I woke up this morning to an email with a variation of a question I get a lot:

“If we pay a costume designer a stipend and we contract to reimburse them for materials up to a certain agreed limit, must we include the cost of materials in the amount we list on their 1099?”

My answer:

The answer is, sadly, “it’s complicated.”

It depends upon whether the company has an “accountable” or non-accountable” plan. Legalzoom handles the description of the differences well (it covers employees but the same standard holds for 1099s):

https://www.legalzoom.com/articles/accountable-vs-nonaccountable-expense-reimbursement-plans#:~:text=An%20accountable%20plan%20is%20an,tax%20liability%20for%20the%20business.

So basically, if you have stated policies and procedures that reconcile the expenses, and you use those policies for everyone, then you could separate out those expenses and not 1099 them. Best practice would be to do a  separate check to the contractor for solely the materials. Please note that you would need to save those receipts and reimbursement info (or the payback if the contractor underspent) as part of your financial records. In an accountable plan, if the contractor used sub-contractors, you would also want to get proof that they sent them 1099s in January, as applicable.

Please note that the disadvantage to this is that the contractor can’t use items “from stock” (for example, of they have 10 yards of fabric they used for you that they had already and then charged you for). Perhaps more importantly, they cannot deduct these expenses as a business expense (either on a schedule C or their corporate taxes, depending on how they file.)

Per diems are always taxable, but I doubt this applies here

So if your company wants to establish and maintain an accountable plan, then reimbursements don’t need to be included on the 1099. Otherwise, they do. (now whether the IRS is really going to check on a small business is another thing altogether.).

The other way to get around this in the future is to establish a limited purchasing account the designer can use directly. Let me know if yow want to get connected through me to Divvy (now a division of Bill.com), which is a cross between a credit card and a line of credit that ties to the corporate assets rather than an individual and allows you to establish short term, limited cards. For example, you could give a designer a budget of $1000 and an expiration date of 1/31, and they could just charge directly to the card; as part of it they are required to upload receipts. It’s very slick.

A couple of other things you should know as you are preparing for year end:

1) You don’t 1099 people you pay by PayPal or Venmo (or a credit card, not including a service like Divvy), since they send them a 1099-K. The disadvantage to this is that these services aggregate all their payments to a vendor, so if you pay them less than the 1099 threshold, but they have other payments that put them over it, they still receive a 1099. The limit for this year was supposed to go down to a $600 aggregate, but the IRS just announced they would keep it at $20K for 2023, and it looks like going forward it would be a higher threshold, likely $5K. More here:

https://www.cbsnews.com/amp/news/irs-delay-600-reporting-form-venmo-paypal-1099k-2024/?fbclid=IwAR0QMRANgCCLkLTPgRciTnG6k-rIvMMl_BclJKOrZ4dnu3ECItmR5cgCNqY

2) Stating in Jan 24 (for tax year 2023), companies must e-file all year end paperwork of they have 10+ forms (aggregate of W2s and 1099s). So, for example, if you have 2 W2s, 7 1099-NECs,a nd a 1099-MISC for rent, you must e-file.
I live a pretty wild weekend morning, don’t I?

Patrick and I have one main joint client, The Caux Round Table for Moral Capitalism. Just now, I was listening in on Patrick’s meeting with them, when one of the people came in late and harried and apologetic. His son and daughter-in-law are in Acapulco, trying to get out after the hurricane, and he had just made phone connection with them; his son is trying to get to Mexico City, where his company could evacuate them. The Caux director, Steve Young, immediately tried to work out who he could connect him to there to make this happen.

Steve’s like that. Going to Europe? He’ll connect you to various political leaders, maybe even have you bring along his personal missive to Emmanuel Macron or even the Pope, with whom he communicates regularly. Or perhaps you’re going to Thailand and would like to visit the royal family? Steve lives to make these kind of introductions.

Steve is a New England Mayflower descendant, and has had generations of family members who have understood the power of making these connections. He also deeply values the inherent power of these exchanges, understanding that they draw alliances both between the people he is introducing — but also with himself.

