This article includes information about some of the most common tax-related questions we receive at Sawyer. The answers below are intended to give you an idea of how Sawyer Tools can help you handle tax requirements and requests.
Although this information reflects our best understanding of tax expectations in general, it's important to note that rules, regulations, and legal requirements can vary significantly by state and by business classification — and can change over time — so you should always consult a tax professional to confirm your tax requirements and responsibilities.
Reporting to the IRS: Form 1099
You're responsible for reporting your business revenue to the IRS. Depending on how much revenue you processed through Sawyer, we may send you a prefilled 1099-K automatically — or if you request it for a particular year.
The amount on your 1099-K should be your total revenue before the fees that are automatically taken out by Sawyer prior to sending payouts to your bank. These fees are taken out automatically from your taxable revenue to pay for a service (e.g. payment processing) similar to any other service you pay for with earned revenue. In other words, the gross revenue is taxable because the fees that are taken out are for services that you pay for, even though you pay for them before the money hits your bank account.
You can find the gross total of all the revenue processed through Sawyer by downloading a Bank Transfers Report from the Financials section of Sawyer Tools.
This does not include revenue that is not processed through Sawyer such as cash or checks. However, an Orders Report will include these orders if they were tracked through Sawyer Tools.
To calculate your total gross, fees, and net for payments processed through Sawyer, download a Bank Transfers report from the Financials section of Sawyer Tools and sum the appropriate columns for the appropriate range of dates.
Collecting Sales Tax
Many states do not require the collection of sales tax for education programs. If you are in one of those states, make sure that you understand the precise and up-to-date definition of education programs or other exempt business-types that may or may not be relevant for you.
Sawyer Tools doesn't have a feature specifically designed to help collect sales tax because most of the providers we work with aren't required to collect it.
However, providers who do have to collect sales tax sometimes build it into the cost of the class or add in an additional required fee to cover the extra tax using the Add-Ons feature. Both of these are workarounds that may not perfectly reflect sales tax but we've seen them used by some providers in the past so we thought you might want to consider that approach as well!
Verification and Tax ID (EIN or SSN)
The government uses a Tax ID Number (also called an Employer Identification Number or EIN) to identify your business. Think of it as a Social Security Number for your company. In fact, if you're a sole proprietor who hasn't formed a corporation or a partnership, your Tax ID Number actually is your Social Security Number because you and your business are considered the same entity.
Whether you have an EIN or just an SSN, your Tax ID Number must be entered into Sawyer Tools in order to verify that you represent a real business. In order to be verified, your Tax ID Number must match the name of your business on the Banking page of your Business Account section of Sawyer Tools.
Whether or not you're currently offering in-person activities, your official business address needs to be kept on file for tax purposes. The address under Business Information in the Business Account section must match your official business address. Your business address isn't necessarily a location you operate out of; it's whatever the official business address is that is associated with your Tax ID Number. This address is separate from your "location" address(es) and is not shown on your widget. However, it does appear on printable receipts.
FSA-Friendly Printable Receipts
In addition to confirmation emails, you or your customer can access printable receipts for every order from the order page. These printable receipts include your business address and can also include your Tax ID Number if you like. Don't enable this setting if your Tax ID Number is your Social Security Number.
FSA (flex spending account) coverage for customers can depend on the company and type of employer. There are typically specific rules that outline what is eligible and exempt for FSA purposes that are included in the documentation for the customer's coverage. Traditionally it applies to supplemental or extended-care options for working families, after school, and other daycare/educational programs.