Earlier this month, I was contacted by María Fernanda Sánchez who always has good questions and insights. María had some great questions about who should get a 1099-NEC. I knew the short answer: Any individual not employed by the church that you pay at least $600 to for services, but it can get complicated when you start digging into it. By the way, things always seem to get complicated when the IRS is involved.
The video gives more detail but here is how I broke it down:
- Who is an individual? – Sole proprietors, partnerships, and LLC’s that are organized as a sole proprietorship or partnership
- Who is an employee? – This can get skipped over…especially for all those part-time employees that a church might pay a weekly stipend to. It’s good to look at each position and justify why each position is or isn’t an employee.
- Does it matter how it’s paid? – It doesn’t matter if you pay them by cash, check, or card. It all counts towards that $600.
- What services count? – I focus more on what doesn’t count such as reimbursements, scholarships, benevolences, and incidentals.
This should be a good primer for those getting ready for 1099’s this January.
- IRS 1099-NEC Instructions: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
- IRS Form W-9: https://www.irs.gov/pub/irs-pdf/fw9.pdf
- Hammar’s Tax Guide: https://store.churchlawandtax.com/2021-church-clergy-tax-guide-book/