He also recognizes the culture of these relationships. While connecting people is not just a white thing (Patrick’s family, for example, is more connected than anyone I know to absolutely EVERYONE, and Steve’s and his wife Hoa have a deep, deep Vietnamese network ), he realizes that here these connections can often be perceived as mainly taking place in white societies. So he’s constantly trying to stretch them.

Overhearing that meeting made me sit back and think about connections, to the point that I had to sit down and write this blog post rather than the bookkeeping I was supposed to be doing right now.

So tell me, who do you need to be connected to? And how can we make that happen?

On my personal blog earlier today, I compared House on the Rock to Taliesin. Some of you who know me well might have been surprised that I came out more on the side of order and constraint rather than eclectic chaos. I was a little surprised myself.

What stood out to me, as I considered this later, was how apt each house was to its place. Taliesin on the “shining brow” of the hill, a self-sustaining retreat for the Wright family (if only because they owed money to everyone in town). House on the Rock a crazy carnival designed to draw people in and dazzle them each step of the way, even if some of that gilding was a little tarnished. Each arguable the better for the presence of the other one.

It seems to me that, in our everyday life — whether that’s our family, our community, national politics, business — that we might have  a lot to learn from that..

That’s also why each place matters, why the “Washington slept here” places are no more important than the former automobile garage or tiny stone house that provided a home for generations. It’s why we should think hard about the meaning of every place we go. Why we should appreciate each place for the role it plays.

I blame second grade.

That’s where SPA started to drill study skills into us in homeroom. First, you worked together on your group, with spelling, reading, math, and writing alternating throughout the days of the week. Then, you had a few minutes at school to do the individual work from that group class. THEN, if you had time left over before you went to the specialized classes or lunch or recess or whatever, you had time for the coveted “free reading.”

I learned to rush through my work so I had time to read, and it took awhile to get out of that mindset, or at least to double check at the end. I still to this day knock out a lot of things in one draft (like blog posts).

But that theory of “you can do XYZ Fun Thing when your work is done” remains with me to this day, and with an extensive to-do list, I rarely get to the free time component. And even if I do, I feel guilty about the work I *should* be getting at least a head start on. My professional coach advises me that if I cut myself a break and do some of the fun things, I’ll actually be MORE refreshed and have MORE space for the work, and i inherently believe her, but I still have a hard time doing it. It’s a ridiculously hard habit to build.

(FWIW, I do still ready every night before bed though).

What do you do to get fun into your everyday life? Or do you suffer with this as much as I do?

(and then Patrick sends me this post: https://everythingchanges.us/blog/energy-makes-time/)

Sorry for the space between posts — I’ve been clearly more concerned about cocktails and gardening than I have been about work! (or, more to the point, paddling like a duck beneath the surface with client things and without enough time to think about Big Issues.)

So I started the day with an amazing coffee meeting at Nina’s with Stephanie Thompson from Ten Thousand Things. They are a client, so it started with things to solve, but quickly moved into bigger thinking, both in solving individual larger issues and then talking about the state of the performing arts in general. I left wanting hours more of that kind of conversation; it was incredible! (And, while I am taking about Ten Thousand Things, you have just a little time left to see EMILIA, and you absolutely should! Get tickets here: https://tenthousandthings.org)

From that meeting, I clarified that the language in the current Minnesota State Arts Board application guidelines for arts education (due today) was indeed confusing. But as part of that, I reached out to my AMAZING development director at FilmNorth, Nancy Paul, who sprang into action to clarify them — and ended up submitted a truly outstanding proposal a couple of hours before the 4:30pm today deadline. I am seriously in awe of her skills, and to how much thought she had already put into the programming that allowed her to write the grant at the very last minute!

It was a capstone to a great week for FilmNorth, in which I submitted a Large and Complicated pre-application for a grant I feel really good about, as well as nailing down over $160,000 in additional capital campaign funding. But don’t worry, there’s still plenty of time for you to give: https://filmnorth.org/capital-campaign/

I then went on to the always lovely Pangea World Theater, where again I solved some long-vexing issues, hung out with their fantastic staff, and felt extraordinarily productive. Any day I can cross a lot of things off my Trello list is a good one!

