Do Nonprofits Issue 1099s? 2026 Rules, Thresholds, and Examples

Do nonprofits need to issue 1099s? It’s a valid question, as a nonprofit’s tax-exempt status can make the rules confusing. But the tax-exempt status applies to an organization’s income tax, and not its information-reporting obligations.

That means nonprofits may still have to issue Forms 1099 in certain situations. If your organization pays independent contractors, vendors, or other service providers during the year, you may need to report some of those payments on a 1099.

For 2026 payments, you should also be aware of an important change to the reporting threshold.

Why Tax-Exempt Status Does Not Remove 1099 Reporting Duties

For information-reporting purposes, nonprofits can still have the same Form 1099 reporting obligations as other organizations engaged in a trade or business. Exemption from income tax and information-reporting requirements are separate. Your nonprofit may be exempt from paying federal income tax on its own income, but it can still be required to report certain payments made to others. Your 1099s also exist separately from your annual Form 990-series return, so filing one does not cover the other.

Whether you need to file a 1099 comes down to four things:

• What was the payment for?
• Who is the payee?
• How did you pay them?
• What was the total paid to that payee during the year?

2026 OBBA Update: Higher 1099 Thresholds That May Affect Nonprofits

For 2026 payments, nonprofits should review an important OBBA change to certain Form 1099 reporting thresholds. The One Big Beautiful Bill Act increased the minimum threshold for reporting certain payments from $600 to $2,000 for tax years beginning after 2025, with inflation adjustments beginning in 2027.

For nonprofits, this change most often affects Form 1099-NEC payments to independent contractors and some Form 1099-MISC payments, such as rents, prizes and awards, other reportable income, and medical and health care payments. However, the $2,000 threshold is not a blanket rule for every 1099 payment.

Some thresholds did not change. Royalties generally remain reportable at $10, gross proceeds paid to attorneys generally remain reportable at $600, sales of consumer products to a buyer for resale remain reportable at $5,000 or more, and payments with backup withholding may need to be reported even when they are below the usual reporting threshold.

When Does a Nonprofit Issue Form 1099-NEC?

The nonprofit 1099-NEC covers nonemployee compensation. Run any payment through a four-part test:

1. You paid someone who was not an employee.
2. The payment was for services connected to your nonprofit’s activities.
3. The payee was an individual, partnership, estate, or, in some cases, a corporation.
4. The payee received at least $2,000 in reportable nonemployee compensation during 2026.

Once a payment clears all four tests, it’s reported in Box 1a. This is where most nonprofit contractor payments end up: freelance grant writers, contract bookkeepers, fundraising consultants, web designers, and guest speakers all typically fall into this category, along with paid directors serving on the board. Attorneys billing for legal services belong here, too, and they’re worth flagging specifically, since the usual exception for payments to corporations does not apply to legal services.

When Does a Nonprofit Issue Form 1099-MISC?

The nonprofit 1099-MISC handles certain other reportable payments, including rents, royalties, prizes and awards, and medical and health care payments. Keep this table handy, as the thresholds are not uniform.

While not a payment made by the nonprofit, direct sales of $5,000 or more of consumer products to a buyer for resale may also need to be reported on Form 1099-MISC, Box 7.

Which Nonprofit Payments Usually Do Not Require a 1099?

Employees are a separate category. Their compensation is reported on Form W-2, not Form 1099-NEC.

Purchasing merchandise alone is generally not reportable. The exception arises when parts or materials are incidental to a contractor’s services, in which case they become part of the reportable payment rather than a standalone purchase.

Most corporations are exempt from Form 1099 reporting, but don’t assume every LLC is one of them. The best way to confirm a vendor’s federal tax classification is to collect a completed Form W-9.

Even then, some corporate payments are still reportable, including attorney fees, attorney gross proceeds, and certain medical and health care payments.

For payments made by credit card or through certain third-party networks, the payment settlement entity generally handles the Form 1099-K reporting, so you should not report the same payment again on Form 1099-NEC or Form 1099-MISC.

Unpaid volunteers do not receive Form 1099-NEC for donated services. However, an honorarium or stipend paid for services may be reportable as nonemployee compensation on Form 1099-NEC if the payment meets the reporting threshold and no exception applies.

