Do You Issue a 1099 to a Nonprofit? Rules, Exceptions, and W-9s

In most cases, you do not issue a 1099 to a nonprofit. Organizations recognized as tax-exempt under Section 501(c) are treated by the IRS as exempt recipients, so the usual $600 reporting threshold does not apply to payments you make to them.¹ Two categories break through that exemption every time: medical or health care services and legal services. Pay a nonprofit $600 or more for either, and a 1099 is required.

Why Nonprofits Are Usually Exempt Recipients

Federal rules require businesses to report payments of $600 or more made to non-corporate, non-exempt vendors during the tax year on a Form 1099. Only payments made in the course of a trade or business count; personal payments are outside the requirement.²

Section 501(c) organizations sit in the “exempt recipient” category. The IRS already receives detailed financial information from these organizations through their annual Form 990 filings, so a 1099 would be redundant for most payment types.³ Practically, this means the church you rent event space from, the trade association you pay dues to, and the 501(c)(3) consultant you hire for a program review are not going to receive a 1099 for those payments.

One catch: a trust that calls itself charitable but has never obtained recognition under Section 501(a) does not qualify. Non-exempt charitable trusts follow the normal 1099 rules for non-corporate entities. If a W-9 comes back without an exempt payee code, treat the payee as a taxable vendor.

Get the W-9 Before You Pay

The exemption only protects you if you can prove you relied on it. Documentation starts with a completed Form W-9 from the nonprofit, which captures the organization’s Employer Identification Number and certifies its tax status.⁴ A 501(c) organization should enter exempt payee code “1” on line 4, which corresponds to organizations exempt from tax under Section 501(a).⁵

If code “1” is on a properly completed W-9, file it, keep it, and skip the 1099 for most payment types. If a nonprofit refuses to provide a W-9 or gives you an incorrect Taxpayer Identification Number, you are required to begin backup withholding at 24% on reportable payments.⁶ Collecting the W-9 upfront avoids that entirely.

Payments That Require a 1099 Even to a Nonprofit

Certain payment types must be reported no matter who receives them. The nature of the payment overrides the recipient’s tax-exempt status.⁷ For payments to nonprofits, the two you will actually encounter are medical or health care services and legal services.

Medical and Health Care Services

If you pay a nonprofit $600 or more for medical or health care services during the year, report the payments in Box 6 of Form 1099-MISC.⁸ Nonprofit hospitals, clinics, mental health providers, and substance abuse treatment centers all fall inside this rule. When a single payment covers both services and supplies (injections, medical devices), report the entire amount rather than trying to split it.

Veterinary services are included. A nonprofit animal hospital or university veterinary clinic receiving $600 or more gets a 1099-MISC in Box 6 the same way a human health care provider would. The one carveout: payments to pharmacies for prescription drugs are not reportable.⁸

Legal Services

Payments to attorneys require 1099 reporting regardless of the attorney’s business structure, and that sweeps in nonprofit legal aid organizations. The form depends on what the payment covers:⁸

Attorney fees for services: Form 1099-NEC, Box 1, when the total reaches $600. This covers any payment for legal work performed by the attorney.
Settlement proceeds paid through an attorney: Form 1099-MISC, Box 10, when the total reaches $600. This applies to gross proceeds routed through an attorney but not paid as compensation for the attorney’s own work.

The “attorney” category is broad and includes law firms, solo practitioners, corporate legal departments, and legal service nonprofits. If a nonprofit legal clinic represents a client and you send settlement funds to the clinic, report those gross proceeds on Form 1099-MISC.

Cash Payments for Fish

One narrow category worth flagging so it doesn’t surprise you: cash payments for fish or other aquatic life purchased from anyone in the fishing trade must be reported on Form 1099-MISC, even when the seller is a corporation or nonprofit.⁹ Relevant mainly to seafood wholesalers dealing with nonprofit fishing cooperatives.

Credit Card and Payment App Payments Do Not Get a 1099

If you pay a nonprofit through a credit card, debit card, or a third-party payment platform like PayPal or Venmo, you do not issue a 1099-NEC or 1099-MISC for that transaction, even if it would otherwise be reportable. The payment processor handles the reporting on Form 1099-K, and IRS rules specifically prohibit double-reporting the same payment on both a 1099-K and a 1099-NEC or 1099-MISC.¹⁰

The 1099-K reporting threshold reverted to $20,000 and 200 transactions under the One Big Beautiful Bill Act.¹¹ The practical takeaway: if you pay a nonprofit by credit card for medical or legal services that would normally require a 1099, the card network handles the reporting. You only issue a 1099 yourself when you pay by check, cash, ACH, or wire transfer.

Goods Versus Services

The 1099 reporting obligation applies to payments for services, rent, and other income, not to purchases of merchandise. If your business buys printed materials, furniture, food, or other products from a nonprofit, no 1099 is required regardless of the dollar amount. A combined invoice bundling goods and services is where it gets tricky. If you can reasonably separate the amounts, only the service portion counts toward the $600 threshold. When the invoice can’t be split and the service component is significant, reporting the full amount is the safer approach.

If You Already Issued a 1099 by Mistake

The correction process depends on timing. If you catch the error before submitting to the IRS, mark the “VOID” box at the top of the form and set it aside.¹²

If the form has already been filed, submit a corrected return. Prepare a new 1099 with an “X” in the “CORRECTED” box, enter the payer and recipient information exactly as it appeared on the original, and change all dollar amounts to zero. That tells the IRS to disregard the original filing.¹² Send a copy of the corrected form to the nonprofit so their records match.

Foreign Nonprofits Follow Different Rules

Payments to a foreign tax-exempt organization sit outside the 1099 system entirely. Instead of a W-9, the foreign nonprofit provides Form W-8EXP to establish its identity, foreign status, and claim exemption from withholding under sections like 501(c), 892, or 895.¹³ Without a valid W-8EXP on file, the default withholding rate on payments to any foreign person or entity is 30%.¹⁴ Foreign private foundations face a separate 4% withholding rate on U.S.-source gross investment income even when they do submit the form.

Payments to foreign nonprofits are reported on Form 1042-S, not on the 1099 series.¹⁴ If your business makes grants, service payments, or royalties to a foreign charity or NGO, treat it as a separate compliance track with its own withholding and reporting obligations.

1
Internal Revenue Service. Information Returns (Forms 1099)
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
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Internal Revenue Service. Annual Electronic Filing Requirement for Small Exempt Organizations – Form 990-N (e-Postcard)
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Internal Revenue Service. Form W-9 (Rev. March 2024)
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Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024)
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Internal Revenue Service. Backup Withholding
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Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
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Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
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IRS. Form 1099-K Frequently Asked Questions
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Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One Big Beautiful Bill
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Internal Revenue Service. General Instructions for Certain Information Returns
13
Internal Revenue Service. Instructions for Form W-8EXP (10/2023)
14
Internal Revenue Service. Foreign Governments and Certain Other Foreign Organizations