It’s looking like a great ending to the week, and in just a couple of hours I get to see Beatrix perform in URINETOWN at SPA, so I’m calling today a general arts win. Beatrix’s skills lie beyond the stage as well, since we just got notified she was the winner of the grades 6-9 portion of the Ordway ArtWalk, and her art will be displayed in their windows from May 30 to June 3. If you want that “arts win” feeling as well, the show is highly recommended, and is free of charge, no tickets needed, just show up at SPA’s Huss Center for the Performing Arts (Randolph and Wheeler) for shows at 7pm tonight and tomorrow or 4pm Sunday.

 

I’ve been working with a professional coach, who uses some methods that some might call woo-woo and which — perhaps because of that — have been remarkably effective. One of these is a semi-hypnotic guided meditation (by zoom, no less!); this week one of the things I ended up saying/realizing during that time was “Disruption is necessary for growth.”

I’ve been trying to sit with that a little, because it surprised me. You see, I hate change. I am currently grieving mightily the fact that Lisa Roering, who has owned Roering Auto Body across the street from us for the entire 30 years I have owned this house, apparently sold the business early in 2023 and there’s some dude-bro running it now. Clearly I did not use an auto body place OFTEN, but having Lisa there was a sense of security in my life that I miss. The email I *just* got that my old fave, Wilde Cafe, has now become someplace called “Pivo” is not helping; that said, I am part of the problem as I have not been there in months.

So back to disruption = growth. The more I sit with that the more I see it, though I am scared of it. I’m currently looking at some exciting new client opportunities (yay!), turning down some other new opportunities (unusual for me but very necessary), and casting an eye on currently client relationships to evaluate them. This is exceptionally hard for me, because I am very loyal to clients. I’m trying to see it as realizing that if they are not serving me, I might also not be serving them as well as another solution might be.

Maybe that means I am ok with change for me, but not others! In any case, I’m just generally trying to grow, and be the best possible resources I can for those I work with. It’s some of the hardest, but also rewarding, work I’ve done.

Last week had me thinking about audiences, at first due to two not great experiences — a relatively unusual thing for me.

The first was at the tour of To Kill a Mockingbird, which was incidentally a great show. As I stood up during intermission, the woman behind me saw fit to stick her legs out on top of my seat, tapping her feet together to clear caked dirt from her boots. At the second, the Spirit Awards screening of Tar, the people behind me spent the entire 158 minutes of the movie alternately scrolling their (bright-screened) phones and (loudly) offering color commentary (“The noise is BEHIND her!”). Others I know have reported similar experiences. It’s as if we have forgotten how to behave in public after the 3 years we’ve been mainly consuming entertainment at home on the couch.

There’s a part of me that chafes a little at the idea of “appropriate behavior” at the theatre or the cinema. Intellectually, I am aware it’s a form of gatekeeping, that keeps people out because they don’t know or are not following behavioral expectations. At least in these two cases, though, I will posit a guess that these people understood the cultural norms — but that they simply did not think that the rules applied to them.

I’m all about making the audience experience more inclusive. Live-tweeting sections during some performances? Bring it on! Creature comforts like shorter late seating holds and being able to bring drinks into the theater — also a plus — as well as greater interaction such as talk backs, backstage tours, and cast meet-and-greets. Theaters like La Jolla Playhouse have been very open about programs, especially for youth, that discuss audience expectations so that they are immediately more comfortable in the space; even teaching people about things like the fact that a show begins at a certain time, as opposed to many live music events when you can just walk into the concert at any point.

OTOH, I also recognize that the performing arts in general are having a really hard time re-building audiences after several years of staying home. Motivation is tough. I know for sure that I am part of the problem; it’s very tempting after a long day to “Netflix and chill” rather than go out — though every time I actually get up off my butt and go out I feel about 100x better for the experience!

Because the truth is that I think that there’s a really important relationship between art and the audience (which is a post for another day or this will get far too long to read!) And being a part of a community experiencing the art is a crucial part of that.

