Section 6041 of the tax code requires all persons or entities engaged in a trade or business who make payments in any tax year of $600 or more in the course of that trade or business to an independent contractor report that income to the IRS on Form 1099-MISC. This reporting requirement is designed to improve tax compliance based on the assumption that payees are more likely to correctly report their taxable income if they realize that payors are reporting that income to the IRS.
The income tax regulations specify that "all persons engaged in a trade or business" includes not only for-profit organizations, but also nonprofit and tax-exempt organizations. Treas. Reg. 1.6041-1(b)(1).
Exempted from this reporting requirement are most payments made to corporations.
The Patient Protection and Affordable Care Act (part of this year's healthcare reform legislation) amended the tax code to require the issuance of a Form 1099-MISC to corporations that are paid $600 or more during the year in the course of the payor's trade or business (with a copy going to the IRS). Exempted from this requirement are payments made to tax-exempt corporations. This provision applies to payments made after December 31, 2011.