1099/1096 Reporting Requirements Overview

Important: There are two different 1099 forms: 1099-MISC and 1099-NEC. As of 2020, the IRS requires Nonemployee compensation to be reported on the new Form 1099-NEC. 
The IRS requires that businesses (including churches and non-profit organizations) issue a Form 1099 to any individual or unincorporated business paid over $600 in the calendar year for services, rents, prizes and awards, stipend income payments, medical and health care payments, and gross proceeds paid to an attorney (even if the attorney is incorporated).  1099/1096 forms must be filed no later than January 31st.

Note: If you did not pay a vendor more than $600, you are not required to file Form 1099.

Why file? 

Generally, Form 1099 is issued to report payments to individuals who are not employees of the business for services rendered, prizes awarded, rent paid, etc.  If you plan to claim the payment as a tax-deductible business expense, the IRS wants to know who should report it as income.

 

How to prepare?

When you are contracting with a vendor for services rendered, have the vendor fill out a W-9 form before starting their work, even if you are unsure if you will pay the vendor more than $600 per calendar year.  This will provide you with the Vendor/Business Name, mailing address, and Tax Identification Number (TIN) you need to file a correct Form 1099.  You can obtain and print W-9 forms at www.irs.gov.

 

Go to your Ledger & Payables → Vendors → add or select the Vendor and verify the name/address information follows the W-9 provided by the Vendor → go to the Vendor's 1099/Checks tab and click the checkbox at "Print a 1099 for this Vendor?" and enter the Vendor's TIN.  Choose the appropriate option in "Print In 1099 Box"; Box 7 Non-Emp Comp is the most common.

 

Then enter your transactions as usual.  The system will automatically track payments to the Vendor. If the total exceeds the $600 limit, a 1099 tax form can be printed for the Vendor. If you have a transaction you do NOT want on the vendor's 1099 form, locate the transaction and clear the 1099 box.

 

 

Employee vs. 1099 Contractor

While issuing a 1099 to an independent plumber or electrician is obvious, you should know the rules for issuing a 1099 or W-2 to your church custodian, cleaning staff, or nurse.

 

Here are seven things every business owner should know about hiring people as independent contractors versus hiring them as employees.

 

1. The IRS uses three characteristics to determine the relationship between businesses and workers:
   • Behavioral Control covers facts that show whether the business has the right to direct or control how the work is done through instructions, training, or other means.
   • Financial Control covers facts that show whether the business has the right to direct or control the financial and business aspects of the worker's job.
   • The type of Relationship factor relates to how the workers and the business owner perceive their relationship.
2. If you have the right to control or direct not only what is done but also how it is done, then your workers are most likely employees.
3. If you can direct or control only the result of the work done (and not the means and methods of accomplishing the result) then your workers are probably independent contractors.
4. Employers who misclassify workers as independent contractors can incur substantial tax liabilities. Additionally, they may face penalties for failing to pay employment taxes or file required tax forms. 
5. Workers can avoid higher tax bills and lost benefits by knowing their proper status.
6. Both employers and workers can request an IRS determination of whether a specific individual is an independent contractor or an employee by filing Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. 
7. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.  

Note: Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? 
These publications and Form SS-8 are available on the IRS website or by calling the IRS at 800-829-3676 (800-TAX-FORM).

 

 

1099/1096 Form Requirements

1. A 1099 form issued to the vendor may be printed on pre-perforated paper in black ink. 
2. 1099 Copy A form can be printed on a red pre-printed form.  
3. 1096 Summary form must be printed on a red pre-printed form.
4. Forms can be obtained from the IRS or ParishSOFT Forms.
5. Please verify all filing requirements with the IRS by visiting https://www.irs.gov/instructions/i1099mec.

Important: The Taxpayer First Act of 2019 authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return e-file threshold. TD 9972, published February 23, 2023, lowered the e-file threshold to 10 (calculated by aggregating all information returns), effective for information returns required to be filed on or after January 1, 2024. Go to IRS.gov/InfoReturn for e-file options.

 

 

What if I don't file?

If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, you report an incorrect TIN (Tax Identification Number) or fail to report a TIN, or you fail to file paper forms that are machine-readable.

The amount of the penalty is based on when you file the correct information return. The penalty is: (Note, these were the fees in 2020 and may have increased slightly in subsequent years).

1. $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).
2. $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
3. $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses). 

Updated February 11, 2026 17:55