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For a business, is there ever a situation where 1099s need to be filed for purchasing a physical item?

Forum|Forum|1 year ago
May 22, 2024
1 reply
0 views

For a business, is there ever a situation where 1099s need to be filed for purchasing a physical item?

I would like to understand when to use a 1099 for this:

"File Form 1099-NEC or Form 1099-MISC to report sales totaling $5,000 or more of consumer products to a person on a buy-sell, a deposit-commission, or other commission basis for resale.

From page 7 of the 1099 IRS instructions

https://www.irs.gov/pub/irs-pdf/i1099mec.pdf

Thanks.

Ask the Experts - Biz Tax - May 2024

Best answer by Cindy4 12

A buy-sell or deposit-commission means the buyer gets to keep part of the money as compensation for services.

The IRS code section that explains this in section 6041A(b)(2)(B) .

Since the buyer may get to keep part of the money for services rendered it counts as income. The IRS wants a record of the transaction.

Example: You make widgets and we agree that I will sell them for you, but I'm not an employee. We agree that I will pay you $1 each, but can sell them for up to $1.10 each, but don't have to pay you until I sell them. When I sell them you get your $1 each and I keep whatever I got over that amount. If during the year the total amount you sold me equals $5,000 or more, you would issue me a 1099.

Hope this helps!

Cindy

Cindy4 12Answer

A buy-sell or deposit-commission means the buyer gets to keep part of the money as compensation for services.

The IRS code section that explains this in section 6041A(b)(2)(B) .

Since the buyer may get to keep part of the money for services rendered it counts as income. The IRS wants a record of the transaction.

Example: You make widgets and we agree that I will sell them for you, but I'm not an employee. We agree that I will pay you $1 each, but can sell them for up to $1.10 each, but don't have to pay you until I sell them. When I sell them you get your $1 each and I keep whatever I got over that amount. If during the year the total amount you sold me equals $5,000 or more, you would issue me a 1099.

Hope this helps!

Cindy

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enjoyfinancesAuthor

That's extremely helpful. Thank you!