Common Nonprofit 1099 Reporting Examples

Here are a few common scenarios where nonprofits have to file Forms 1099:

Do Nonprofits Receive Form 1099?

It’s worth asking if nonprofits ever receive 1099s themselves. While they may not commonly receive Forms 1099-NEC or 1099-MISC, a nonprofit might still get a 1099 for interest earned, card payment processing, or brokerage activity tied to its investments. Whenever one arrives, check the figures against your own records rather than assuming they are correct.

How Nonprofits Should Prepare and File Form 1099

Step 1: Get Form W-9 First

Don’t wait until January to ask for it. Collect a completed Form W-9 before you pay a vendor so you have the legal name, tax classification, TIN, and other details you’ll need when it’s time to prepare Forms 1099.

Step 2: Review Vendors and Payments

Add up each vendor’s reportable payments. Also, separate payment types. While doing this, exclude payments that are reportable on Form 1099-K by the payment settlement entity.

Step 3: Choose the Right Form

Once the payments are classified, pick the appropriate form. Payments reported on Form 1099-K don’t need to be reported again by nonprofits.

Step 4: Furnish and File

Finally, once the forms are ready, send recipient copies first. Next, file electronically through IRIS when electronic filing is required, or file on paper otherwise. Keep your supporting records.

2027 Deadlines for 2026 Payments

Statements reporting Form 1099-MISC Box 8 or Box 10 amounts are generally due to recipients by February 16, 2027, because February 15 falls on Washington’s Birthday, a federal holiday.

Common Nonprofit 1099 Mistakes

• The old $600 service threshold being applied for 2026 payments
• $2,000 threshold applied to royalties or attorney gross proceeds
• Assuming payments to an LLC or corporation are automatically exempt from Form 1099 reporting
• Assuming paid board directors do not need a 1099 because the organization is a nonprofit
• Waiting until January to request W-9s, or assuming a federal filing also satisfies state requirements

FAQs

1. Do 501(c)(3) organizations issue 1099s?

Yes. That status exempts the organization from income tax but not from its reporting duties.

2. What is the threshold for 1099-NEC in 2026?

The Form 1099-NEC threshold is $2,000 for nonemployee compensation paid in 2026. This means a nonprofit generally files Form 1099-NEC when it pays an independent contractor or other nonemployee $2,000 or more for reportable services during the year. Backup withholding can still create a reporting requirement, regardless of the amount paid.

3. Does a nonprofit issue a 1099 to a volunteer?

No, no 1099-NEC is needed for unpaid work. Only actual compensation, if reportable, needs to be reported on a 1099.

4. Do nonprofit board members receive Form 1099?

A paid director is typically a nonemployee, so qualifying payments at or above the threshold are reported on Form 1099-NEC, Box 1a.

5. Does a nonprofit issue a 1099 for an honorarium?

Honoraria or training fees paid for services are generally nonemployee compensation and may be reportable on Form 1099-NEC if the threshold is met.

6. Does a nonprofit issue a 1099 to an LLC?

It depends on the LLC’s tax classification and the type and amount of payment. Get Form W-9 first.

7. Does a nonprofit issue a 1099 for a grant?

Payments associated with services may be reportable regardless of label, but a bona fide charitable grant generally is not.

File Your Nonprofit’s Forms 1099 Accurately

Nonprofits may need to file Forms 1099 when they make reportable payments, especially payments reported on Form 1099-NEC or Form 1099-MISC. A consistent process for collecting Forms W-9, tracking payments, and verifying tax classifications makes filing much easier.

For returns filed in 2027, nonprofits should also be ready for the IRS transition from FIRE to IRIS. FIRE will not be available for current, prior-year, or correction submissions after its 2026 year-end shutdown, making IRIS the key filing system for these information returns.

What also helps is a provider like 1099Online which streamlines Form 1099 creation, IRIS eFiling, recipient furnishing, corrections, and recordkeeping in one place. When you’re ready, collect your vendor details, match each payment to the right form and threshold, and file your nonprofit’s Forms 1099 through 1099Online.