Tax Law (Questions About Taxes)/1099 forms

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Question
Hello

We have a small art gallery in New Mexico that is a part of the Santa Fe Community College.  When a piece by an artist is sold we pay the sales tax and then 1/2 of the sales price is paid to the artist.  For some reason my accounts payable mananger does not beleive that we need to give the artist a 1099 even if the artist sells over $600 in a calendar year.  She said that the artist is not providing us a service and therefore should not receive one.

Now one of the artists is calling me and wants the 1099 to show her income on her taxes.  I told her I would check into it.  I am thinking that we should be issueing them 1099 forms at the end of the year.

Is there somewhere I can locate this information on the IRS website?

Thank you for any assistance you can provide. It is appreciated.

Nancy

Answer
If you pay an individual over $600, you must provide a 1099-MISC

Here's the low-down:
 If you are required to send a 1099-MISC and don't, the IRS can assess penalties on your organization.
 If you are not required to send a 1099-MISC and you do anyway, there are no penalties.

So, if you want to be safe, send out the forms if you are not sure.

The purpose of the 1099-MISC is to collect taxes on the "underground" economy. A lot of artist are working this underground economy to not pay taxes. If you encourage it, then the IRS starts by assessing your organization.

Tax Law (Questions About Taxes)

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Randall Klein, MBA, EA

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I am an expert in personal and small business taxation, including Forms 1040, 1120, 1120S, 1065. I can answer any type of tax question except those that are requesting help in illegal tax evasion. Tax avoidance is legal, however. I do not do offshore trusts, or opt-out of the tax system type of queries.

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