My business will be via internet. If I sell an item for $5.00 and the buyer pays thru paypaland my share is $2.50 and a sales associate (salesperson) gets his or her share of $2.50via paypal. Since I never received the $5.00 can I under the IRS code be taxable only onmy share of $2.50? Do I send the sales associate a 1099 or how does it work. Is it theresponsibility of the sales associate to report that income to the IRS as on an honor system? What is the code number if applicable.
Hi ~ I am an attorney and would like to help you with your question.
Is the salesperson an employee of your business?
I would like to help you with your question; are you still there?
Not an employee. Commission sales only.
The $2.50 could go to help someone fund raise for medical reasons etc via
face book etc
Please give me more information about what you are referring to as far as raising money for medical expenses.
Okay - assuming the person is truly not an employee, I would recommend having a written contract with the person that sets forth that they are not an actual employee. In this case, you will issue them a 1099 at the end of the year and they will be responsible for paying their own taxes. To use the numbers in your example, you will show $5 income for the business on a Schedule C of your tax return and will have an expense for $2.50 on Part II, Line 10 of the tax schedule. This will allow you toessentially have a $2.50 write off so that you will be taxed only on the $2.50 that you kept in the transaction.
They will have a 1099 that shows $2.50 of earned income.
I think I understand what you were referring to about the medical expenses now and I think the above information I gave you addresses how you will not be taxed on that $2.50 that goes to the salesperson.
Please let me know if you have any other questions regarding this issue.
I am an attorney who has handled matters relating to small businesses in my general practice for 14 years.
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The item for sale is a novelty type item. To be more on my question, I mostlyplan to market this item in sort of collaboration with someone or organizationthat needs to raise funds for medical type needs for example a child needs fundsto get medical treatment or clubs that need money to travel etc but they will dotheir own soliciting via facebook, twitter and other internet means. For each itemsold $5.00 will be paid to paypal and paypal will deposit $2.50 into their accountthen they in turn will withdraw their funds. Does this still require a 1099 or willpaypal issue it.
I got the info from paypal. This closes out my question.
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