At the end of every tax year, 1099 forms must be sent to individuals to whom the district has paid miscellaneous income of varying amounts or nonemployee compensation in excess of $600. SchoolInsight Financials supports forms 1099-NEC and 1099-MISC, as well as form 1096, which should be generated once to transmit paper 1099-NECs and once to generate paper 1099-MISCs.
All 1099 recipients should be listed as a vendor and should receive compensation through the Accounts Payable process rather than through Payroll.
Each district must make the determination of which payments should be reported using 1099s. However, we have outlined the basic differences between the 1099-NEC and 1099-MISC below. Please consult the IRS website or your auditor for the most up-to-date information.
The 1099-NEC is used for reporting nonemployee compensation of at least $600 paid to independent contractors.
For more details on the process, see 1099-NEC Reporting.
The 1099-MISC is used for several particular circumstances outlined by the IRS. As of the writing of this article, this includes:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Prizes and awards.
- Other income payments.
- Medical and health care payments.
- Crop insurance proceeds.
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
- Payments to an attorney.
- Any fishing boat proceeds.
- If the district made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.