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posted Jan 28, 2023 8:30:28 PM

Consignment- what to claim and where

Hi all!
I have a small business (llc) that has my own art/wholesale products, as well as vendors that do consignment in my store.
They do not pay a monthly rent. I only keep 20% on what I sell of theirs.
I pay sales tax every month so they don’t have to.
I cut them a check of their 80% and that’s that.
Tax time.
I’ve never done this for a business.
I know you have to 1099 anyone that I pay over $600 to.
But, the other income- how do I file it? Do i file this on my personal taxes or business? (i also did not pay myself because I was using any amount of money "profit" to pay the bills. -$7k per the expenses sheet.) And how do I not claim I kept all of this money for these other sales even though they’re under $600 per vendor.
 
I have seen conflicting information. Some sources say file with personal taxes and only claim what you kept of the "profit". 
Other sources say claim all the sales and write the payments to the vendors down as expenses?

Im entirely lost, and don't have $1000+ to have an accountant help me (though I fully recognize and appreciate their skills and that their services are accurately priced).... Any and all advice is appreciated. 

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1 Replies
Expert Alumni
Jan 30, 2023 7:32:47 AM

Let's take the questions one at a time.

  1. I know you have to 1099 anyone that I pay over $600 to. - You can  connect to Quick Employer Forms to prepare and submit those documents. This can be accessed through TurboTax Online Self Employed, TurboTax CD/Download or TurboTax Business without any additional fee.
  2. How do I file it: You report all income received by you from customers on your business return. For any amounts you paid for consignment you will enter that as an expense. My advice is to list it as a miscellaneous expense defined as Consignment Payments. This includes all, income for those above and below the threshold.

There's no mystery how the IRS conducts it's audits.  One of the first places they look at is your bank account to match income on the tax return.  It's import your books, records, business bank account and income tax return reflect the activity.  This is the simplest and most accurate way to track each detail of your business.  Without the business there would be no consignment, which rules out reporting as personal income.