The dreaded 1099 form….

One of the biggest tasks we face each year is helping churches issue their 1099 forms before the January 31^st deadline.  Imagine running a hot summer marathon after drinking a gallon of milk.  That is what 1099 season can feel like!

It involves reviewing every non-employee paid through out the year, finding pertinent information for those paid more than a certain amount, and then preparing and sending each of them the required tax form.

Save yourself a headache, and possible fines, by understanding what 1099 is and collecting the necessary information throughout the year.  Don’t wait until they are almost due!

Churches are generally required to provide Form 1099-MISC (or Form1099-NEC) to individuals or businesses they have paid for services during the year under certain conditions.

The key situations include:

1. Independent Contractors or Freelancers:

If a church hires an independent contractor and pays them $600 or more in a year for services rendered (such as a guest speaker, consulting, music, or landscaping/repairs), the church must issue a 1099-NEC form to report those payments. 

Perhaps you didn’t pay the guest speaker or musician $600.  Is it important to have them fill out a w-9 form and collect the information needed for the1099?  Maybe. 

The IRS states a 1099 should be filled out for anyone you pay $600 or more in a year. What if this person helps out more than one time?  Could they hit the threshold by year end? It is easier to get the data you need while they are standing in front of you than trying to contact them at the end of the year.  Get it up front!

2. Non-Employee Compensation:

If a church pays non-employee compensation of $600 or more, this should be reported on Form 1099-NEC Many churches don’t classify staff as employees and instead pay staff stipends. (staff pastors, paid volunteers, interns, janitors, etc.) Those staff must recieve a 1099 form.

3. Rental Payments:

If the church pays $600 or more in rent for office space, land, or other rental property, and the landlord is not a corporation, the church is required to issue a 1099-MISC form.

4. Attorney Fees:

If a church pays an attorney $600 or more for legal services, even if the attorney is incorporated, a 1099-MISC should be issued.

5. Other Miscellaneous Payments:

Churches must also provide a 1099-MISC for other types of payments, such as prize winnings, royalty payments, or certain types of insurance proceeds, if these payments meet the $600 threshold.

Exceptions:

Churches do not need to issue 1099 forms to employees. These are reported through Form W-2 instead.

Churches typically do not need to issue 1099 forms to corporations (with some exceptions, such as for legal services or medical payments)

Hopefully you have a better understanding of 1099 requirement.  A little work through the year can change the 1099 marathon into a short walk through the park.  Trust us, it is worth it!