By law, The Folk Project is required to report fees paid to performers whenever the total payment meets or exceeds $600 in a given year. It’s done via a 1099. Starting in 2020, the form of choice was a 1099-NEC (Non Employee Compensation), but prior to 220 we used a 1099-MISC (Miscellaneous Income). Forms can be ordered online or purchased in season at most office supply stores. It changes every year, so you can't reuse leftovers in the future.

This is a multi-part form, with designated copies for the payer (that’s us) the IRS and the state (which we don’t use). There are two copies for the recipients, so they have one to save and one to submit. All the performer forms need to be in the mail by January 31. A set of forms also goes to the IRS and that needs to be mailed by February 28, for payments made in the previous calendar year.

(General Note: It would be advisable to check the mail-by dates online early in this process. Until 2017, the IRS allowed an extra month for submitting the forms to them, but moved it back to January 31 that year. There's no reason not to prepare both mailings together, so it's hardly burdensome. But it was a surprise. And in 2018, the due date for the 1096 went back to February 28 for paper filers and was moved into April for electronic filters. In 2019, it was back to January 31.)

I’m breaking it down here for the sake of Treasurers yet to come, and it’s best to think of it in several stages.

1: Analysis

Try to get this step done in the first week of the new year. You will almost certainly need to chase down at least a few W9s, and that can be harder (and more time consuming) than you’d expect. (The W9 is the form used by individuals to provide an official address and a tax ID number.)

Most performers who qualify for a 1099 are paid with a check, and that makes things simpler. If the venues have been doing their jobs, you should already have gotten W9s for everyone who needs one, so you will have the address and Tax IDs on file.

However, performers who are paid out of the door cash at the Troubadour (for example), will show up in a full Performer Fee report, but that cash payment will not be associated with their vendor record. If a performer is hired by more than one venue during the year, there's another layer of complexity. Let’s say John Folksinger gets a $300 workshop gig at the Getaway and later earns another $310 at the Troubadour. Individually, the payments don’t cross the threshold. Together they do.

Another thing in the mix is the fact that some bands, particularly dance bands, are pretty loose affiliations. We might show a payment of $800 for Name That Tune, but it was really paid in four lots of $200 to each player. In QuickBooks, the band would appear to deserve a 1099, but the band is really just a brand name, not a financial entity.

We sometimes do house concerts, where we essentially pass the hat and give the proceeds to the performer directly. Events like that often have no expenses, and the relationship is such that we’re not really paying the performer as an organization. It’s more like the tip income from the creel. The performers should be reporting it on their taxes, but we don’t report it to the IRS.

Finally, foreign performers may (or may not) provide paperwork that gives them an exemption from 1099 reporting. They may be using a tour management firm to handle all their bookkeeping, or they may claim other specific exemptions by providing the appropriate form (like a W-8BEN).

The first step then, is to build a reference report. Start with a P&L for the previous year, filter it for Totals only and Performer Fees and export the details to Excel. Sort by performer name, and then go through it row by row, aggregating the numbers as you go. (If you have two consecutive rows for the same performer, add the payments together and delete one of the rows.) The objective is to end up with one row for each performer, showing the total paid to that performer for the year in question. (See exhibit below.)

Then sort the results by the payment column, in descending order. Anything below $600 can be ignored. Start at the high end, and decide if any of those who would otherwise qualify are exempt for one reason or another. Make notes in the sheet. When you’re done, you should know how many forms you’ll need, as well as the total for the payments you’ll be reporting. Save that sheet!

2. Procurement

QuickBooks Online gives you the option of filing electronically, for a fee.

That seems like it would be more convenient, but it might not be so. In 2015, it was an incredible amount of work trying to chase down email addresses at the 11th hour, since they are not part of the W9 data collection. Take a look at what QuickBooks is offering to support the work and make an informed decision. It changes a little every year.

Thanks to your work in step one, you know how many forms you need to buy, so go buy them. Don’t forget the envelopes. They come in batches of 25, and that’s probably enough for most years. In the package, you’ll find the forms themselves, as well as three copies of the 1096 form that’s used as a transmittal document with the copies that go to the IRS.

3. Reconcile

On top of the QuickBooks Vendor page, you’ll see a button to Prepare 1099s. Clicking it will walk you through a Wizard that ultimately leads to a listing of what QuickBooks thinks our 1099 submission should look like for the current year. Now you need to true that up to your spreadsheet.

If there are performers showing who shouldn’t get a 1099, because of one of the exemption conditions noted above, you can go to their vendor record and unclick the “Track payments” box. That will drop them from the 1099 listings.

It’s more likely there will be performer payments missing, because they were paid in cash. It’s also possible that the numbers might not match. That can happen (for example) if a performer didn’t make his or her guarantee at a cash gig, and a check was mailed to them later. The check will be associated with the vendor record, but the cash payment will not. The spreadsheet attached below has logic to calculate the size of the patch needed.

4. Make Correcting Entries

The simplest way to address these discrepancies is to make correcting entries in the check register. Go to the register, enter a bogus check (without a check number) for the appropriate performer, and date it for Dec 31 of the previous year. That will deal with anyone who was paid in cash.

The same approach will also remedy situations where a performer got a deposit via a check in advance, and more cash at performance time.

Set aside a block of quiet time for this, because it takes a lot of concentration and fiddling. Sooner or later, though, you’ll have a 1099 listing in QuickBooks Online that matches the results shown in your spreadsheet, for both the total forms count and the total payments. Eureka!

At this point, print and save the QuickBooks Information Sheet. It’s a good quick reference and you can scan it visually to confirm that you have addresses and Tax ID numbers for everyone in the batch. Save it with your spreadsheet.

5. Prep and Print

The print process here works just like the one for checks. You’ll have the option of printing an alignment grid and holding it up to the light with one of your pre-printed forms. Once the alignment looks OK, click Print, and the system will generate a Print Image file for however many 1099s you’re printing. Load the forms into your printer, click print again and you’re on your way.

You’ll need to repeat that process for each part of the 1099 form (A, B, C and 2). There are two sets of Copy C, since that’s the one we keep and the one that could be filed with state tax entities in some jurisdictions.

6. Collate and Package

Separate the forms and stack them up so you have a complete set for each performer. A big table would help here. Then just slip them into their envelopes, add a stamp and drop them in the post. The full set that goes to the IRS will likely be too fat, so you’ll need a manila envelope for that one.

And if you have any extra forms, hang on to them for a few weeks. Every now and then an error will turn up. Twice in five years, the performer address on file was no longer valid and the 1099 was returned by the Post Office. People move, and being able to reprint one or two saves the expense and hassle of buying another set.

7. Delete Correcting Entries

Don't forget that you created double payments to some performers to make the QuickBooks 1099 tally match correctly to the actual payments made. That’s a kludge, but it’s the simplest way to handle it. If all the correcting entries are dated for December 31 of the previous year, it’s easy to go back into the register and delete them. (But DON'T delete them until you've printed the 1096, or your total reporting numbers will be out of kilter. Whether printing 1099s or 1096s, Quick Books is going to the core database. It's only once you have all the necessary hard copy in hand that you can delete the patches.

That’s it. Good thing it only happens once a year!