usually considered independent contractors.
They are most likely considered employees and should be issued W-2s. One of the biggest errors churches can make is incorrectly classifying an individual.
Generally, an independent contractor is a person over whom you do not exercise financial and behavioral control.
Examples of Independent Contractors…
If you do determine an individual is an independent contractor, payments for services go in box 7 – Nonemployee compensation (on a 1099-MISC).
Some examples of independent contractors may include repairmen, accountants, attorneys, cleaning services, and lawn care services.
Revival ministers, supply preachers, and guest speakers are usually classified as independent contractors and should be issued 1099 if the total paid to them in the year was $600 or more.
If your church or nonprofit rents from an individual, you should probably send them 1099. The amount would be recorded in Box 1.
You do NOT send 1099s to:
- Nonprofit organizations/churches
- Corporations (Exception: Attorneys who do business as corporations must receive 1099s!)
- Independent Contractors you paid electronically (“Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC”… an excerpt from IRS1099 Instructions)
You should not pay an independent contractor until you have received a completed and signed W-9.
Use Form W-9 “Request for Taxpayer Identification Number and Certification” to obtain names, addresses, and taxpayer identification numbers (SSN or FEIN) from people you will be required to provide form 1099-MISCs.
Have all independent contractors fill out a W-9 even if you think they are incorporated. If they are, there is a place on the W-9 for them to indicate they are incorporated.
Note: Churches should require all guest speakers to complete a W-9 and then keep that completed W-9 on file … even if they do not believe they will be required to send them 1099.
The Church Accounting: How To Guide devotes a whole section of the book to payroll for churches. It covers payroll terminology and forms and then takes you through the steps necessary to set up a payroll, calculate and file the necessary taxes and forms, and even details how to handle the minister’s payroll. It also includes sections on filling out IRS forms: 1099 and 1096.
If you have QuickBooks or are considering using it in the future, go ahead and purchase the QuickBooks for Churches and the How To Guide combo for a complete package on setting up and administering a payroll using QuickBooks.
Due Date for Form 1099-MISC
The period for which you report payments is the calendar year, not your fiscal year. The forms must be “furnished to recipients” and to the IRS by January 31! That due date applies to paper and electronic filings!
*Notice: You cannot download a usable 1099 from the web! The original that’s filed with the IRS is printed in red ink and is read by a scanner.
You can order forms from the IRS at no charge, or purchase them from an office supply store. You can reach IRS at 1-800-TAX-FORM to request the ones you need.
Make sure to get the transmittal form too!
It is Form 1096. Form 1096 is the cover page for the 1099s that will be submitted to the IRS. 1096 summarizes the total payments included on all of the 1099s.
Your Pastor’s compensation should NOT be reported on 1099 as ministers are usually considered employees of their churches! (There are instances where you MIGHT be able to report a minister’s compensation on 1099, but do not make that determination on your own. Consult a knowledgeable CPA!)
If you are eligible to report a minister’s compensation on 1099 DO NOT include their housing allowance payments!
Completing a Form 1096
Electronically filing 1099s is the easiest way to file 1099s! If you file your 1099s you can skip the 1096 form, but be aware that you will pay a fee to electronically file your 1099s with one of the IRS-recommended vendors.
How to paper file 1099s:
- Fill in your church/nonprofit’s information. Check the box at the bottom to indicate the type of form being filed. For example, check the box for 1099-MISCs if you are filing 1099-MISCs.
- Fill in the number of (1099-MISCs) forms you issued on line 3.
- Fill in the total amount of payments from your forms (1099-MISC) on line 5.
- Sign your name, title, and date.
- Remove pin-feed strips before sending. Be careful not to tear the form while pulling them off.
- Do NOT fold the forms! Mail them in a flat envelope.
- Mail to the correct IRS address. Addresses are on the front and back of Form 1096.
Need training on how to use QBO or Aplos effectively for a church or better yet need an expert in either of that accounting software to do your monthly bookkeeping and/or payroll? See more on our accounting services!
Conclusion
churches and nonprofit organizations must file IRS Form 1099-MISC for independent contractors who have been paid $600 or more during the year for services rendered. The form must be submitted to the recipient and the IRS by January 31st and accompanied by Form 1096, which summarizes the total payments included on all the 1099s. Independent contractors, such as repairmen, accountants, attorneys, cleaning services, and lawn care services, may require 1099. Churches and nonprofit organizations should obtain a completed and signed W-9 from independent contractors before making payments, even if they do not believe they will be required to send them 1099. Guest speakers and revival ministers should be issued 1099 if the total paid to them in the year was $600 or more. Churches should also require all guest speakers to complete a W-9 and then keep that completed W-9 on file. The due date for filing 1099s is January 31st, and churches should order forms from the IRS at no charge or purchase them from an office supply store. Churches should also make sure to get the transmittal form, Form 1096, which summarizes the total payments included on all the 1099s. Pastors’ compensation should not be reported on 1099 as ministers are usually considered employees of their churches.
FAQ
What is Form 1099-MISC?
It is a form that churches and nonprofit organizations file to report payments of $600 or more made to independent contractors for services rendered during the year.
Who should file Form 1099-MISC?
Churches and nonprofit organizations should file Form 1099-MISC when they pay $600 or more to an independent contractor for services rendered during the year.
When is the deadline to file Form 1099-MISC?
Form 1099-MISC must be submitted to the recipient and the IRS by January 31st.
What should accompany Form 1099-MISC when filed?
Form 1096 must accompany Form 1099-MISC when filed, which summarizes the total payments included on all of the 1099s.
Who are independent contractors that may require 1099?
Independent contractors who may require 1099 include repairmen, accountants, attorneys, cleaning services, and lawn care services, among others.
What is the difference between an independent contractor and an employee?
Generally, an independent contractor is a person over whom you do not exercise financial and behavioral control, whereas an employee is someone who is subject to the employer’s control over the manner, method, and means of performing work.
What should be included in Box 7 of Form 1099-MISC?
Payments for services rendered by independent contractors should be included in Box 7 – Nonemployee compensation on Form 1099-MISC.
Who should not receive Form 1099-MISC?
Nonprofit organizations/churches, corporations (except attorneys who do business as corporations), and independent contractors paid electronically (through credit cards, payment cards, or third-party networks) should not receive Form 1099-MISC.
Why should you require independent contractors to fill out Form W-9?
You should require independent contractors to fill out Form W-9 to obtain their names, addresses, and taxpayer identification numbers (SSN or FEIN) before making payments and filing Form 1099-MISC.
Should pastors’ compensation be reported on Form 1099-MISC?
Pastors’ compensation should not be reported on Form 1099-MISC as they are usually considered employees of their churches.