NFP at Work – December 2016
Keeping You Up-To-Date With Information About Nonprofit Solutions
Nonprofits Have New 1099/1096 Filing Date for 2016 Forms
The IRS has changed the date for filing 1099’s and the related 1096 to January 31, 2017. This new filing date does not allow 1099 recipients to review their information prior to when the organization/s 1099’s are submitted to the IRS. Nonprofits that file the 1099 and the related 1096 have only 31 days to complete the task from closing out their books for December 31, 2016. The 1099 is required to be filed on a calendar year basis, regardless of when a nonprofit selects a fiscal year end. Prior filing requirements allowed organizations to submit on various later dates. Now, regardless if you paper-file or e-file the 1099 returns, all submissions are due by January 31, 2017.
Generally, you have to issue a 1099 to any unincorporated entity paying more than $600 in a calendar year. You don’t have to issue a 1099 if you bought products, like chairs/tables or inventory, or if anyone paid by credit card. All legal fees are subject to 1099’s. There are different boxes on the 1099 depending on the type of payment made (rent, services, other, etc.) If you need to issue a 1099, you will need their address and social security number or EIN number. Most businesses have EIN numbers, and individuals may use their social security number. The best way to find the information needed to complete the forms is to issue a W-9 to the vendor or consultant, prior to paying them.
Issue 1099’s to everybody except corporations. Assuming you are not getting back the properly completed W-9, to check if a vendor is a corporation, you need to look at their invoices and at least one cancelled check. Cancelled checks are helpful because banks require endorsements to include corporate identity. If an invoice says “William Company”, then the cancelled check will be “William Company Inc.” if it is incorporated. The initials Inc., Corp. or PC indicate a corporation. If an invoice says “William Skody Inc”, but the cancelled check is endorsed “William Skody”, the consultant should receive a 1099. Make sure your accounting records reflect the exact name of the entity you are paying.
All partnerships payments are subject to 1099’s if over $600. Their name may include Partners, Limited (LTD), LLC or LLP. All individuals and sole-proprietorships are subject to 1099’s. Individuals may have fantastic names for doing business (Skody International Diversified Co. or Company). Just because someone uses Company, does not mean that they are incorporated. Be careful about this.
Lastly, some nonprofits automatically classify every individual working with them as an independent contractor. The IRS and various states have launched programs to identify those who misclassify payments as independent consultants. IRS 990 audits are expanding into federal employment audits. Agents are being trained to review these transactions, and during 2015, 25% of the 990 audits resulted in employment tax changes for these nonprofits.