1099s for Nonprofits 2026: $600 Rule, 5 Mistakes

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Table of contents

• Do nonprofits have to issue 1099 forms?

• Do nonprofits receive 1099s for grants?

• 1099-NEC vs 1099-MISC: which form do you need?

• Who does not require a 1099 from your 501(c)(3) nonprofit?

• How to collect W-9 forms from contractors

• 1099 filing deadlines and penalties for 2026

• 5 common 1099 mistakes nonprofits make (and how to avoid them)

• Step-by-step: how to issue 1099 forms for your nonprofit

• Appendix: the 21 types of 1099 forms

• Final thoughts

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If you run a small nonprofit, 1099s probably feel like the boring half of compliance. They are. They are also where all-volunteer orgs quietly rack up penalties, because nobody told the treasurer that being tax-exempt does not mean you are exempt from issuing 1099s.

Here is the honest truth for a small 501(c)(3): 1099 mistakes are almost never knowledge problems. They are timing problems. Collect a W-9 the moment a contractor sends their first invoice (not in January), file electronically through the IRS IRIS portal, and remember the three exemptions that actually matter, and 1099 season takes a morning.

This guide walks the volunteer treasurer of a small nonprofit through every 1099 question that actually comes up at tax time: do you issue them, do you get them for grants, do donations count, what changes for 2026, and what does the IRS actually require this year.

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Do nonprofits have to issue 1099 forms?

Yes. The IRS treats a 501(c)(3) as a trade or business for the purposes of information reporting, so the same 1099 rules that apply to a small business apply to your nonprofit. The IRS Instructions for Forms 1099-MISC and 1099-NEC state plainly that nonprofit organizations "are considered to be engaged in a trade or business and are subject to these reporting requirements."

The simplest rule: if your nonprofit pays an unincorporated person or LLC $600 or more for services in a calendar year, you issue a 1099-NEC.

You issue Form 1099 when all four of these are true:

• You paid a non-employee (a contractor, vendor, freelancer, or attorney).

• You paid an individual, sole proprietor, partnership, LLC, or estate (not a C-corp or S-corp, with a small list of exceptions).

• You paid for services in the course of your nonprofit's work.

• You paid $600 or more across the calendar year (one check or many).

The $600 figure is cumulative. If you paid the same trainer $300 in March and $400 in October, that is $700 and a 1099-NEC is required. Verified against the IRS 1099-MISC and 1099-NEC instructions.

For a small nonprofit: the surprise is not the rule, it is the volume. The annual contractor bookkeeper, the trainer who ran one workshop, the freelance designer who did the gala flyer, the attorney who reviewed your bylaws. Three contractors at $700 each is three 1099-NECs, and three chances to miss the deadline.

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Do nonprofits receive 1099s for grants?

This is one of the most-searched 1099 questions for nonprofits, and the answer depends on who is paying whom and why. Here is how the IRS treats the most common grant scenarios.‍

Grant to your 501(c)(3) from another tax-exempt org or foundation. Generally no 1099. The IRS exceptions list explicitly excludes "payments to a tax-exempt organization." A foundation does not issue a 1099 to a public charity for a program grant.

Grant to your 501(c)(3) from a government agency. The agency may issue a Form 1099-G (Certain Government Payments) for some types of government payments. This is not the same as a 1099-NEC and does not create taxable income for a 501(c)(3) in the same way as an unrelated business activity. Confirm the treatment for your specific grant with the grantor and, if you have one, your accountant.

Grant your nonprofit pays to another 501(c)(3). No 1099. Payments to a tax-exempt organization are on the IRS exemption list.

Grant your nonprofit pays to an individual for services. If the "grant" is actually compensation for services the individual performs for your org (a research stipend tied to deliverables, a contracted artist residency with required output), it likely looks like nonemployee compensation to the IRS and a 1099-NEC may be required at $600 or more. The label "grant" does not control. The substance does.

Scholarship grant to an individual. Scholarships paid to a degree candidate at a qualified educational institution for tuition and required fees are generally not reported on a 1099. The IRS treats them differently from compensation.

For a small nonprofit: if you are receiving program or operating grants from foundations or other 501(c)(3)s, you almost never receive a 1099 for them. If you are paying an individual and calling it a "grant," ask whether they are performing services for you. If yes, it probably needs a W-9 and a 1099-NEC at $600.

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1099-NEC vs 1099-MISC: which form do you need?

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Two forms cover most nonprofit payments. Use the 1099-NEC for contractor services. Use the 1099-MISC for almost everything else.

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The $10 royalty threshold is real and often missed. The IRS confirms a $10 royalty reporting threshold on Form 1099-MISC. If your nonprofit pays anyone for use of copyrighted material, you may be on the hook well below the $600 contractor floor.

A note on the proposed 2026 $2,000 threshold. The IRS has signaled a future change to the 1099-MISC rent and similar payment threshold, raising it from $600 to $2,000 for payments made in 2026. As of this update, final IRS instructions have not been published. Treat $600 as the safe assumption for the 2025 tax year (forms you file in January 2026) and check the current IRS 1099-MISC instructions before filing for payments made in 2026.

