Form W-9. What happens if our church does not issue the required 1099s?

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1 A 1099 is an IRS form your church will use to report to the IRS annual non-employee compensation totals of $600 or more paid to non-incorporated service and rental providers. Examples would be: - Guest Speakers - Guest Musicians - Lawn Care Service - Snow Removal Service - Church Maintenance Providers - Rental Vendors - Attorneys Note: If your church paid an attorney during the year, the attorney should receive a The $600 and incorporated rules do not apply to them. Form W-9 You should have a signed form W-9 from every 1099 vendor. This form will give the vendor s name, address, and tax ID number. Note: If the vendor is a business name, you will need their federal ID#. If the vendor is the name of a person, you will need that person s social security number. It is easy to obtain a blank form W-9. Just go online to You will not have to send the W-9 forms to the IRS. You will, however, need to keep them on file. You will need them if you are ever audited by the IRS. Your church policy should be to have the signed W-9 BEFORE payment is given to the 1099 vendor. Why? It is much easier to get the W-9 before the payment is given than after especially if you wait until December to request the W-9. If the vendor does not want to fill out the W-9 for you, you simply say, That is fine, but I will have to withhold 28% of your payment for backup withholding. If they still refuse to sign, subtract the 28% from their payment. Any backup withholding collected during the year needs to be paid to the IRS annually using form 945. This form and payment are due by January 31 st following the year the backup withholding was withheld. What happens if our church does not issue the required 1099s? If your church is audited by the IRS, they will look to see if you have issued the required 1099s. If you have not, then the IRS may consider the payments to the vendors as payroll. Your church will then have to pay the social security and Medicare taxes plus penalties and interest for those 1099 now payroll payments. You may also open up

2 the vendor to an IRS audit as well. It s much safer to get the W-9 up front and issue the required 1099s. Remember.it is the law. Preparing PowerChurch to print 1099s The following is the pre-1099 print list I use with my church clients to make sure the 1099s will be correct. 1. Print the consolidated (all funds) Income Statement for January December. (check Print account numbers ) 2. Highlight all the expense lines that may contain payments to 1099 vendors 3. Print the Account Activity Report for each needed expense line (Accounting Fund Accounting Reports Fund Accounting Activity Report Major Accts From-To Sub Acct Numbers From To Jan Dec) 4. Highlight the payments subject to a Make sure all the1099 payments are noted in the vendors history tab (Accounting Accounts Payable Maintain Vendors) If needed, you can highlight the payment, click Change 1099 Status to change payments to the appropriate 1099 status.

3 6 Make sure the vendors addresses are entered on the Vendor Contact Information Tab 7 Make sure the vendors tax ID numbers are entered on the vendors Account Information tab

4 8 Print the 1099 Vendor List from A/P Reports (Accounting Accounts Payable Reports Accounts Payable 1099 Vendor List). This report should match the1099 payments found in the Account Activity Reports from step #3. Printing the 1099s in PowerChurch Once you have determined the 1099 vendors are correctly set up in PowerChurch, you are ready to print the 1099s. You will need the pre-printed 1099 forms. You can get these from your office supply store. In PowerChurch go to Accounting Accounts Payable Print 1099-Misc Forms. You will need to make sure you federal ID is entered. Next

5 The Next at the top left will allow you to scroll between all 1099 forms. You may also add an additional form or delete a 1099 form if needed. When satisfied all is correct, click Next at the bottom of the screen. You now have the opportunity to align your 1099 forms. Load an extra 1099 form into your printer and click, Print Test. PowerChurch will print x s in all the information fields. Use the bold, black arrows to align as needed and print another test sheet. When you are satisfied with the alignment, click Next.

6 You may now load your first set of blank 1099s into the printer. You will need to print at least 3 sets - IRS copy, vendor copy, and church copy. At this time PowerChurch does not print the 1096 the transmittal form for the 1099s. PowerChurch will print a report showing the information to enter on the 1096 form which should have been included in the 1099 packet you purchased from the office supply store. You will mail the 1096 form plus the IRS copy of the 1099 forms to the appropriate address listed at the bottom of form The vendors copies, of course, will need to be mailed to each vendor. Keep a copy for your records. You are done! Next month we'll go over some items that may need to be added to your 4th quarter 941 and W2. We'll also go over how to print the W2s and the W3 transmittal. As always, if you need any help with your PowerChurch software you are more than welcome to contact us at Summit Tax & Accounting, LLC. No question is too small or too big. We are here to help you! (Fees applied on an hourly basis. Churches are billed at a discounted rate.)

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