1099 requirements for pass through awards
I have a non-profit client who wants to make grants to teachers--a check (>$600) would be written to one teacher ("master teacher") who is responsible for opening a separate checking account and distributing the money in smaller award amounts to other teachers (usually each sub-award is <$600). The master teacher is responsible for reporting back on the sub-awards and use of funds.
Who gets the 1099? and who is responsible for filing it? My gut tells me that the master teacher who received the check would get a 1099 from the organization and then she would turn around and issue 1099s for the sub-awards.
But, I'm not sure if the rules are different than a traditional contractor/subcontract arrangement b/c the organization is a non-profit....
Anyone with similar experience? and how did you handle it? thx.
Answers
Company: Consulting
Hi Kim. I don't believe the 1099 rules are any different for non-profits. Whoever gets the check needs to complete a W-9. If the "Master teacher" is creating some kind of Non-profit company or entity that will be getting the funds, then that entity would be getting the 1099. But if it's simply passing money through, then the master teacher should get the 1099. If the sub awards are less than $600 then no 1099 is needed (as you suspected). The organization is responsible for filing the 1099 paperwork (y-e transmittal).
Company: Windhorse Lightships
This seems rather burdensome on the teacher. They will either pay taxes on the income if they do not itemize or need to set up some sort of business to receive the funds and expense the distributions. They will also need to keep receipts for 7 years to prove they spent the money. Could you give the money to the school and let them handle the expenses and award the "Master Teacher" an award for administering the program? The school already has accounting and filing admin for this. Or you could award the funds take p.o.'s for the expenses and buy them yourself tax free. Lets figure a way to lessen the burden on teachers for the money you give them!