What's different here
- Exempt payee, not exempt payer. Payments to a 501(c)(3) are exempt from 1099 reporting; payments by one are not. Contractors, consultants, speakers, landlords and grantees paid $600 or more in 2025 ($2,000 in 2026) get a 1099-NEC or MISC from the nonprofit.
- Grants to individuals are the hardest classification. A grant to an individual for services (a fellowship with work required, a commissioned artist) is nonemployee compensation. A prize or award (a competition, an honor) is 1099-MISC box 3. A qualified scholarship to a degree candidate used for tuition is not reportable at all. A hardship or disaster grant to an individual under a properly designed program is generally not reportable. The program's design determines the form, so tax counsel should sign off on program rules before the first check.
- Honoraria and speaker fees are 1099-NEC to the speaker (or to the speaker's employer if paid to the institution). Travel reimbursed under an accountable plan is excluded; a flat travel stipend is included.
- Research subjects and study participants are 1099-MISC box 3 above the threshold, and gift cards count. Many organizations pay them through petty cash and never capture a TIN.
- Grants to other organizations are not 1099 reportable (the grantee is usually an exempt organization or the payment isn't for services), but the funder still needs the grantee's EIN, exempt status and, for federal pass-through funds, a SAM.gov check.
- Volunteers and board members reimbursed under an accountable plan get nothing; a board stipend is 1099-NEC (or W-2 if the director is also an employee).
- Donor-facing questions (does a donor get a 1099 for a raffle prize? yes, box 3, above the threshold) tend to land on the finance team without warning.
A process sized for a small team
- Make the W-9 a condition of the check request form; no W-9, no payment, including for honoraria and study participants.
- Verify every name/TIN pair against IRS records at setup and log it; a small nonprofit's 1099 file is small enough to check completely.
- Write the grant-program rules with the 1099 classification stated in them, so program staff know which payments are reportable before they're made.
- Do the December sweep of payees without a TIN and log the solicitation; that is what makes the penalty waivable if a grantee never responds.
- Screen grantees and vendors against OFAC, and against SAM.gov when federal money is involved.