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Q&A #180 – Does Form 1099 reporting use cash basis or accrual basis?
The Treasury Regulations and Form 1099 instructions provide that the 1099 reporting requirements apply to payments made “during the calendar year.” This guidance strongly suggests that nonprofits should issue Forms 1099 to their vendors and service providers based on when the payments were actually made (cash basis), even if the organizations otherwise use accrual basis for tax and accounting purposes.
VIDEO Q&A for Subscribers: December 2025
Ben and Mike answer questions from subscribers about documenting Executive Director performance in committee minutes, whether tax-exempt status can be transferred to another organization, addressing audit findings related to handling of restricted funds, how new nonprofits should fill out Form W-9, and whether new nonprofits should file a Form 990 for the first short tax year.
VIDEO Q&A for Subscribers: October 2025
Ben and Mike answer questions from subscribers about converting from 501(c)(4) to 501(c)(3) status, communicating the financial condition of an organization with significant restricted funds on the balance sheet, how much unrelated business income tax (UBIT) is too much, and considerations when opening a bank account in a foreign country outside of the United States.
Video Podcast: Private Benefit Rule Basics for Nonprofits
Ben and Mike discuss the private benefit rule that applies to 501(c)(3) organizations, addressing how the private benefit rule is broader than the private inurement and excess benefit transaction rules, examples of how the private benefit rule applies to specific programs, how to assess whether private benefit is "incidental,” and more.
The Fundamentals of the Private Benefit Rule
501(c)(3) nonprofit organizations rightfully focus much of their attention on complying with laws involving conflicts of interest among Board members, officers, and management. However, the “private benefit rule” is often overlooked and reaches far beyond an organization’s insiders. A basic understanding of the private benefit rule can help you navigate potential issues in a wide variety of programs and activities.
Q&A #175 – Can a nonprofit organization’s 501(c)(3) tax-exempt status be revoked by executive order?
It is well-established that a nonprofit organization’s tax-exempt status cannot be revoked by the mere issuance of an executive order. Revocation generally requires an individualized examination by the IRS with a notice of determination and opportunities for organizations to appeal both within the IRS and in federal courts, subject to certain specific exceptions (such as automatic revocation for failure to file Forms 990 for 3 consecutive years).
Q&A #174 – Are past due Forms 990-N required to be filed for retroactive reinstatement of tax-exempt status?
Internal Revenue Service (IRS) Revenue Procedure 2014-11 describes the process for reinstatement of tax-exempt status that has been automatically revoked for failure to file annual tax filings. Under this guidance, it is not entirely clear whether the Section 5 and Section 6 retroactive reinstatement processes require filing past due Forms 990-N. However, there are strong arguments that filing Forms 990-N for prior years should not be required under any of the retroactive reinstatement processes.
VIDEO Q&A for Subscribers: April 2025
Ben and Mike answer questions from subscribers about the potential consequences of having 501(c)(3) tax-exempt status revoked, whether a mid-year amendment to the budget should be made if an organization’s federal grants have been terminated, tax forms and disclosures required when hiring foreign contractors, and what to do when a project must be stopped in the middle of a capital campaign.
Q&A #171 – Can nonprofits rely on Form W-9 information when sending the Form 1099?
When issuing a Form 1099 (e.g., 1099-NEC), an organization is generally entitled to “reasonable reliance” on the information provided by a contractor or vendor in the Form W-9, provided the form was completely filled out, properly signed and dated, and not altered to remove required statements. However, an organization cannot rely on Form W-9 information the organization knows or has reason to know is incorrect. In that case, additional steps should be taken to verify the information.
Q&A #170 – Must nonprofits issue a Form 1099 for a contractor based in a foreign country?
In general, payments made by a nonprofit organization to consultants or contractors who qualify as “United States persons” under the Internal Revenue Code are subject to Form 1099 reporting, including U.S. citizens based abroad. Payments made to foreign persons are generally not subject to Form 1099 reporting but may be subject to withholding and reporting under Form 1042 and 1042-S.
Q&A #169 – Must a Form 1099 be issued for a scholarship payment?
Despite common misconceptions, Treasury Regulations and Internal Revenue Service (IRS) guidance provide that most scholarship payments provided by nonprofit organizations are not required to be reported by the payor on Form 1099 (or Form W-2), regardless of whether the scholarship is a “qualified scholarship” or taxable to the recipient, so long as the primary purpose is to aid the student in pursuing their studies and not as compensation for past, present, or future services.
VIDEO PODCAST: Assessing Independent Contractor vs. Employee Status
Mike and Ben discuss the legal standards for determining whether a nonprofit organization is permitted to a treat a worker as an independent contractor rather than an employee, the risks of worker misclassification and the different ways this issue can come to light, the reformulated IRS “20-factor” test, common mistakes and misconceptions about these rules, and more.
VIDEO PODCAST: Common Form 1099 Questions from Nonprofits
Mike and Ben discuss the basics of the Form 1099 rules and address some questions that are frequently asked by nonprofit organizations related to the Form 1099, including whether nonprofits are required to comply with the Form 1099 rules, whether a 1099 is required when the payee is also a nonprofit organization, whether a 1099 is required when reimbursing Board members for expenses, the importance of timely collecting Forms W-9 and avoiding 1099 mistakes, and more.
Q&A #147 – Must a Form 1099 be issued for expense reimbursements paid to Board members and volunteers?
IRS guidance suggests that reimbursements paid to Board members and volunteers for expenses properly incurred in connection with organization functions are generally not required to be reported on Form 1099 if the expense reimbursements are made pursuant to a reimbursement arrangement that qualifies as an “accountable plan.” This is similar (but not identical) to the rules that apply to employee expense reimbursements and Form W-2 reporting.
Q&A #138 – How do nonprofits report a change of address to the IRS?
Nonprofits may, but are not required to, report a change of address to the IRS on Form 8822-B. Alternatively, a change of address may be reported on the organization’s next Form 990 by checking the “address change” box in Column B on the left side at the top of page 1.