Yet another point on the issue of consignment: I have just been
contacted by a gallery I consign to [I’m just starting out - I
consign to 2 galleries - and that’s enough for me. I don’t want to
tie up any more inventory, nor do I want to keep track of it - but I
will say it’s been worth it up to now] to provide them with my social
security number for their year end 1099 forms. Is this standard? The
gallery has changed hands since I began working with them, but in the
past, and at the other gallery, this has not come up. It sounds odd
to me. Thanks for any advice.
I am a bit wary of giving out my social security number in view of
all the identity thefts. Also, the 1099 form sounds peculiar to me
too. I thought that these were for salary earned—not for sale of
consigned pieces, but I am not a tax expert.
As I understand it the 1099 is for miscellaneous non-salaried work.
My husband is an artist and he gets 1099’s from magazines he does
illustrations for.
to provide them with my socialsecurity number for their year end
1099 forms. Is this standard? The gallery has changed hands since I
began working with them, but in the past, and at the other
gallery, this has not come up. It sounds odd to me. Thanks for any
advice.
It’s completely standard and actually a good sign for you as well.
Although there is a small chance that the previous management team
at the gallery was not doing things correctly, chances are it
actually means your sales figures were higher this year than in
previous years. A 1099 is not required if amounts paid to a
person/business are less than 500 dollars. You still are required to
report your consignment income if it is under 500, but the gallery is
not required to keep track of it. (the 500 dollar figure is what was
the law the last time I had to fill out a 1099, it may be different
now, so please, if anyone needs to know the real figure, double
check)
Or, give your accountant a call. I would hate for them to report it
as labor and then you might get taxed twice on the money. This is
all speculation on my part. I’ve done a bunch of consignment in the
past and never had anyone ask for my SS#. I’d call your accountant
and see what she/he has to say.
The 1099 is required by the IRS as a way to report payments of $600
or more in a year.
To create the 1099 the gallery needs your tax payer id number (TIN).
This can be either your social security number (SSN) or an employer
ID number (EIN). The gallery is used to working with individuals so
they ask for a SSN. If you are uncomfortable giving out your SSN, you
can get an EIN as an individual (even without employees). Go to www.irs.gov and search for EIN. Applying is for an EIN is quick and
easy by web, phone or fax.
I am a bit wary of giving out my social security number in view of
all the identity thefts. Also, the 1099 form sounds peculiar to me
too. I thought that these were for salary earned---not for sale of
consigned pieces, but I am not a tax expert.
You have a valid concern here. The only ways I know of to get around
it are to either not consign…deal only with galleries who will buy
your work outright or register for a Federal Employer Identification
Number. Here is a link
to an Acrobat file on www.irs.gov. I got my from page
Gen 9 under 2005 1099 instructions-All.
As you deal with more galleries you probably will find that most
don’t scramble to get EINs and SSNs in the month of January, they get
them when they bring you on board. They may not deal with you if you
are not willing to provide your numbers.
A side note, there are too many different reasons for 1099s to list.
I won some money on the local lottery years ago…they issued a 1099
on the spot. People get 1099-DIVs every year from their bank or
mortgage company for any interest paid to them. 1099s are just a fact
of life
The 1099 that you will receive from the gallery will be a 1099-MISC.
Good luck and the usual disclaimer…nothing takes the place of a
qualified CPA
It is typical of some stores to run 1099 for merchandise they sell
on consignment. Really, they are in a way saying that you are working
for them, which of course you aren’t. I had a couple of companies do
this to me in the past. It can make it harder I think for you to do
your taxes because it looks more like gross income when it is
actually gross receipts. You can still do the paper work to show your
expenses. You should talk with them and ask them why they are doing
this, they may have a reason but… It would be better if they
recorded your sales as merchandise sold and the payment to you as a
purchase of that merchandise sold. They might not want to do this
because it may have a different tax structure when it comes to
inventory in their store. Who can say?
My accountant has always said that a consignment is just like
selling wholesale. No taxes on my part. Nobody, including the state
run gallery here, private galleries or the non-profit museum I am in
have asked for a SS# for a 1099.
Once upon a time a hospital that placed a large order for their
lobby did, then we had a discussion about it and they ended up not
doing so.
I have never encountered this situation in any of the galleries that
I’ve consigned to, and I’ve not required the 60 plus artists who
consign in my gallery. They do NOT WORK for me, I pay state sales
tax on items sold. I would question the need for this sort of
documentation. Please keep us posted.
I have never encountered this situation in any of the galleries
that I've consigned to, and I've not required the 60 plus artists
who consign in my gallery. They do NOT WORK for me, I pay state
sales tax on items sold. I would question the need for this sort of
documentation. Please keep us posted.
With all due respect, a 1099 is not for an employee, it is for (what
the IRS refers to as) a subcontractor. It is possible that the
galleries that you have been dealing with are treating items on
consignment as inventory purchases, but only accounting for them as
“bought” after a customer has purchased them. I know this sounds
confusing, but hypothetically I could have a store full of consigned
items, but not have to record much of it in my inventory account
because I don’t technically pay for the items until I have sold them
and I cut a check to the artist. This is good for me right? I have a
much lower inventory account number at the end of the year and so my
tax bill is also lower. Remember, there are several components to
income, one being money in the door, another being change up/down in
the level of inventory.