I’ve possibly spent more time than the average citizen at the Capitol (and its associated buildings). One of my clients is a labor union, and another is a mental health organization with a strong lobbying presence. I’ve also been lucky enough to live in districts led by strong, amazing people; I adore my current representative Kaohly Her, and for the record, my Senator, Erin Murphy, is likely the most inspirational politician in the state. I have a general working knowledge of many legislators and their interests, though I don’t think the Green Book has been published yet this session. I generally know the flow of the session, and I know where the Senate Building and the SOB are and the closest parking, even if I’m not 100% sure where each office is located. I’m geeky enough that our family once spent New Year’s day on an MNHS tour of the Capitol. I have a sense of the main bills passing, and of course I have a righteous indignation when something I support does not get passed.

I’ve also had a strong education in general political matters, especially due to my amazing friend Katharine who has made it her life’s work to get more people involved.

But until last week, I think I had actually only testified once in my life, which was a number of years back speaking for nurse scheduling reform and for less use of traveling nurses. And to be honest, because it’s such a sensitive subject for me (my mom’s death was most likely caused by neglect by a traveller), I don’t even remember much about testifying for that.

But in the last several days, I have testified for a bonding request for the new FilmNorth building before the Economic Development committees of both the House and the Senate. It was both nerve-wracking and a lot of fun!

The House had a large committee. FilmNorth’s Representative, Leigh Finke, is new to the House, but is carrying the bonding bill, HF 752, with several other co-authors, and she is doing a great job with it! I was probably not as prepared as I could have been, and we did get several “nays,” but it doesn’t matter because we passed that committee and moved on to the next one. Several representatives came up to speak to us afterwards and express support for us, so I guess this is where I totally get to also fan girl on Representative Alicia Kozlowski, who is pretty fantastic.

Then, yesterday, Andrew and I got to bring the same dog and pony show to the Senate Economic Development Committee for the companion bill SF 289, which is being authored by Senator Erin Murphy. With one hearing under our belt, and some great coaching form Senator Murphy, I think we did a good job presenting there, and I am excited for it to move to the Capital Investment committee.

But here’s what I really want you to know. Afterwards, Senator Murphy was giving us some tips about what to do next, and we also wanted to take a picture of the three of us. There was a young woman about Beatrix’s age sitting at one of the benches looking at her phone, so Erin asked her to take the picture. And then afterwards, she spent several minutes asking her about why she was there, and making sure she knew she was always welcome and should come often, and generally inviting her into the process. I’ve seen Erin Murphy campaigning, and I’ve seen her be personally vulnerable, and i’ve seen her be joyful. But seeing her so laser-focused on her job and on making our state government work…well, it gave me a whole new respect for the way things happen, and made me want to get more involved.

Which brings me back to the point of this post. It’s relatively easy to get more involved, and you should! If you don’t know how do do so, may I humbly suggest:

1. You contact your Representative of Senator in support of FilmNorth’s Bills (again, House File 752 and Senate File 289). You can look them up here. Just tell them why you support FilmNorth (I suppose “Bethany likes it so it must be ok” works, but it would be better if you can talk about what it means to you that amazing films get created in Minnesota), and be sure to put in your name and address so they know you are a constituent. See, that was easy — time to move on to:
2. Sign up for Arts Action Week through Minnesota Citizens for the Arts March 20-24. Most meetings are still by zoom, so you don’t even need to get down there, unless you want to go for the rally. It’s a really easy way to make your voice heard.
3. Maybe mental health is important to you and you want to really make your voice heard in person? Attend Mental Health Day on the Hill on March 9. This is a great, in person, low barrier way to express support for an important cause AND get more comfortable at the Capitol.

So I’ve now realized that the problem with having two blogs is that a lot of parts of my life cross over.

I posted this on my personal blog, but the historic preservation elements resonate here strongly as well:

http://prologuist.blogspot.com/2023/02/moving-pastries.html

It’s the last day of January, and if you know anyone who works in non-profit finance, they are probably looking  little draggy today. January is the month that employee paperwork is all due — quarterlies, W2s, and especially the dreaded 1099s (as well as many grant reports and applications — funders, why do you DO that??)

1099s are especially hairy. Organizations (and any company, or honestly even a single payer) needs to send a 1099 to (almost) anyone that worked for them during the previous calendar year that made $600 and above.

