Happy New Year! I hope you wrapped up 2023 with some celebrations and a grand finale for your nonprofit's mission and funding. It's January, which means it’s time for some annual filing deadlines. Today I'm going to remind you of three important deadlines you need to hit in January.

W-2s for Nonprofit Employees

     This is the tax reporting form that you are required to file for all employees who are compensated through your organization. It's due by January 31st. Chances are, you have a payroll service doing this for you, or you may have accounting software that makes it pretty easy for you to do it yourself. Either way, I want to remind you to get started today. Don't put this deadline off! It's not only a good service to your employees to get them out quickly, but it's also a good buffer. I've seen lots go wrong in the world of W-2 preparation- from printing issues to errors that have to be corrected to software services that require tech support. So, save yourself the stress and get started today! Get your W-2s out as early as possible in January.

Do Nonprofits File 1099-MISC?

     The next filing deadline you should be aware of is the 1099 Miscellaneous. There are several reasons you might need to file this form. It reports income that a non-employee has received. Typically for nonprofits, 1099s report some form of contractor pay. This is a payment that you’ve made to someone for goods received or services rendered. 

     The decision tree above can help you  determine your 1099 filing requirements for each vendor paid based on the circumstances of that payment.  It’s important to note that a 1099 may be required for not only goods or services, but also for gifts given. Often in nonprofits, we give gifts that require us to file 1099s to report those gifts. 

Credit Card Payments and 1099s

     Before you file a single 1099, you’ll want to first ask, “Was this paid by credit card?”  If it was paid via  credit card, the credit card company will actually do their own 1099 reporting. In this case, you don't need to do anything.

Cash, Check or ACH Payments

      If payment was made with cash, check, or ACH directly from your organization, then your next step is to go review that vendor’s W-9. Do this for all payees to determine your next step. 

Gather W-9s

The W-9 form tells you whether that vendor is a corporation, an individual, or another type of entity. Speaking of W-9s, you should have been collecting them before any payment was made, but if you haven’t already done so, you’ll want to get those W-9s quickly. This is yet another reason to start these annual filings early in January! 

Compare Vendor Types

     Next, check the W-9 to see if the vendor is a corporation. Corporation types includes an LLC, an S-corp, or a nonprofit. Nonprofits are corporations. If the vendor is a corporation, then no 1099 is issued. However, if the vendor you paid is an individual, with a W-9 that lists their name and social security number, you must issue a 1099.

Industry Specific 1099 Filing Requirements

     If you pay a vendor who is an attorney or someone in legal practice, by definition, you have to issue a 1099. There are a few other really obscure industry specific requirements, like fishing, so you may want to review the Instructions for Form 1099-MISC and 1099-NEC to make sure you're not missing anything specific to these unusual situations. 

Filing Rules for all 1099s

     Regardless of the circumstances,  if you’re required to issue a 1099, those reports are also due by January 31st, and they're only issued when your total payments exceeded $600 in the calendar year. Keep in mind that 1099 payment totals are based on payment dates, so we’re looking for a combined total of $600 in payments issued in a calendar year.

Donation or Contribution Statements

     IRS Publication 506 covers charitable contributions. It basically states that in order for individuals to claim deductions, they need to receive a contemporaneous written acknowledgement from a qualified organization. So, your nonprofit needs to issue these to donors. These come typically in the form of contribution statements that show all of the gifts the organization received during the calendar year. If the gift is cash, the amount should be listed on this statement. If the gift is property or a non-cash donation, you would actually just be entering or revealing the description of the property that you received. 

Goods and Services Exchanged for Donations to Nonprofits

     The acknowledgement or contribution statement has to do a couple of things. First, it should say whether any goods or services were provided in exchange for the gift that the nonprofit received. If so, you have to provide an estimated value of the goods and services received in exchange for the donation.

 Let's apply this practically: 

     The most commonplace that I see this is in an event where you sell a ticket or a table and you have the cost of food and potentially entertainment. These costs depends on what you're doing at your event. In this case, you would need to reduce the amount that the individual paid you for the ticket or the table by the cost or the fair market value of both the meal and in rare cases, the entertainment so that you are only reporting the net value of their donation on the contribution statement. You’ll also need to include somewhere on your statement that little phrase, “No goods or services were provided in exchange for this donation.”

     As you prepare your contribution statements, don’t miss the opportunity to send a thank you note while you're mailing that tax form that your donors need. Take a moment to tell them how thankful you are for what they did. Tell a story, explain what their gift did, and give them some tangible evidence that they're investing in an incredible mission that's making a difference!

     If you found this helpful, then I encourage you to download my Checklist of Key Financial Tasks. It’s a free resource that will help you maintain efficient financial rhythms in your nonprofit. The checklist includes the 3 filings I’ve covered above, as well as many other cyclical financial tasks.