Nonprofits must issue 1099s to independent contractors, but the rules differ slightly from for-profit businesses
Yes, nonprofits issue 1099s. A nonprofit organization that pays an independent contractor $600 or more in a calendar year must send that contractor a Form 1099-NEC (Nonemployee Compensation) by January 31 of the following year. The IRS treats this requirement the same way for nonprofits as it does for regular businesses — the threshold is $600, the form is the same, and the important date is the same.
The key difference is what nonprofits do not have to report. Nonprofits are exempt from issuing 1099s for payments to other nonprofits, payments for goods (as opposed to services), and payments made to corporations. A nonprofit that hires a freelance graphic designer must send a 1099-NEC. A nonprofit that buys office supplies from a vendor does not, even if the purchase exceeds $600.
Nonprofits also do not issue 1099s to employees, regardless of how much they earn. If someone is on payroll, they receive a W-2 instead. The distinction between contractor and employee matters just as much for nonprofits as for any other employer.
Key Takeaways
- Nonprofits must issue 1099-NEC forms to independent contractors paid $600 or more in a single calendar year, just like for-profit businesses do.
- Payments to other nonprofits, payments for goods only, and payments to corporations do not require a 1099.
- Nonprofit employees receive W-2 forms, not 1099s, regardless of salary amount.
- The 1099-NEC must be sent to the contractor by January 31 and filed with the IRS by the same important date.
- Nonprofits must have the contractor's tax ID (usually their Social Security number or EIN) before issuing a 1099.
When a nonprofit must issue a 1099-NEC
A nonprofit issues a 1099-NEC when it pays an independent contractor for services and the total reaches $600 or more in a single calendar year. "Services" means work performed by a person who is not an employee — consulting, freelance writing, contract labor, professional fees, and similar arrangements. The $600 threshold is cumulative, so if a nonprofit pays a contractor $400 in January and $300 in June, a 1099-NEC is required.
The nonprofit must report the total amount paid to that contractor during the year. If the nonprofit paid the contractor through multiple invoices, checks, or payments, all of those amounts add together toward the $600 threshold. The nonprofit does not issue separate 1099s for each payment — one form per contractor per year covers all payments made to that person.
Payments that do not require a 1099
Nonprofits do not issue 1099s for payments to other nonprofits, even if the amount is large. If a nonprofit pays another nonprofit $5,000 for a service or program, no 1099 is required. The receiving nonprofit's tax-exempt status means it falls outside the 1099 reporting requirement.
Payments for goods only — not services — also do not require a 1099. If a nonprofit buys $2,000 worth of supplies, equipment, or inventory from a vendor, no 1099 is issued. The distinction is whether the nonprofit is paying for a thing or paying for work. A nonprofit that hires a contractor to build a website sends a 1099. A nonprofit that buys software licenses does not.
Payments to corporations do not require a 1099-NEC, even for services. If a nonprofit hires a consulting firm (a corporation) to do strategic planning, the nonprofit reports that payment on a different form — Form 1099-NEC is only for individuals and sole proprietorships. Payments to corporations are tracked differently by the IRS.
How to collect contractor information before issuing a 1099
Before a nonprofit can issue a 1099-NEC, it needs the contractor's tax identification number. For most individuals, this is their Social Security number. For contractors who operate as sole proprietors or partnerships, it may be an Employer Identification Number (EIN). The nonprofit should request this information when the contractor is first hired, not at the end of the year.
The standard way to collect this is through a Form W-9, which the contractor fills out and returns to the nonprofit. The W-9 asks for the contractor's name, address, tax ID, and business structure. The nonprofit keeps the W-9 on file and uses the tax ID from it to complete the 1099-NEC. If a contractor refuses to provide a tax ID, the nonprofit should not hire them — the IRS requires this information before payment can be made.
important date for sending and filing 1099s
The nonprofit must send a copy of the 1099-NEC to the contractor by January 31 of the year following payment. At the same time, the nonprofit files copies with the IRS and, in most states, with the state tax authority. The important date for filing with the IRS is also January 31, though the IRS sometimes extends this important date by a few days.
If a nonprofit misses the January 31 important date, it should file as soon as possible. The IRS charges penalties for late 1099 filing, but the penalty is smaller if the form is filed within 30 days of the important date than if it is filed much later. A nonprofit that realizes in March that it forgot to send a 1099 should send it when ready and file with the IRS right away.
How nonprofits track and report 1099 payments
Most nonprofits use accounting software or a bookkeeper to track contractor payments throughout the year. When a contractor invoice is paid, the nonprofit records it in a way that flags it as a 1099 payment — separate from employee payroll and separate from vendor payments for goods. This makes it easier to pull together all 1099 amounts at year-end.
At the end of the year, the nonprofit or its accountant gathers all contractor payments that total $600 or more and prepares the 1099-NEC forms. The nonprofit will need the contractor's name, address, tax ID, and total amount paid. Many nonprofits use tax software or hire a tax preparer to generate the forms correctly, since errors on a 1099 can trigger IRS notices to both the nonprofit and the contractor.
What happens if a nonprofit does not issue a required 1099
If a nonprofit fails to issue a 1099-NEC to a contractor who should have received one, the IRS may penalize the nonprofit. The penalty starts at $50 per missing or incorrect form if the nonprofit files within 30 days of the important date, and increases if the filing is later. For nonprofits with limited budgets, these penalties add up quickly if multiple 1099s are missed.
Beyond the penalty, a missing 1099 can cause problems for the contractor, who may not report the income correctly to the IRS. If the IRS later audits the contractor and finds unreported income, the contractor may face back taxes and interest. The contractor may then contact the nonprofit asking why they did not receive a 1099. Issuing the form on time protects both the nonprofit and the contractor.
Frequently Asked Questions
Do nonprofits have to issue 1099s to volunteers?
No. Volunteers are not paid, so there is no payment to report. If a nonprofit gives a volunteer a small gift or reimbursement for out-of-pocket expenses, that is not considered taxable income and does not require a 1099.
What if a nonprofit pays a contractor less than $600 in a year?
No 1099 is required. The $600 threshold is a hard rule — if the total paid to a contractor in a calendar year is $599, the nonprofit does not issue a 1099. However, the nonprofit should still keep records of the payment in case the IRS asks about it later.
Can a nonprofit issue a 1099 to a contractor who did not provide a tax ID?
No. The nonprofit cannot complete a 1099-NEC without the contractor's tax identification number. If a contractor refuses to provide one, the nonprofit should not make the payment. The contractor must complete a W-9 before work begins.
Do nonprofits report 1099s differently than for-profit businesses?
The form and important date are the same for nonprofits and for-profit businesses. Both use 1099-NEC and both file by January 31. The main difference is that nonprofits do not issue 1099s to other nonprofits, whereas a for-profit business would issue a 1099 to any independent contractor regardless of their business structure.
What if a nonprofit hires the same contractor in multiple years?
A separate 1099-NEC is issued each year the contractor is paid $600 or more. If a nonprofit pays a contractor $800 in 2023 and $900 in 2024, the nonprofit issues one 1099-NEC in January 2024 (for 2023 payments) and another in January 2025 (for 2024 payments). Each form covers only the payments made in that specific calendar year.