May I ask you how you account for inventory? If, on Dec. 31st, you
have items in your gallery that are there on consignment, where do
you have your accountant put them on your tax return? There seem to be
many questions/concerns about 1099’s so here is a link to the IRS
instructions
Some accountants tell their clients that they must provide these
forms to anyone that provided $500 or more in goods or services. I
would NEVER provide my social security number or tax ID to these
people - if they don’t have that info, they can’t send a 1099! I
always wondered if they tried to send one to walmart or wherever they
bought their other business items from.
I have never encountered this situation in any of the galleries
that I've consigned to, and I've not required the 60 plus artists
who consign in my gallery. They do NOT WORK for me, I pay state
sales tax on items sold. I would question the need for this sort of
documentation. Please keep us posted.
My apologies to everyone. I am thinking about my previous post and I
have made an error. You do not have to put consigned items on your
tax return anywhere. They do not have to be recorded until sold. I
hope I haven’t confused everyone too much.
I would suggest that you read the IRS instructions on the link, they
may clear some questions up.
I have never encountered this situation in any of the galleries
that I've consigned to, and I've not required the 60 plus artists
who consign in my gallery. They do NOT WORK for me, I pay state
sales tax on items sold. I would question the need for this sort of
documentation. Please keep us posted.
It was bothering me very much that i could not give the proper
answer to the 1099 questions, so I went over the directions for the
form again and called the IRS. Consignment sales are not reported on
a 1099. They are exempt. Payments for services only are reported on a
1099-MISC. An example would be: those of you who teach and consign
your work. You would receive a 1099 for amounts paid to you for
teaching. You would record amounts paid to you for consignment sales
on the gross receipts line on your Schedule C (or other appropriate
schedule should you be filing as, say, a partnership).
One funny thing though…I asked the agent “how do I account for
sales made on consignment?” His reply…“I don’t know, you’ll have to
check with your CPA” So, I go back to the old standby. Please don’t
rely on anyone (not even an IRS agent) to give you proper tax advice.
Ask a qualified CPA.
I’m sorry if I confused anyone.
Kim Starbard
Cove Beads
Uncle Sam has the upper hand in this situation. You are considered
an independent contractor and as such, the gallery owner has to file
a form 1099 with the IRS, this of course requires your social
security number. The money you were paid is considered income to you.
There were actual sales made and you received money for your
product, no matter what your part of the retail sale you received.
The form 1099 must be filed if you were paid over $600.00. Some
gallery owners prefer to file the 1099 no matter what amount is paid
to the artist. Many artists do not consider that they will have to
pay taxes (if applicable) on the additional income. This arrangement
for the gallery owner allows the gallery to save the additional money
that is required to be paid to the government for the social security
and Medicare taxes were you a regular employee… You may now
have an additional liability when you pay your 2005 income taxes, you
may not, check with your income tax preparer for exact information
and proper filing of income taxes.
Beth Katz Unique Solutions, Inc.
Paste Solder and Powder Solder for Jewelers and Metalsmiths www.myuniquesolutions.com
It is typical of some stores to run 1099 for merchandise they sell
on consignment. Really, they are in a way saying that you are
working for them, which of course you aren't. I had a couple of
companies do this to me in the past. It can make it harder I think
for you to do your taxes because it looks more like gross income
when it is actually gross receipts.
I have never worried one way or the other about receiving a 1099
from someone, since I do in fact carefully record and pay income
taxes on everything I make, so whatever income the gallery reports to
the IRS is included in my tax form already. I don’t go to any extra
trouble to even check up on the numbers, which have always seemed to
be in the ballpark, other than to glance at them, or perhaps to see
if my sales there are up or down from last year.
I have other income from other sources…wholesale, retail…and for
IRS purposes, it is all the same. For state sales tax purposes, some
of it is different, but not for the IRS. It would be good to take a
look at any 1099 you get just to make sure that they did not make a
big error and add an extra digit, or something like that which could
throw your reported income way out of whack from the truth. If my
income were ONLY from consignment, I would check these forms to the
penny, so my numbers would for sure be exact with what the IRS thinks
I am getting, as reported to them on the 1099’s.
Wholesale, yes, but still income that you would report on your IRS
form and pay tax on?? I would assume a 1099 would record an expense
paid out by the gallery so that they don’t have to pay tax on the
amount of money you made.
Galleries are supposed to send you a 1099 form if they pay you over
a certain amount in a year. They need an ID number for this, either a
federal tax ID number such as an Employer Identification Number, or
your Social Security Number. This is done so that the IRS can check
up on you and make sure that you are declaring that income, hence the
need for a proper IRS number of some kind. If your other galleries
have never sent you a request for this they either did
not sell enough of your work in the year to reach the threshold where
they are required to do this, or they were not compliant with IRS
law. I have had 2 requests for this in the past week from
new customers. I gave them my SS#, since that is what is on my
previously filed 1099 forms. So the request you got from the gallery
sounds perfectly legit to me.
If this makes you uncomfortable, you might want to apply for an
Employer Identification Number in the future. I don’t think you
actually have to have an employee to get one of these. But for this
year, you will have to give them your SS#. Anyone…please correct me
if I’m wrong on any of this, since I am no accountant.
I am afraid that you have completely misconstrued my comments. My
concern was the inadvisablity of giving out ones social security
number, because of the problem of identity theft… There are other
means of identification one can use that satisfy the IRS.
requirements.
Your statement that “many artists do not consider that they will
have to pay taxes (if applicable) on the additional income,” is a
total distortion of the entire issue, and an insult to all who
faithfully and honestly pay their taxes, with or without l099s…
For the world of me I cannot understand how you could possibly jump
to such an unfair and unfounded conclusion.