If they were paid by credit card or debit card, the organization does not have to send one, because the credit card company does in a 1099-K. Interestingly, the credit card company has to send one only if there was $20,000 or more in aggregated payments; that was supposed to go down to $600 this year, but it was postponed. Organizations take note; if you use Divvy, they do NOT 1099 and you will have to do so.

Payers like PayPal and Venmo also 1099, unless you are using the “Friends and Family” option, in which case they don’t 1099 and the payer does have to 1099 them! And if you are using Venmo to pay people, just DON’T (another post on that later).

Other incidents that you have to 1099 for include royalties, winnings, interest paid (even if to a private person like in a personal loan), and rent (that last one is the one that usually catches people up). Plus a few other things I have not mentioned here, like fishing proceeds.

Until a few years ago, the 1099-MISC was the default form. Then, the IRS divided it up, so rent/royalties/interest, etc. still go on a 1099-MISC, but “non-employee compensation” goes on (you guessed it), a 1099-NEC.

They also changed the due dates. Up until a few years ago, you had until 1/31 to send out the 1099s, and then 60 days more to file with the IRS, allowing you time to make any corrections. Now they are due to be both sent AND filed by 1/31, and the payer has to issue a corrected 1099 if something needs to be fixed. This year, one of the major filers (Intuit) pushed that due date even earlier due to changing to a filing service that mails out the forms rather than allowing people to do it on their own, so everything needed to be in by 1/27.

A few other things that catch people up — 1099s are on the calendar year (like W2s), so even if your fiscal year is on a  different timeframe, you need to be looking back at the whole previous year. And they are on a cash basis, so if you have a bill in the system that was not paid out, you don’t count it (likewise, if you had a bill entered in 2021 that you paid in 2022, you do have to include it.)

In the past, 1099 rules have also said you need to 1099 anyone who makes $600 or more, even if only part of that is non-employee compensation (for instance, if someone made $500 in payroll and then was paid a $100 stipend for a different job). This rule seems to be relaxed as of this year.

1099s also need to be issued for per diems. Materials are a mixed bag, depending on whether they were part of the contractor’s bill, whether receipts were provided, and whether the organization has an accountable or non-accountable plan. A note for you, the 1099 recipient; if it is not included on the 1099, you can’t deduct the associated expense from your taxes.

Then there is the matter of getting the information. The best practice is always to get a W9 when you pay out a new vendor, to enter that information in the accounting system, and to map out the 1099 liability correctly. However, there are often barriers to that.

The first/main problem is that, when requesting a bill, the payer’s representative often forgets to collect a W9 from the vendor. Often the payer is concerned about ensuring the vendor is paid on time, and does not request one when the check comes in, figuring they will get it “later” — and that holds things up at 1099 time. Want to help out here? If you are a purchaser for an organization, support your finance department in collecting that W9 at the time of purchase. If you are a vendor, just send your W9 with your first bill, and update it if you have address changes or the like.

Some organizations use electronic W9 services; I especially like Track1099 so I can get the W9 electronically and have the vendor update it annually.

If you do get a message from an organization that they need your W9, shoot it off as soon as you can. If they don’t have it by 1/31, they will have to submit your 1099 without your tax ID number, and I can’t think of a quicker way to get the IRS to take an interest in your taxes.

It can also be tricky for the payer to determine if a 1099 is actually needed. Non-profits don’t need to get them. Individual filers do need them, as do LLCs; however, corporations (such as S-corps, C-corps, and LLCs taxed as S-corps or C-corps) do not. If in doubt, send one. It doesn’t hurt anything; the payees should be declaring that income on their taxes whether or not they receive a 1099 (including if they are below the $600 limit).

Finally, a tip for organizations; don’t rely on your 1099 report from QuickBooks to pull the information. Do a quick analysis of all payments in case something is missed. I like to run a transaction report by vendor to ensure something was not mis-categorized. I also check other payment logs, in case the payee was accidentally entered into the system as a customer, employee, or “other” rather than as a vendor.

See why it’s not yet 9am on the last day of January and I am already bleary? But I’m almost done. If you have non-profit finance people in your life, it’s a good day to buy them a cup of coffee.