W-2s & 1099s Filing for Churches, Nonprofits & Seasonal Businesses

Christmas market scene with striped tents, showcasing seasonal goods, and a historic tower in the background, emphasizing community and festive atmosphere for seasonal businesses and nonprofits.

Churches, nonprofits, and seasonal businesses often work with a wide range of staff—employees, independent contractors, temporary help, and volunteers. Understanding how to properly issue W-2s and 1099s is essential to staying compliant with IRS rules and avoiding costly penalties.

Key Takeaway: Filing W-2s and 1099s accurately comes down to knowing how to classify workers, track payments, and meet deadlines with the right documentation.

Whether you’re hiring for seasonal events, managing a nonprofit’s operations, or running a church ministry, this guide breaks down what you need to know to file correctly and confidently.

Understanding Worker Classification

W-2 vs. 1099: What’s the Difference?

  • W-2 forms are issued to employees—people who are on your payroll, receive a regular wage, and have taxes withheld.
  • 1099-NEC forms are issued to independent contractors—individuals paid $600 or more in a calendar year for services, without tax withholding.

How the IRS Defines an Independent Contractor

The IRS uses what’s called the Common Law Test, which evaluates behavioral control, financial control, and the relationship between the parties. If you direct how someone works, they’re likely an employee. If they control their own work and tools, they’re likely a contractor.

For example:

  • A church custodian who follows a set schedule and uses church equipment is likely a W-2 employee.
  • A freelance musician paid to perform at a holiday service may be a 1099 contractor.

Filing Requirements for Churches

Who Needs a W-2?

Churches should issue W-2s to:

  • Pastors and clergy (special rules may apply)
  • Office staff and administrative assistants
  • Maintenance or janitorial staff
  • Childcare providers if regularly employed

Who Gets a 1099?

Churches may issue 1099-NEC forms to:

  • Guest speakers or worship leaders paid $600+
  • Freelance musicians or sound technicians
  • Outside consultants or contractors

💡 Tip: Churches are exempt from certain employer taxes but are not exempt from filing requirements. Double-check clergy compensation and housing allowances with a qualified tax advisor to avoid mistakes.

Filing Requirements for Nonprofits

Nonprofit organizations often rely on a mix of paid staff, contractors, and volunteers.

W-2s for Employees

Anyone on regular payroll—even part-time or seasonal—is an employee and should receive a W-2.

This includes:

  • Executive directors
  • Program managers
  • Fundraising staff
  • Administrative support

1099s for Contractors

Nonprofits commonly hire contractors for:

  • Website development
  • Grant writing
  • Event planning
  • Strategic consulting

If you pay $600 or more in a calendar year to a non-employee, you must issue a 1099-NEC.

What About Volunteers?

Volunteers don’t receive W-2s or 1099s—unless you reimburse them beyond actual expenses or offer a stipend. In those cases, payments may be considered taxable income and should be reviewed with a tax professional.

Filing Requirements for Seasonal Businesses

Seasonal businesses, such as holiday shops, summer camps, landscaping companies, or catering services, often deal with rapid hiring and short-term labor.

Key W-2 Considerations

Seasonal employees should still receive W-2s if:

  • They’re on your payroll
  • You dictate their work hours or conditions
  • You withhold Social Security and Medicare taxes

Examples include:

  • Summer lifeguards
  • Winter retail clerks
  • Temporary kitchen staff

When to Use 1099s

Issue 1099s for independent contractors you hire during the busy season:

  • Freelance photographers for events
  • Independent drivers or delivery help
  • Contracted maintenance or setup crews

If you paid someone $600 or more during the year for services (not goods), and they aren’t an employee, they should receive a 1099.

Avoiding Mistakes in Worker Classification

Misclassifying workers is a common and costly mistake. If you treat a worker as a contractor when they meet the legal definition of an employee, you may owe back taxes and penalties.

Here’s how to stay safe:

  • Review each role carefully using the IRS Common Law Test
  • Document roles, responsibilities, and expectations in writing
  • When in doubt, consult a tax professional or err on the side of W-2 classification

To keep track of contractor info year-round, always collect a completed W-9 before issuing the first payment. Learn why it’s essential in The Importance of Obtaining a W-9 from Every Contractor.

Tips for Easy 1099 and W-2 Filing

Even if your organization isn’t large, your responsibilities are still significant. Here’s how to simplify filing:

1. Organize as You Go

  • Collect W-9s from all contractors before paying
  • Keep detailed records of all payments made (vendor name, amount, date, service type)
  • For employees, maintain payroll and hours documentation

2. Use an IRS-Recognized Filing Service

Manual forms can be a headache. Filing electronically reduces errors and ensures faster delivery. IRS-approved tools like WageFiling allow you to:

  • File W-2s and 1099s online
  • Print and mail recipient copies
  • E-file directly with the IRS and Social Security Administration

3. Don’t Wait Until the Last Minute

January 31 is the IRS deadline for submitting both W-2s and 1099-NEC forms to recipients and to the IRS. Avoid penalties by preparing in advance.

What to Expect When Filing 1099 or W-2 Late: IRS Penalties

What happens if I file a 1099 or W-2 late?

You may be subject to IRS penalties ranging from $60 to $310 per form, depending on how late the filing is. Deliberate disregard can lead to a penalty of $630 per form.

Do churches have to issue 1099s?

Yes. If a church pays an independent contractor $600 or more in a year for services, it must issue a 1099-NEC—even if the church is a nonprofit entity.

Can a volunteer ever receive a 1099?

Only if they are paid or reimbursed beyond actual expenses. For example, a volunteer given a $1,000 “gift” may need to report that income, and a 1099-NEC may be required.