Nonprofit Resources


General Form 1099-NEC and 1099-MISC Preparation Guidelines

Beginning with payments made in 2020, payors need to fill out and file Form 1099-NEC, Nonemployee Compensation, for eligible payments made for services performed by a nonemployee. Payments that were once reported in Box 7 of Form 1099-MISC, Miscellaneous Income, will now be reported on Form 1099-NEC, Line 1. Form 1099-MISC is still used to report certain payments, however, which means that your organization will need to determine which form to use in various circumstances.

The following guidelines are derived from the instructions for Forms 1099-MISC and 1099-NEC, which we encourage you to review.

Who Should (or Should Not) Receive a Form 1099-NEC or 1099-MISC?

The instructions note that you should use Form 1099-NEC for each person to whom you have paid at least $600 for “services performed by someone who is not your employee (including parts and materials)” in the course of your business during the year.

Therefore, nonemployee compensation of $600 or more should be reported on Form 1099-NEC, Line 1, to:

  • Individuals.
  • Sole proprietorships.
  • Partnerships, including limited partnerships and professional partnerships.
  • Limited liability companies (LLCs), as long as they are single-member disregarded entities or have elected to be taxed as a partnership.
  • Attorneys and law firms. Report attorneys’ fees of $600 or more paid in the course of your trade or business for the attorney’s services to you. This is for lawyers and other providers of legal services regardless of their business form, including law firms. But see “Gross proceeds payments to attorneys,” below.
  • Independent contractors.
  • Directors who receive directors’ fees and other remuneration, including payments made after retirement.

The following payments of $600 or more over the course of the year should be reported on Form 1099-MISC:

  • Rents. However, Form 1099-MISC should not be used if the payments are made to a real estate agent or property manager.
  • Deceased employees. Report accrued wages, vacation pay, and other compensation paid after the year of death for any employees who died during the year. See page 3 of the instructions for details and an example.
  • Gross proceeds payments to attorneys. Report payments made to an attorney in the course of your trade or business but not for the attorney’s services (such as for a settlement agreement). See pages 2 – 3 of the instructions for details and an example, as well as page 7 for where this amount should be recorded.

You do not need to send a Form 1099-NEC or 1099-MISC to:

  • A C-corporation (but see pages 2 – 3 of the instructions).
  • An S-corporation.
  • A professional corporation (except for law firms; see above) and payments for medical or health care services (see page 6 of the instructions).
  • A LLC that has elected to be taxed as a C corporation.
  • A LLC that has elected to be taxed as an S corporation.
  • A tax-exempt organization.
  • Employees to whom you paid business travel allowances (however, these may be reportable on Form W-2, Wage and Tax Statement).
  • Recipients of scholarships or fellowship grants that are taxable to the recipient because they are paid for research, teaching, or other services as a condition for receiving the grant. These are considered wages and are reported on Form W-2. You do not need to report other taxable scholarship or fellowship payments to the IRS.

Form 1099-NEC and 1099-MISC are prepared on a cash basis.

Form 1099-NEC and 1099-MISC versus Form 1099-K

If you pay vendors using a credit card, debit card, or third-party payment service (such as PayPal), you are not required to include those payments on Form 1099-NEC or 1099-MISC. These types of payments are reported on Form 1099-K, Payment Card and Third Party Network Transactions. See the section entitled “Form 1099-K” on pages 2 and 8 of the instructions.

IRS Form W-9

Form W-9, Request for Taxpayer Identification Number and Certification, is used to gather relevant information to aid a payor in completing Form 1099-NEC or 1099-MISC, including determining the type of entity to which it has made a payment.

You should always obtain a Form W-9 from each payee before you make a payment to the payee, because you may have a tax withholding obligation if the payee refuses to give you their taxpayer identification number. If you fail to withhold when you were required to do so, the IRS may hold you liable for the amount you should have withheld.

The information below outlines how Form W-9 should be prepared by various business entities.


If an organization is formed as a corporation, in Form W-9 Box 3 the corporation should check either the box for a C-corporation or an S-corporation. (It should check S-corporation only if it has filed an election to be taxed as an S-corporation.)

Limited Liability Companies

If an organization is formed as a LLC, then it should either:

  1. Check the individual/sole proprietor or single-member LLC box if it is a single-member LLC whose single member is an individual;
  2. Check the C-corporation box if it is a single-member LLC whose single member is a C-corporation;
  3. Check the S-corporation box if it is a single-member LLC whose single member is an S-corporation;
  4. Check the Partnership box if it is a single-member LLC whose single member is a partnership;
  5. Check the Trust/Estate box if it is a single-member LLC whose single member is a trust or estate; or
  6. Check the Limited Liability Company box if it is a LLC that has more than one member and enter the letter (C, S, or P) corresponding to its elected tax status (C-corporation, S-corporation, or Partnership). It would not also check the corresponding check box above.

Please contact our CapinCrouse tax team with any questions.

