When it comes to taxes, it seems everyone does things a little differently. Some file things themselves, some use a software system, and some hire an accountant. Even each accountant seems to have his or her own way of doing things. When it comes to providing the IRS with the correct tax information you can do things in a few ways.
1) Keep track of your sales, rent, and fees yourself using the settlement report that comes with your check at the end of the month. Add up all the reports for the year and report your sales and expenses to the IRS.
2) If you would prefer, we can provide a document to you with your sales, rent, and fees for the tax year upon request. We call it the financial summary report and it includes everything you should need to complete your taxes.
Sometimes a person will ask if we will send a 1099-MISC for each vendor in the store. After much study and many conversations with different accountants and tax professionals, we want to provide a detailed explanation as to why we do not provide 1099’s to vendors.
As a general rule, “you must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards, or other income payments.” In this case, Painted Tree does not pay rent to vendors, you pay rent to us. Painted Tree provides a service to our vendors (You don’t work for us, we work for you!). Painted Tree does not give out prizes or rewards, but we do payout for merchandise sold every month. This often leads to confusion as it seems to fit into the “Other income” category. A careful reading of the 1099-MISC specific instructions from the IRS website found at https://www.irs.gov/ instructions/i1099msc, reveals a list of exceptions:
Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following…
Payments for merchandise, telegrams, telephone, freight, storage, and similar items. “
Painted Tree’s payments to vendors at settlement constitute payments for merchandise, therefore these payments do not have to be reported on a 1099. This does not mean vendors are not responsible for reporting their sales or income to the IRS. How you report your sales revenue is conversation each vendor should have with their tax professional. We provide the monthly Settlement reports and the Financial Summary report so that you can report all the relevant information on your taxes.
As with much of the tax code, this topic can be a confusing one, which is why many markets do things in many ways. Furthermore, all the material prepared above is for general information purposes only and does not constitute legal or tax advice.
We hope this will bring some clarity to any confusion on the topic. If you would like a copy of the Financial Summary report don’t hesitate to ask our staff.