For a small nonprofit: 1099-NEC is the one you will use most. If you only pay contractors for services, you may never touch a 1099-MISC. If you also pay rent to an individual or settle anything through an attorney, learn the boxes.

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Who does not require a 1099 from your 501(c)(3) nonprofit?

The exemption list is short and worth memorizing. The IRS instructions exempt these payments from 1099-NEC and 1099-MISC reporting:

• Payments to a C corporation or S corporation. The big one. If a vendor's W-9 says "C corporation" or "S corporation," you generally do not issue a 1099. Two exceptions: payments to attorneys (always reportable regardless of entity) and medical or health care payments.

• Payments to a tax-exempt organization, including 501(c)(3)s. If you pay another nonprofit for a service, no 1099. This is exactly why your nonprofit also does not receive 1099s for program grants from a foundation.

• Payments for merchandise, products, freight, storage, or similar. Goods are not services. The lumber you bought for the build, the t-shirts for the 5K, the office supplies. No 1099.

• Wages paid to employees. Those go on a W-2, not a 1099.

• Payments to an LLC taxed as a C-corp or S-corp. The W-9 tells you. If the LLC box is checked and a "C" or "S" is filled in, treat it as a corporation.

• Business travel allowances paid to employees.

For a small nonprofit: the three exemptions that actually matter for you are C/S corps, other 501(c)(3)s, and merchandise. Everything else is rare. If you remember those three, you will avoid the most common over-issuance mistake.

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How to collect W-9 forms from contractors

The W-9 is the form your contractor fills out so you can issue them a 1099. It captures their legal name, business name, entity type, address, and Taxpayer Identification Number (SSN, ITIN, or EIN). You keep it on file. The IRS does not see it directly. It is the source data for the 1099 you file.

The single highest-leverage habit a small nonprofit can build is collecting the W-9 at the moment of first invoice, not in January.

The contractor onboarding checklist

• 1. When a new contractor sends their first invoice, request a W-9 before cutting the check. Not after. Not at year-end. Before payment. This single rule solves 80% of January panic.

• 2. Verify the four required fields: legal name, address, entity type (the box check), and TIN. Mismatches between name and TIN are the #1 IRS rejection reason for 1099s.

• 3. Store the W-9 securely. It contains an SSN or EIN. Keep it in your password-protected accounting or document system, not in a shared inbox or on a desktop.

• 4. Re-request a W-9 if the contractor's information changes, if they move, change entity type, or restart a relationship after a gap.

• 5. If a contractor refuses to give you a W-9, the IRS allows you to begin backup withholding (currently 24%) on their payments. The cleaner path: do not pay an unincorporated vendor who will not complete a W-9.

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To keep donor records and fundraising data organized year-round, many small nonprofits manage donor records in one place using the same system they use for everything else. One annual report at year-end beats a shoebox of invoices.

For a small nonprofit: the onboarding habit is the entire game. A W-9 request template you paste into the reply to every first invoice is a 30-second task in March that saves you a 30-hour fire drill in January.

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1099 filing deadlines and penalties for 2026

The IRS deadlines for 1099-NEC and 1099-MISC are tighter than most small-org treasurers expect. Mark them on your calendar in November.

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When January 31 falls on a weekend or federal holiday, the next business day applies. Verified against the IRS 1099-NEC and 1099-MISC instructions.

The free filing option. The IRS offers a free web-based filing portal called IRIS (Information Returns Intake System). Any business of any size can use it. No special software, no fees. For a small nonprofit issuing fewer than 10 forms, IRIS is the right answer.

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Late filing penalties

The IRS publishes current-year penalty amounts in the General Instructions for Certain Information Returns. Penalties scale by how late you are and apply per form, so a missed deadline for five contractors is five penalties, not one.

The tiers are:

• Filed within 30 days after the deadline: the lowest per-form penalty tier.

• Filed after 30 days but by August 1: a higher per-form penalty.

• Filed after August 1, or not filed at all: a higher per-form penalty still.

• Intentional disregard: the highest penalty, with no maximum cap.

The IRS adjusts these dollar amounts for inflation each year, so prior-year figures are not a reliable guide. Check the current penalty table at the IRS General Instructions for Certain Information Returns before filing to get the exact amounts for the tax year you are reporting.

For a small nonprofit: the penalty math is simple and brutal. Five missed 1099s is five penalties. If you have any chance of being late, file what you have on time and amend later, rather than missing the deadline entirely.

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5 common 1099 mistakes nonprofits make (and how to avoid them)

1. Waiting until January to collect W-9s

Here is where many nonprofits get it wrong. Treasurer realizes on January 12 that nobody has a W-9 from the dog trainer who got paid $1,800 last year. The trainer is on vacation. Two weeks of chasing follows. Fix: request the W-9 at first invoice, every time, no exceptions. Make it part of the payment workflow.

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2. Issuing 1099s to corporations

Here is where many nonprofits get it wrong. A volunteer treasurer issues a 1099-NEC to every vendor over $600, including the incorporated cleaning company and the catering corporation. Wasted forms, confused vendors, and unnecessary work. Fix: read the W-9. If the entity type is C corporation or S corporation, no 1099 (except attorneys and medical payments). If you do not have a W-9, you cannot tell. Which is why mistake #1 leads directly to mistake #2.