This article has been updated. 

Chris Purnell

Chris serves as Partner and Tax Counsel at CapinCrouse. A licensed attorney, he advises exempt organizations of all sizes on a wide range of issues, including tax and employee benefit related matters, representation before state and federal tax authorities, and assistance with firm audit or advisory engagements to formulate advice and counsel on important operating and tax issues. Chris also assists clients with general tax issues, unrelated business income, charitable solicitation, and missionary employment structures. Prior to joining CapinCrouse in 2019, Chris served as the Executive Director of the Neighborhood Christian Legal Clinic, the nation’s largest Christian legal aid organization. Note: Although licensed to practice law in Indiana, Chris’s services through CapinCrouse do not involve the practice of law and consequently do not result in the creation of an attorney-client relationship.


  • Stephen R Bradley says:

    I run an AP department for a company that owns and runs Skilled Nursing Facilities. Many of the facilities are under there own tax ID number. I pay invoices out of one company. My question is do I need to report the payments to the IRS under the facility’s TIN or the TIN of the company that issues the checks

  • Chris Purnell Chris Purnell says:


    You will most likely not need to fill out Form 1099-MISC or Form 1099-NEC to report your scholarship or fellowship grants. Scholarship or fellowship grants that are taxable to the recipient because they are paid for teaching, research, or other services as a condition for receiving the grant are considered wages and must be reported on Form W-2. Other taxable scholarship or fellowship payments (to a degree or nondegree candidate) do not have to be reported to the IRS on any form, unless you are required to report those amounts on Form 1098-T, Tuition Statement. The Form 1098-T is what educational institutions use to report taxable student aid. See the Form 1098-T Instructions at for more information. Also, see the Form 1099-MISC and 1099-NEC instructions (“Scholarships”):

  • Natalia Mostacero says:

    An LLC with 4 partnerships (1065 form) received income. The partnership are drivers and received cash from the LLC. This mean the all 4 partnerships can received a 1099-nec and report each of them in the personal tax and make deductions in the personal? Or is better if they became a c Corp ?

    • Chris Purnell Chris Purnell says:


      For general guidance on whether a 1099-NEC is required when making payments to an LLC, you should review the Instructions for Forms 1099-MISC and 1099-NEC (especially the “Exceptions” sections). Those are available here:

      Your second question is fairly nuanced and has several factors to consider. I would recommend that you seek the advice of a qualified attorney in your particular jurisdiction who could give you advice regarding the various costs and benefits of the various organizational forms.

  • Aundrea says:

    We pay landlords and some residents rental and utilities assistance via funding process from the state. Do we issue a 1099 MISC and which box does the amount belong in?

    • Chris Purnell Chris Purnell says:


      Thanks for your question. We suggest that you contact your state authority for guidance on whether any type of tax reporting is required for these payments.

  • Rebecca says:

    We are a small trucking company who has some proprietorships and single person LLCs as vendors. If I understand the 1099 NEC correctly, any parts and materials that they use as well as the labor are included in the 1099 that we issue them? We do not have to exclude the parts or materials? Some invoices we get do not split out the labor and the parts. One vendor procures computer equipment for us that become fixed assets. They also provide our IT services. Should the cost of the computers be excluded? Thank you.

  • Sam says:

    What about payment to foreign vendors. Do payors need to issue a 1099-NEC?

  • Chris Purnell Chris Purnell says:


    There may be tax reporting required for paying foreign vendors, and it will depend on the nationality of the vendor, whether it is an individual or an organization, where the work is performed, and other factors that are too nuanced to go into here. For more information, you should review this IRS website (for payments to a foreign vendor performing the work in the US):

    As well as this one (for payments to a foreign vendor performing work abroad):

  • Rachel says:

    So payments made to nonprofit (501(c)3) organizations do not require a 1099-NEC?

    • Chris Purnell Chris Purnell says:

      Hi Rachel,

      Yes, that is correct. The Form 1099 instructions state that payments made to a tax-exempt organization are not required to be reported on a Form 1099. However, tax-exempt organizations are required to report the qualifying payments that they make on the appropriate Form 1099. See Instructions for Forms 1099-MISC and 1099-NEC at for more information.

  • Zach says:

    I need guidance on who/if a 1099-NEC needs to be issued. Taxpayer owns 5 real estate properties that are in an LLC. Each LLC paid the same property manager $500 ($2,500 total across the board). Even though it’s under $600 for each entity, is the Taxpayer who owns all 5 properties responsible for submitting a single 1099-NEC to the property manager for $2,500? Or would each LLC need to submit their own 1099-NEC for $500 each?

    • Chris Purnell Chris Purnell says:


      Thank you for your question. Please see the Form 1099 instructions at for guidance on your situation.

      • Jamie says:

        Hello Chris my husband owns a small handyman business and some of his clients included supplies on the 1099 they sent him that he bought for their job that need don’t and they already reimbursed him for those so how do I correct the amount on the 1099 to not include supplies that homeowners have paid me for or do they need to be included!!!

