Selling on Amazon.com can be financially rewarding, but there’s a lot of hard work, diligence, and even risk that comes with being an online seller, particularly when it comes to taxes.
But there’s also a significant upside to being an Amazon or e-commerce seller come April 15 thanks to tax deductions.
In fact, just like any other self-employed individual or entrepreneur, sellers on Amazon.com and other platforms can claim a host of deductions, including costs for your home office, education and training, and myriad other expenses.
Here is a quick list of deductions that are common for Amazon and e-commerce sellers:
- Your cost for the goods you sell (wholesale or manufacture price)
- Seller fees you pay to Amazon
- Shipping costs (including all supplies and fees)
- Mileage to and from vendors, suppliers and/or business meetings
- Salary and benefits to your employees
- Printing and marketing costs, including online
- Subscriptions and professional membership fees, including software tools
- Home office costs for furniture, supplies, computer equipment, etc.
- Education, workshops, and professional development costs
- Fees for hiring consultants and advisors
- Charitable donations (including damaged/unused inventory donated to charity)
Here are a few more notes and tips when it comes to tax deductions for Amazon.com sellers:
- Always keep your receipts! Since a lot of what you do is online, save emails or screenshots of payments, or pay with one dedicated credit card that will keep track for you.
- The 1099-K is a form that reports your sales to the IRS, including monthly and annual gross sales data. It includes items like shipping fees, sales taxes, and more.Be on the “lookout” for this form as you will need this to file your taxes.
- Amazon.com will populate your 1099-K IF you meet certain standards as a seller, including more than $20,000 in adjusted gross sales and more than 200 transactions. If you don’t meet these criteria, you’ll still be responsible for submitting tax ID or social security number to Amazon, or you may have your seller status rescinded (although that has nothing to do with the IRS).This is just so Amazon can comply with all the IRS requirements. Furthermore if you do not receive a 1099-K from Amazon because you did not meet their criteria to produce one, you will still be required to report your sales on your tax return.
- If you are operating your Amazon business under your name or a single member LLC, then, we’ll look at filing a Schedule C with the IRS with your 1040 by April 15, 2020. If you organized your Amazon business as an S-Corp, then you’ll look at filing Form 1120-S with the IRS by March 16, 2020. If you organized your Amazon business as a Partnership (two or more members to an LLC) then you’ll look at filing Form 1065 with the IRS by March 16, 2020. If you organized your Amazon business as a C-Corp, then you’ll look at filing Form 1120 with the IRS by April 15, 2020.
- The #1 area where Amazon sellers get in trouble with the IRS is sales tax. It’s no wonder why, as there’s a lot to consider and keep track of, especially if you sell FBA (Fulfillment by Amazon). Even if you think you have all of your Amazon sales tax in order, remember that the tax liability rules differ from state to state.
- So, I highly advise my clients to use TaxJar, the best solution I’ve found to keep Amazon or e-commerce organized, automatically documents, and available whenever you need it at the click of a button. It’s a great investment that will make your life easier when it comes tax time!
To make sure you’re maximizing all of the deductions available, please schedule a consultation or call with my office.