The 501 S(c)ene

The latest view on not-for-profit accounting issues

Independent Contractors – Who Should Be Reported on Form 990?

Part 7, Section B of the Form 990 asks you to list the organization’s five highest compensated independent contractors.  It sounds simple enough, but here are some questions that might come up:

What do they mean exactly by independent contractors?
Independent contractors provide SERVICES, not merchandise or goods.

Would this only include those that the organization filed a Form 1099 for (under the current rules for 1099’s)?
Not necessarily.  Currently, Forms 1099 are not required to be filed for organizations that are incorporated (inc.’s).  But for purposes of the 990, you would include payments to any service provider.

What about rent?
You should include any 1099 amounts in this Section of the 990, which means rent is included (1099’s are required to report rent paid).

What about health insurance?
It is my understanding that health insurance premiums would not be considered a service and would not need to be reported in this section of the 990.

What about investment fees paid to a large brokerage firm?
Yes, these would be included.

What if my organization pays fees for services performed by an individual?
Section B should include both individuals and companies.  You may want to read IRS Publication 1779 which describes when an individual should be classified as an employee versus an independent contractor.

One important point to remember is that you only have to list the 5 highest to whom you paid more than $100,000.  For a lot of nonprofits, this means that Section B will be blank.

By Colette Kamps, CPA

Comments

  1. ER says:

    What source do you have that rents are to be included? Our accounting firm as matter of policy does not include rents paid as one of five highest independent contractors. They have not been able to provide me a basis either for or against in IRS literature.

    • admin says:

      Thank you for your question. The blog you are referring to was posted in 2010, and we have since changed our stance on this, as the 990 instructions over the last few years have provided further clarification. We agree that rents should not be included in Section B of Part VII of the Form 990. Please see below for further info.

      Per the IRS Form 990 instructions, page 36 states,” Enter the amount the organization paid, whether reported on Form 1099-MISC, box 7, or paid under the parties’ agreement or applicable state law, for the calendar year ending with or within the organization’s tax year.” The instruction only references box 7 (nonemployee compensation) of the 1099 and never refers to rent (which would be box 1), royalties, or any of the other boxes.

      Colette Kamps, CPA