I am the Treasurer for a 503(c)(3) nonprofit organization. Being new at this, I'm still learning the ropes. I recently filed a 990-EZ so got through that OK. However, we are currently starting to pay our President a monthly salary (she will be an independent contractor) and I know I need to send her a 1099 in January. Do I have to go to an accountant to get this done or can I order or download this form and do it myself? I don't want to have to pay to do this, but want to make sure it's done correctly.
You cannot download the form and mail it in. See the first page of
1099-misc on the web
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Attention: This form is provided for informational purposes only. Copy A appears in red, similar to the official IRS form. Do not file copy A downloaded from this website. The official printed version of this IRS form is scannable, but the online version of it, printed from this website, is not. A penalty may be imposed for filing forms that can?t be scanned. See part O in the current General Instructions for Certain Information Returns for more information about penalties. To order official IRS forms, call 1-800-TAX-FORM (1-800-829-3676) or Order Information Returns and Employer Returns Online, and we?ll mail you the scannable forms and other products. See IRS Publications 1141, 1167, 1179 and other IRS resources for information about printing these tax forms.
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So you have to order a special form from the IRS. It looks like the one on the web but has different style of paper, etc. It is free to order.
What I'm not sure about is how to fill it out. Perhaps you can just fill it out by hand. But I know that there are font regulations, etc
-- in many pages of regulations -- though perhaps these only apply when you are typing it out.
I agree with the message. I would add: Scrutinize the rules that distinguish employees from contractors. I am very suspicious of an organization president (I assume the 501(c)(3) is incorporated?) who is not an employee.
Not rhetorical. All officers of exempt organizations are statutory employees. That makes the officer subject to FICA, FUTA and FITW. The officer can be an independent contractor. The officer would report the wages from the W-2 as gross receipts on his/her Schedule C. Allowable business expenses are also reported on Schedule C. There is no self-employment tax.
The preceding applies to those who have the "statutory employee" box on Form W-2 checked, but that is a different meaning of "statutory" from the subject of the OP.
The officer of a corporation is considered an employee by operation of statute, rather than common law, but I believe in all other respects they are an ordinary employee, i.e. wages on Form 1040 Line 7 and no Schedule C. They would not normally have the "statutory" box checked on Form W-2 Box 13. This is similar, in California at least, to unlicensed contractors working for firms construction industry - they are automatically considered employees, regardless of whether or not they they would be classified as independent contractors under common-law rules.
The so-called "statutory employees", with the W-2 box checked, who are considered employees for purposes of FICA, but self-employed for purposes of income tax (Schedule C), are limited to the following very specific categories:
Full-time life insurance sales agents (meeting certain additional conditions)
Drivers who distribute certain products or make certain deliveries if the driver is an employer?s agent or paid on commission.
Individuals who work at home on materials or goods the employer supplies under certain additional conditions.
Full-time traveling or city salespersons who work on the employer?s behalf, again under certain additional conditions.
To summarize previous posts, the person is almost certainly an employee, not an independent contractor. As such, withholding of various payroll taxes must be done, and the organization has certain payroll tax forms it must file at both federal and state levels.
Yes, you really should go to an accountant to get this started correctly, as it is probably not too late to make things correct for the current tax year. It's up to you if you wish to continue outsourcing your payroll after that, or if you want someone to show you how it's done so you can continue yourself. There are many payroll service options available.
Yes, you can hand-print a paper 1099-MISC obtained from the IRS and file it, but you are only inviting a lot of trouble down the road. Payroll taxes for those determined to be employees, that should have been withheld and remitted, but weren't, can become personal obligations of the corporate board members, for example, for multiple years. Search for "trust fund penalty" for more information. W-2's can also be hand-printed on official IRS printed forms, but without the withholding and payroll tax returns filed, it wouldn't be very helpful to do so.
I just saw this on the instructions for the linked 1099-M forms from the IRS website.
"Caution: Because paper forms are scanned during processing, you cannot file with the IRS Forms 1096, 1097, 1098, 1099, 3921, 3922, or
5498 that you print from the IRS website"
It clearly states that you are not allowed to print these forms and file them. So there is some conflicting information in this topic that needs to be addressed.
yep... you're right. It is a statute that defines all officers of exempt organization who are compensated as employees subject to FICA, FUTA and FITW. They report their W-2 wages just like any other employee.
You can hand print a 1099-MISC you obtain from the IRS, but not one that you generate by printing the pdf at
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If you request a copy from the IRS, they will send you one that can be filed. You can also purchase blank forms at any office supply store at the end of the year.
Be careful about the use of the word "statutory" in this context. A Statutory Employee gets special tax treatment - pay goes on a W-2 but employee business expenses go on Schedule C and no SE tax is due.
As several others have noted, I'd like to know HOW/WHY the president is considered a contractor. Keep in mind that ease of processing and even agreement by the Prez is INSUFFICIENT to legitimately classify them as a contractor. On the other hand, I do believe that DIRECTORS can be paid as contractors, but I don't have a cite handy for that - just my memory.
We really aren't trying to do anything illegal, HONESTLY! We are in the business of helping educate students in this state on green issues and all our time is volunteer. However, our President (who started the organization which is an incorporated 503(c)(b)) spends 25 hours a week and is getting burned out. We voted to pay her for her fundraising activities at the very least, so it's not a lot of money ($300/month). I've been thrown into the Treasurer's job and have no experience. I was just trying to save the organization some money on hiring a bookeeper, and I thought paying the President as an independent contractor would save us both time & money (much the same as people who write grants are paid). Our budget each year is only $15000 (fundraised by Pres.) and every dime goes toward education of young people. None of us on the board gets a red cent up to now, now even for expenses. So I guess from all I've read here that we're going to have to bite the bullet and pay for a bookeeper too, or at least for payroll services. Thank you all for the advice. I certainly don't want to do anything that is illegal or immoral or will cause us trouble down the road. By the way, if the President is changed to Director, can she then be paid by 1099?
Just thinking out loud here, but with these samll amounts being paid, could the officers, who I am assuming are also corporate directors, work for zero salary, but get paid a small director's fee? If so, we're back at OP's original situation?
What in the world does that mean? It's nonsense. An employee is normally defined by common law. If that definition has been changed by statute, then it's a statutory employee.
I certainly don't think that anyone here thought that you were trying to do anything illegal.
When you first posted, it sounded as though your organization wanted to pay the President for the job of being President of the organization. And, in a way, what you wrote above does sound a little like your organization wants to give the President some small amount of money ($300/month) for the 25 hours a week of work that she does as president.
On the other hand, if fundraising is a job that needs to be done, and the organization is considering paying someone to do or coordinate the fundraising, I think it may be possible and completely okay to pay any board member (including the President) to do that job. There are some issues about making sure the amount of compensation is fair and not above what it would cost to hire someone who is not a board member to do the job. However, since you are only talking about $300/month, and the nature of the work is such that the person doing it does it on a fairly independent basis without the organization specifying when, where, and how she does it etc, I have a hunch that paying her as an independent contractor $300/month for coordinating and handling the fundraising for the organization may be perfectly okay.
I am not a bookkeeper, accountant, or tax person, so this is just my guess and opinion. I do have some knowledge of nonprofit organizations and how they work and what rules they need to follow etc.
There have been a number of laws passed in the last few years specifying circumstances under which someone is an employee. That's statutory law, not common law.
But "statutory employee" is a legal Term of Art, which does not include (for instance) a computer programmer who works at the company's office, on the company's schedule, using the company's equipment, etc. Years ago, such a person could be a contractor; but the law changed and now defines that person to be an employee.
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