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How to Interpret the Info on the Amazon 1099-K

By John V

Republish: EasyPublish™
Published: 29Feb2012
Word count: 472
Viewed: 128 time(s)

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When sellers receive the Amazon 1099-K tax form, they might look at the gross income reported and nearly pass out. Just as those who sell on Esty and Ebay, as well as those who accept electronic payment options through Paypal or mobile e-readers, anyone selling on Amazon who received more than $20,000 in online transfers or more than 200 total transfers has to report that income on the corporate tax schedule based on what the 1099-K form says. The concern comes for those who think their corporate and self employment taxes will reference that gross transfer value, because this number will usually be way higher than actual revenue from online payments and transfers.

The system for reporting that causes this discrepancy might be flawed, but the important thing to remember is that the business owner filing the corporate tax forms has the responsibility to account for any discrepancies. For example, the value reported by Amazon on the 1099-K is almost certainly higher than revenue due to business expenses, taxes and fees, refunds, and cases of fraud that show up as positive online transfers but don't translate into income. The onus is on the business owner to note all these specific instances and appropriately reduce how much revenue they report to reflect this in order to avoid suggesting that total corporate income was higher than what actually came in. So on the one hand, recognizing the relatively logical reason why the numbers don't match should help such owners avoid becoming excessively worried that they made a major accounting mistake and will owe much more than they expected, but it doesn't actually make completing tax returns any easier.

Those who will struggle the most are the business owners whose accounting methods are behind the curve technologically. Trying to keep track of details like percentages of a payment transfer that went to state sales tax using just a spreadsheet, or worse yet a pencil and paper in a ledger, is a recipe for headaches at best, and probably for paying too much taxes at the same time. Tax and accounting software is a step in the right direction. But for business owners who are already accepting online payments there's no reason not to opt for a service that is internet-based and directly links their bookkeeping tools to a business' major marketplace and payment processing accounts.

Not only will upgrading accounting methods to this kind of tool catch business owners up with the digital age that makes their businesses possible, it will make handling that Amazon 1099-K and all other major tax and accounting responsibilities easier and more effective. And it will eliminate that terrifying moment when the uninformed open their 1099-K and pass out when they see how much Amazon says they earned in revenue for the year.

The Amazon 1099-K May Suggest a Revenue Amount That Seems Very High. It Is Important to Understand Exactly What That Number Represents.

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