Form 1099-MISC and Form 1096

Form 1099-MISC communicates to the IRS and the recipient the amount of money your organization paid to the recipient during the year.

Note: Churches are not exempt from filing 1099s!

Form 1099-MISC to independent contractors...

Form 1099-MISC Information and Instructions

Your church or nonprofit organization should send an IRS Form 1099-MISC to independent contractors...

that you paid $600 or more in rents, 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. See this article on Misclassification of Workers.

See this page on the IRS site for more clarification on that issue:

Independent Contractor (Self-Employed) or Employee?

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 contractors, 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 a 1099 if the total paid to them in the year was over $600.

If your church or nonprofit rents from an individual, you should probably send them a 1099. The amount would be recorded in Box 1. See this post:  "Churches Issuing Form 1099-MISC to Landlords" in the Ministry CPA's Blog.

Do not send a form 1099-MISC’S to a corporations!

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, address, 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 is they do not believe they will be required to send them a 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.

QuickBooks for Churches & Church Accounting Combo Bundle

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” by the end of January and to the IRS by the end of February...unless you electronically file them. If you efile you have until the end of March. (See more about efiling 1099s at the end of this article.)

*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.

Important: The IRS has made changes to the 1099 and 1096 forms for Tax Year 2013. They have changed the sizing and formatting on some of the boxes on the forms.

Example:

A large part of Box 7 on the Form 1099 is now shaded red. In order for the IRS scanners to read the form, the dollar amounts need to be printed in the unshaded white part of the box. If you print the dollar amount in the red shaded area, the IRS scanners may not be able to pick up the amounts.

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. The 1096 summarizes the total payments included on all of the 1099s. Click here to view instructions for the IRS form 1099.

Completing a Form 1096

  1. 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.
  2. Fill in the number of (1099-MISCs) forms you issued on line 3.
  3. Fill in the total amount of payments from your forms (1099-MISC) on line 5.
  4. Sign your name, title, and date .
  5. Remove pin-feed strips before sending. Be careful not to tear the form while pulling them off.
  6. Do NOT fold the forms! Mail them in a flat envelope.
  7. Mail to the correct IRS address. Addresses are on the front and back of Form 1096.

Notice: If you efile 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. See IRS Pub 1220.

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