There are all sorts of entrepreneurs that have found a way to make income, and many of them have also diversified their income by becoming Amazon sellers. There are all sorts of individuals that are happy to sell products, goods, and services through Amazon and make money as a result. In fact, there are around 2.5 million Amazon sellers that live in the United States alone. The question has to arise: are these millions of Amazon sellers expected to pay taxes on their income?
The answer is, of course, yes. There might be many sellers that are confused about the process or unsure about which forms to sign. Today, we’ll provide you with some additional information regarding Amazon and how to deal with paying taxes as a seller.
What Income Should I Be Reporting?
If you are an Amazon seller, you might immediately be thinking about what constitutes as income in order to calculate your taxes. Luckily, the question is pretty simple for Amazon sellers: you should take everything into consideration. The IRS is interested in knowing how much you made in terms of gross annual income, so you should be reporting every dollar that came into your Amazon business.
If you are still unsure about the process regarding Amazon and taxes, you can contact a qualified accountant to help you with the process. There are also a variety of Amazon accounting solutions on the market to help simplify the process for Amazon sellers.
What Is A 1099-K?
If you have been involved as an Amazon seller for some time, there’s a good chance that you are already aware that you will need your 1099-K when it comes to paying your taxes. For those who don’t know, a 1099-K is a form that is issued to Amazon sellers by third-party payment processors. Some examples of established third-party payment processors include Amazon, Square, Paypal, and more.
It should be noted that not every Amazon seller will be generating a 1099-K for their taxes. In order to do so, you will have had to make over $20,000 in over 200 transactions. The 1099-K will take into account the gross sales that you made for the year on Amazon, and you can find the information in your Amazon Seller Central Account.
Amazon sellers are bound to have some questions and concerns regarding taxes, and no one wants the wrong information to be reported. One of the most important aspects of paying taxes on your Amazon income is to go through your 1099-K and ensure that there are no errors. You might find that there are errors of some kind that can affect your taxes significantly.
For those who don’t know, there are some important numbers to remember for your Amazon taxes. First, you will want to have a number for product sales, and a separate number for FBA product sales. Second, you will want to take into account any shipping credits or gift wrap credits. Third, Amazon sellers should also factor in any promotional rebate refunds. For those who don’t know, this will actually end up becoming a subtraction when you end up doing your taxes. Lastly, you will need to provide a number for the sales, shipping, and gift wrap taxes collected.
If you add up these numbers, it should equal the exact number that you put in box 1a of your Amazon 1099-K. It should also be noted that when it comes to Amazon and taxes, certain business types might help you more than other business types.
What About International Sales?
Let’s say that you are an Amazon seller that has become quite successful and is making a significant amount of revenue outside of the United States. You might be wondering about taxes and if you would be required to pay a U.S. tax on this income. The answer is no: you will not need to pay U.S. taxes on income generated outside of the United States.
However, you will need to fill out a form from Amazon to become exempt from the U.S. taxes here. This form is W-8BEN, and it will need to be provided to Amazon.
Of course, as an Amazon seller, you are entitled to certain deductions when it comes to your taxes. You might be wondering what exactly you can deduct. First and foremost, Amazon sellers can deduct any Amazon Software and FBA subscription fees on their taxes. FBA inventory costs can be used as a deduction on your taxes, and you may want to use an Amazon inventory tool to help determine this number. Any Amazon fees can also be deducted on your taxes. Supplier shipping and office supplies can be deducted as well.
Also, sellers can deduct donations of items and mileage when it comes to their Amazon taxes. If there is an FBA Sourcing Travel or meal that is business-related, it can also be deducted. Lastly, retirement plans and health insurance plans can be deducted, as well.
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