The One Box On Your 1099 That May Hurt You

The One Box On Your 1099 That May Hurt You

Overlooking this box may have a bad effect on your taxes

The basic rule for issuing a 1099 is if a person makes over $600 , you have to issue a 1099.

Millions of direct sales/mlm reps will receive one every year. Some may receive a 1099 with no amount in the box or an amount under $600.

Furthermore, some may receive a 1099 with a little box checked (see the red circle). This is the box that can (and has) caused trouble for many a representative. Why? Let’s look at what the box states:

“Payer made direct Sales of $5,000 or more of consumer products to a buyer (recipient) for resale.”

If this box is checked, the IRS is notified that you purchased enough product from your company to resell for at least $5,000.

So, even if you made ,for example, only $800 in commissions from your company, the IRS is looking for sales of at least $5,000 on your schedule C, line 1.

Most accountants who are unfamiliar with direct sales overlook this small, but significant, box when preparing taxes. The downside to ignoring this box is that if your line one is less than $5,000 PLUS your commissions, you will most likely get a letter asking you to correct it, or get an audit notice.

Paying attention to this box will keep you off the IRS audit radar.


Steven Spangenberg

Home Based Business Tax & Marketing Expert

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