It’s hard to believe we’re already thinking about tax season. And even though the deadline is still a couple months away, we understand that Amazon sellers that have been selling on Seller Central have a lot to consider and do to get their taxes finished on time.
To make an easy tax process for Amazon Sellers before April 18, 2017, we put together a three-step guide of tax tips for Amazon sellers:
Step One: Prepare Paperwork, Receipts and Tax Forms
Taxes for online sellers don’t have to be a headache, if you are prepared with the necessary information and paperwork in advance.
Start by gathering documents for your gross Amazon income. By now you should have access to your 1099 from Amazon, which shows the total amount that they’ve reported to the IRS. You are required to report to IRS as a seller if you meet the criteria:
- Selling more than $20,000 in unadjusted gross sales, and
- More than 200 transactions.
You’ll use this to calculate your taxable income in Step Two.
Next, make sure you have all relevant paperwork, receipts and tax forms.
Pro Tip: “Information is one of the most important tools you can have in your business. Know your business better than anyone else when it comes to hard data, and call your vendors to see what reporting is available for you. They have their own reporting structures but most will be more than happy to set up a custom report specifically for you and your business.” – Doug Tharp, Payability customer and owner of The American Leather Belt Co.
Step Two: Organize Your Tax Deductions
As an Amazon business owner, it is important to track the sales you’ve made throughout the year but you can’t forget to also track expenses you can deduct which helps reduce your total taxable income from Amazon.
Here is a list of common tax deductions for Amazon sellers:
An Amazon Date Range Report will show you all of your 2016 Amazon fees and expenses.
Including the cost of acquiring and storing it.
Your Home Office
Any utility expenses incurred within the square footage of your home office are considered business-related.
Think about mileage you’ve covered while acquiring inventory or visiting a supplier. Also, did you stop for a meal? Get gas? Stay in a hotel? Make calls from the road?
Do you wear gear branded with your company’s name or logo? Did you purchase office supplies in 2016? Did you take a course to learn more about growing your Amazon business? Talk with a tax expert about these and other expenses you may be able to deduct.
*Pro Tip: If you don’t already, keep track of all of your expenses in a spreadsheet or with a service like Quickbooks – and don’t forget to save your receipts
Step Three: Consult Tax Experts & File
Once you’ve compiled the necessary paperwork, deductions and receipts, consult an expert to help with the filing process. Finding someone with experience in taxes for online sellers — or more specifically who can give tax tips to Amazon sellers — should be at the top of your list.
But if you’d rather go through the process yourself, start with a service like TurboTax for Small Business, which carefully walks you through every necessary step and can help you discover other (sometimes surprising) expenses to deduct.
*Pro Tip: Jessica Hammonds, Payability customer and owner of Dailydealz on Amazon, strongly encourages Amazon sellers find a local CPA: “This is my first year and my CPA advised me it really takes two years to get the swing of taxes/sales/deductions, etc. She gave me a list [of deductions], and per the square footage of space I am using we will submit my housing/warehousing deductions appropriately.”
We hope you have found these tax tips for Amazon sellers helpful. For specific questions related to Amazon Seller tax deductions you may be eligible for, please consult a professional.