Congratulations on your sale! Upon receiving a sale (of any amount) from either our online showroom, commissioned project or our art advising services, we need you to you fill out important tax information.
Make sure to identify your tax classification and EIN number if you are a U.S. company. We will send you appropriate tax documentation when eligible.
Below the form is information regarding 1099-K forms and who is eligible to receive one. If you are an international artist, please email us.
How to fill out the form:
This should be your full name and match the name on your individual tax return.
Legal Company Name
If you have a business name, trade name, DBA name or disregarded entity name, fill it in here. If you do not have a business you can leave this line blank.
Federal Tax Classification
This section defines how you, the business owner is classified when it comes to federal taxes. You will check the first option if you are filing as an individual, sole proprietor or single-member limited liability company (LLC) owned by an individual and disregarded for U.S. federal tax purposes. A sole proprietor business operates under the owner’s Social Security number and hasn’t been registered as another type of business.
The other options correspond to C corporation, S corporation, Partnership and Trust/estate businesses.
The Limited liability company option is for a Partnership or LLC businesses with multiple members. You can check this option if you own an LLC treated as a partnership for federal taxes, an LLC that has filed Form 8832 or 2553 and is taxed as a corporation or an LLC whose owner is another LLC not disregarded for federal tax purposes. If your LLC has not filed a request to be taxed as a C or S corporation, it is taxed as a Partnership. You can always seek your attorney’s or tax advisor’s help to ensure you complete your form(s) correctly.
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN especially if they do not want to use their social security number for business purposes. For an EIN, apply online. This is a free service offered by the Internal Revenue Service and you can get your EIN immediately. You must check with your state to make sure you need a state number or charter.
1099-K Tax Form Information
You may qualify to receive a 1099-K form if you meet certain profit and sales thresholds. If you receive a 1099-K form from us, Embrace Creatives is required to send a copy of the same form to the IRS and/or the tax authority of your state.
If you aren’t a US seller and aren’t paid in USD you won’t receive a 1099-K from EC.
Federal IRS Requirements
Embrace Creatives is required to issue a 1099-K form to you and the IRS if you meet both of these requirements:
- You had $20,000 USD in gross sales through Embrace Creatives payments during the calendar year, AND
- You received 200 or more individual orders through Embrace Creatives over that same period.
What is a 1099-K form?
Unlike a typical 1099 form which reports income from a particular business, regardless of the form of payment, form 1099-K reports bank card income from all your customers and clients. Embrace Creatives, like other marketplaces, is required by US law to send out a 1099-K tax form to any U.S. seller that meets the above thresholds.
A 1099-K form reports the total gross sales income you received through Embrace Creatives payments during the last calendar year. “Gross sales” includes the total sales + shipping cost for orders that were shipped and paid out that year.
Don’t worry, though – you only pay taxes on your profit (gross sales minus expenses including EC commission and any fees or deductions) so take care to keep accurate accounting records.
While Embrace Creatives does not offer tax advice we want to help you be a professional business and navigate this confusing stuff.
For more information on the 1099-K form review the IRS article: https://www.irs.gov/businesses/understanding-your-1099-k or talk to your accountant.