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3. Using the wrong form: NEC vs MISC

Here is where many nonprofits get it wrong. Pre-2020, all of this went on the 1099-MISC. The 1099-NEC was reintroduced for tax year 2020 to carve nonemployee compensation out of the MISC. Old habits issue MISC for contractor services. Fix: contractor services for $600+ go on 1099-NEC. Rent, royalties, attorney settlement proceeds, and medical payments go on 1099-MISC. When in doubt, check the form's box-by-box instructions on irs.gov.

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4. Missing the $600 threshold across multiple payments

Here is where many nonprofits get it wrong. The $600 is cumulative across the calendar year, not per invoice. Two payments of $400 to the same contractor is $800 and triggers a 1099-NEC. The bookkeeper who only flags single payments above $600 misses dozens of these. Fix: run a year-end report by vendor that totals all payments. Anyone over $600 who is not an exempt entity gets a 1099.

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5. Sending 1099s to recipients but never filing them with the IRS

Here is where many nonprofits get it wrong. The treasurer mails the contractor copies on January 30, breathes a sigh of relief, and forgets that the IRS copy is due the same day. The contractor side is half the job. Fix: file with the IRS at the same time you furnish recipient copies. The IRS IRIS portal makes this a single workflow.

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Step-by-step: how to issue 1099 forms for your nonprofit

• 1. Pull a year-end vendor report. List every non-employee you paid during the calendar year and the total per vendor.

• 2. Filter to anyone you paid $600 or more (or $10+ in royalties, for 1099-MISC Box 2).

• 3. Drop the exempt entities. Remove C-corps, S-corps (except attorneys and medical providers), other 501(c)(3)s, and merchandise-only payments.

• 4. Confirm you have a W-9 on file for everyone remaining. Chase the missing ones now.

• 5. Choose the right form. 1099-NEC for contractor services. 1099-MISC for rent, royalties, medical, attorney gross proceeds.

• 6. Fill out each form using the W-9 for recipient info and your vendor report for the dollar amounts.

• 7. Furnish the recipient copy by January 31.

• 8. File with the IRS by January 31 (1099-NEC) or the applicable 1099-MISC date. The free IRS IRIS portal is the simplest path for a small org.

• 9. Keep copies for four years. The IRS recommends retaining information returns and supporting W-9s for at least four years.

For broader context on nonprofit tax obligations, see Zeffy's nonprofit tax filing guide and do nonprofits pay taxes. For the bookkeeping habits that make this whole process easier, see the nonprofit accounting guide and an overview of nonprofit accounting software.

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Appendix: the 21 types of 1099 forms

The two forms above cover almost every payment a small nonprofit makes. For completeness, the IRS publishes 21 different 1099 variants. Most you will never touch. Keep this list as a reference.

• Form 1099-A, Acquisition or Abandonment of Secured Property

• Form 1099-B, Proceeds from Broker and Barter Exchange Transactions

• Form 1099-C, Cancellation of Debt

• Form 1099-CAP, Changes in Corporate Control and Capital Structure

• Form 1099-DIV, Dividends and Distributions

• Form 1099-G, Certain Government Payments

• Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments

• Form 1099-INT, Interest Income

• Form 1099-K, Payment Card and Third-Party Network Transactions

• Form 1099-LS, Reportable Life Insurance Sale

• Form 1099-LTC, Long-Term Care and Accelerated Death Benefits

• Form 1099-MISC, Miscellaneous Income

• Form 1099-NEC, Nonemployee Compensation

• Form 1099-OID, Original Issue Discount

• Form 1099-PATR, Taxable Distributions Received from Cooperatives

• Form 1099-Q, Payments from Qualified Education Programs (Sections 529 and 530)

• Form 1099-QA, Distributions from ABLE Accounts

• Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts

• Form 1099-S, Proceeds from Real Estate Transactions

• Form 1099-SA, Distributions from an HSA, Archer MSA, or Medicare Advantage MSA

• Form 1099-SB, Seller's Investment in Life Insurance Contract

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Final thoughts

For a small nonprofit: the whole game is building the W-9 habit in month one, not January. Everything else follows from that.

1099 compliance for a 501(c)(3) is a 2-hour task done correctly in November or a fire drill in February. Build the W-9 onboarding habit, keep contractor totals in the same place you keep donor records, and file for free through IRS IRIS in January.

The single biggest budget lever a small nonprofit has on compliance is not a tax tool. It is the cost of the fundraising platform. Zeffy is the only 100% free fundraising platform built specifically for nonprofits. No platform fee, no transaction fee, no credit card fee. Ever. Every dollar you do not lose to platform fees is a dollar that can pay your bookkeeper, your accountant, or just buy your treasurer back a Saturday in January. See how Zeffy's 100% free model works.

More than 100K+ nonprofits use Zeffy to raise over $2B+, free, so they can spend their budget on the work, including the compliance work that keeps the IRS off their back.

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