  • Dawn fuller says:

    My husband was killed on the job in 2020. Workers comp made a settlement with me in 2021 and the workers comp insurance company sent me a 1099-NEC for the settlement amount. I was told the settlement was nontaxable income but they have it listed as nonemployee compensation. Is that right???

    • Chris Purnell Chris Purnell says:


      First off, I would like to pass on our firm’s condolences for your tremendous loss.

      As to the taxability of workers’ compensation settlements, it is a difficult issue to tease out. There are several factors to consider; however, it partially depends on what the settlement was for – that is, whether the settlement was purely compensatory, involved punitive damages, or both. You should speak to your attorney as well as an individual tax advisor about this to determine what, if any, portion of this settlement will need to be included as taxable income.

  • Christie says:

    We paid a consultant salary and reimbursed all of his travel expenses. Should the 1099-NEC include all payments made to him? Salary and reimbursements or only the salary portion?

    • Chris Purnell Chris Purnell says:

      Hi Christie,

      Yes, you should include all payments made to the consultant, including reimbursement amounts, on a Form 1099-NEC. Should the consultant be able to do so, they could deduct their travel expenses on their individual tax returns.

  • Adam Pearson says:

    Hello, I am a licensed professional counselor and worked for 5 companies and received 1099 NEC except for one and received the 1099 Misc, line 6 (medical payments). To me this is a red flag that they are doing something funky. Your opinion or feedback would be awesome. Thanks.

    • Chris Purnell Chris Purnell says:

      Hi Adam,

      We recommend that you consult with your tax advisor about your specific situation. Thank you.

  • Sandy Sanders says:

    Hello Mr. Purnell. My contracted nonemployees recieved a 1099 NEC. Sadly, one contractor passed away in August 2022. Please advise how I should handle her compensation. Thank you

    • Chris Purnell Chris Purnell says:


      Thank you for reaching out with this question and my sincerest condolences to the family for their loss. If this payment was made to the worker before they passed, then the tax reporting would still be made out to the worker themselves. However, if the payment was made to the worker’s estate after the worker had passed, then there may be a different rule that comes into play. You can find more information in the 1099 instructions, which are available at (see “Deceased employee’s wages”).

  • Phil C. says:

    Our firm is paying rent to a landlord who has only checked Box 3. Trust/estate on Form W-9. The Limited Liability Company box has not been checked. Are I required to issue a 1099-Misc to this landlord?

  • Michelle says:

    Our non-profit company is acting as administrator for a city grant providing daycare scholarships to parents, paid directly to the daycare provider. Are we required to send the daycare provider a 1099?
    We are also paying incentives from the grant to daycare providers. Do those payments require a 1099?

  • JoAnna Toth says:

    I was a class rep for a class action and now have been sent a 1099-NEC for the incentive award! I am not self-employed, a freelancer or independent contract and not employed them. They should have sent me a 1099 Misc shouldn’t they? I contacted them but they have not provided a corrected form so how should so report it and avoid them self employment tax since I am not self employed?

  • Rosi E says:

    I am 501(C) participating in the Amazon Vine program in 2023. After 6 months, most of the items are being donated to local organizations and vets/rescues, which I am keeping records of. Some are used as giveaways during events held. The ones that are kept are used in house (printers, furniture, etc). I receive products from Vine for free but in return I must review them; my reviews are posted online. I spend hours testing the products and reviewing them. They will not send me a 1099NEC since I am a 501(C) but they do track the Estimated Value of all products they have sent me. Will they send me a 1099MISC? I know I should report somewhere on my 990 the total estimated value of products, but can I report the value of my time doing the work testing & reviewing them? Seems like getting free products but really am having to work in return. Thank you.

  • Miry P. says:

    I am a church. If I pay monthly missionary support to an individual (Jane Doe) directly with our company credit card, is the church supposed to prepare the 1099 for them or will Amex send it to the individual? (this is not support to a non-profit organization but to an individual. CC’s only issue 1099’s to Vendors but can’t seem to find anything about 1099’s to individuals)
    Thanks for your time.

  • Hello, I am a veterinarian that owns my own 501(c)3 organization. I did some work for a local animal shelter and want them to pay me as my non-profit. Is this allowed and if so, do I put my EIN number and organization name on the W9 they want me to fill out? Thank you so much for any advice.

    • Chris Purnell Chris Purnell says:

      Hi Amber,

      Thank you for your question. We recommend that you consult with your tax advisor about your specific situation.

  • Paul says:

    My nonprofit organization provides matching funds to individuals to help/start small business ventures. Do these people receive 1099s?

  • Anthony says:

    Hello Chris,
    My wife received two 1099-NEC for awards received to complete dissertation during her doctoral degree and present her dissertation research at a conference. Are these taxable since they were awards given to her while she was still in her PHD program, used for her research study, and used to present her data at a conference?

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