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Although a nonprofit is tax-exempt, this does not mean that all payments it makes are exempt from information reporting. If a nonprofit uses freelance workers, consultants, legal counsel, landlords, health care providers, or any other outside vendor, it may still need to file a Form 1099.
The main nonprofit 1099 requirements vary based on the nature of the payments and the total amount of payments made during the year. Also, there are other factors to consider, like the recipient's tax status and how the payments were made.
The new $2,000 threshold also affects how many common contractor/vendor payments are subject to review in 2026.
Yes. Tax-exempt organizations can still have Form 1099 filing obligations when they make qualifying payments in the course of their activities.
Here’s an easy example: a charitable organization should review payments to:
The decision to file must be based on what the nonprofit paid, who was paid, and why the payment was made. Also, consider how much was paid, how it was paid, and whether the recipient is exempt from Form 1099 reporting.
In 2026, the federal threshold for payments subject to IRC sections 6041 and 6041A was raised from $600 to $2,000 for qualifying payments.
This means that, in general, a nonprofit is required to report:
The 1099 threshold for 2026 is not the same for every payment type. Royalties continue to be reportable when equal to or more than $10, and gross proceeds paid to attorneys continue to be reportable when equal to or more than $600.
Identify the payment category before choosing the form and threshold. The threshold is only relevant once the payment has been identified as being reportable.
The correct form depends on what the nonprofit paid for.
The primary form for ordinary contractor services is Form 1099-NEC for nonprofits. Qualifying nonemployee compensation is reported in Box 1a in 2026. Attorneys’ fees of $2,000 or more are reported in Box 1a. This can include payments to law firms organized as corporations.
Scholarship and fellowship grants are not reported on Form 1099-MISC or 1099-NEC. Generally, a scholarship payment is treated as wages and reported on Form W-2 if the recipient is required to perform teaching or other services in exchange for the payment.
A nonprofit should request a W-9 during the vendor onboarding process. Do not wait until the final filing time.Form W-9 provides the payee’s:
Store the filled-out Form W-9 in the nonprofit's records. It is not sent to the IRS with the Form 1099.If a reportable payee doesn't provide a TIN (or another backup withholding condition applies), the nonprofit is required to withhold federal tax at 24%. A Form 1099 is required if backup withholding applies, even if the payment is below the normal reporting limit.
Check Whether the Vendor or Payment Is Exempt
If a nonprofit pays $2,000, it doesn't mean it has to send a 1099.Many exemptions for payments to C corporations and S corporations apply. However, some key exceptions are there as well. Payments for legal services and certain medical and health care payments may be reportable even if the recipient is incorporated.That is why the nonprofit should review the W-9 classification and the payment classification before determining whether the vendor is exempt.
Does the Payment Method Affect 1099 Reporting?
Yes. Different payment methods may lead to different reporting responsibilities.Generally, payments made by credit card go through a payment settlement entity for purposes of the Form 1099-K rules. Some third-party network payments may also be reported on a 1099-K and not be reported again by the nonprofit on a 1099-NEC or 1099-MISC.Direct payments (cash, check, ACH, or ordinary bank transfer) should be examined as per the regular Form 1099 rules.If the nonprofit pays the same contractor by ACH and credit card, separate the transactions before deciding what the nonprofit may need to report.
How Should a Nonprofit Prepare and File Forms 1099?
The practical nonprofit 1099 filing process should start before year-end:
The general rule is that organizations filing 10 or more information returns in total must e-file them, unless they have an approved waiver. Beginning tax year 2026/filing season 2027, IRIS is the only IRS intake system for these information returns; FIRE will not be available after its 2026 year-end shutdown.
These dates reflect 2027 weekend and legal-holiday rollovers. Recipient and IRS filing deadlines can be different, so nonprofits should track them separately.
A correction may be required when the nonprofit reports an incorrect name, TIN, payment amount, reporting box, or withholding amount.Corrections also may be required if a payment was double-reported on a 1099 or if a 1099 was issued for a payment that should not have been reported.Compare the error with the original filing, file a corrected Form 1099 if needed, and provide a corrected recipient statement when the recipient copy was wrong.
Tax1099 can help nonprofit finance teams collect vendor details, prepare Forms 1099, file with the IRS, and deliver recipient copies.
These tools can reduce manual work when a nonprofit is managing a large contractor or vendor list.
Generally, ordinary volunteer expense reimbursements are not considered nonemployee compensation. Payments for services are different from ordinary volunteer reimbursements and may be reportable on Form 1099-NEC.
Not always. A reimbursement for a contractor’s actual business expense may be left out of the 1099 amount when the contractor provides receipts or other records showing what was spent. If the nonprofit pays an extra amount without supporting records, that amount may need to be included with the contractor’s reportable compensation.
Generally, yes. Director fees are normally listed on Form 1099-NEC, and corporate directors are considered nonemployees.
Look through the payment options individually. Direct payments might be reportable by the nonprofit, and qualifying card payments will typically be subject to the rules of Form 1099-K.
Keep asking for the correct TIN and apply backup withholding. Also, never make up or put the wrong TIN on the return.
Handle Nonprofit 1099s Without Missing the Details Tax1099 helps nonprofit finance teams manage vendor information, TIN checks, federal and state eFiling, recipient delivery, and corrections in one filing workflow. File Nonprofit 1099s with Tax1099
Tax1099 helps nonprofit finance teams manage vendor information, TIN checks, federal and state eFiling, recipient delivery, and corrections in one filing workflow.