5 Things Amazon Sellers Need to Know About Taxes
Amazon is the largest online marketplace available, and there are some crucial things to know regarding taxes for Amazon sellers. If you want to make your products accessible and get them in front of as many people as you can.
However, some specific procedures and regulations apply to selling on Amazon. So, it’s necessary to be aware of them before proceeding.
When you use the Amazon platform to offer products or services, you must direct many of your platforms and transactions through Amazon. Particularly when using Amazon Fulfillment (FBA). This throws some complicated elements into the accounting process and may have an unanticipated impact on your taxes.
What you need to know about your tax responsibilities and any potential worries you may have if you run a business and sell on Amazon.
You’ll Need a 1099-K, First
You should receive a Form 1099-K from Amazon detailing the total payments they handled for you if your business on Amazon surpasses a predetermined threshold. In terms of both money and transactions.
This means that if you have more than $20,000 in sales and more than 200 transactions handled through Amazon, you will get a 1099-K from Amazon for your tax return. The $20,000 figure represents unadjusted total sales. Which may exceed the entire amount of money given to you from Amazon.
Describe a 1099-K.
Transactions that were made via a third-party payment network, such as Amazon, are reported on your 1099-K IRS form.
When you sell goods on Amazon, Amazon collects and processes payments from customers. Whether those payments are made with a debit card, Paypal, or another method. And then Amazon distributes the appropriate portion of those funds to sellers like you.
Between you and your consumer, Amazon is acting as a third-party payment network. And they are reporting the money they have processed through the 1099-K.
To Whom Does Amazon Mail the 1099-K?
Using the data they have on file; Amazon will create and deliver the IRS Form 1099-K straight to the company or seller. If you do not request electronic delivery, it will be forwarded to you via postal service.
You should also be able to download the paperwork immediately from your account with Amazon along with any other tax documentation.
If My 1099-K Is Inaccurate, What Should I Do?
You will have to deal with Amazon to have any significant inaccuracies on your 1099-K fixed. You might have to give Amazon your tax information once more. Just as if it were the first time if the form’s business information is inaccurate. Once you resubmit your tax documentation, they should issue you a new 1099-K.
You might need to contact Amazon support if you think there is a mistake in the numbers on your 1099-K.
Register Your Small Business on Schedule C
Most Amazon sellers must additionally file Schedule C, Profit or Loss from Business, a supplement to form 1040. The basic personal tax return when it comes time to make their yearly tax returns.
Regardless of whether you have a registered business or license, even if selling things on Amazon is just a modest side job, the money you make qualifies as the income you receive as a small business owner. You have a simple approach to reporting that self-employment revenue by completing schedule C.
Increase Your Tax Deductibility
You have the option to set off that revenue to your advantage by filing schedule C. This also gives you the chance to claim that income as coming from a company.
As an independent small business, you can keep track of every penny you spend to run your enterprise and then deduct those costs from your taxes.
Tax deductions operate by directly deducting business costs from your taxable income. Your tax debt will decrease as a result. And you might even fall into a lower tax category. Here are just a few examples of the business costs you can deduct to reduce your income:
- Office equipment
- Mileage and other expenses related to business travel
- Employee salaries, office rent, and maintenance
- Premiums for medical care
- Contributions to retirement savings
- Fees for expertise
Because they are deductions designed especially for small businesses, you can use them without sacrificing the standard deduction on your tax return. Any individual taxpayer may claim additional deductions. But doing so necessitates forgoing the basic deduction.
Do Amazon Sellers Collect Sales Tax?
Amazon sellers must think about sales tax in addition to income taxes. The regulations governing this complex subject of internet commerce are continually evolving. And occasionally differ from state to state.
The good news is that Amazon can easily apply and file sales tax for you on your purchases made through their platform. However, you must inform Amazon of the locations and details of how to apply sales tax in various locales for various clients.
Having a sales tax nexus in each state will determine your specific sales tax obligations there.
Your Best Tool to Reduce Your Tax Bill Is an Accountant
Even if you’re only attempting to make a little more money on the side, any time you start earning more money, you’re also going to start owing more in taxes. This can easily mount up to a substantial tax burden if you’re unprepared. Especially if you’re not adept at locating deductions to lower it.
Fortunately, if you’re willing to get help with your small business taxes, you don’t have to figure out the entire tax system yourself.
You can take control of your tax burden and optimize your savings by working with a professional from Your Part Time Accountant.