Before 2023, sellers listing items on Amazon would only receive a 1099-K once their sales reached $20,000 or 200 transactions. Because of the size of this figure, very few small sellers received 1099-Ks from the platform. Starting in 2023, the IRS lowered the threshold for receiving a 1099-K to $600. This means that many small vendors can expect to receive a 1099-K for 2023.
What is a 1099-K form?
The IRS sends 1099-K forms to report transactions processed and reported by third-party payment processors. Credit card companies, eBay, PayPal, and other similar entities distribute these third-party payments to report the total amount of payment that came through for a business during the tax year.
The 1099-K form helps the IRS ensure that businesses properly report all of their income.
The 1099-K form differs from other types of 1099 forms in that it explicitly reports payment card and third-party network transactions. Different types of 1099 forms, such as the 1099-MISC and the 1099-NEC, report income from various sources, such as contract work or rental income. Additionally, the 1099-K form is only issued by payment processors, whereas various entities, including employers and clients, can issue other types of 1099 forms.
Who Gets a 1099-K Form from Amazon?
Starting in 2023, the criteria for receiving a 1099-K form from Amazon will change. This was due to the 2022 Inflation Reduction Act. The new criteria reduces the threshold from $20,000 to $600 for sales from payment card transactions. There is also no minimum number of transactions for receiving a 1099-K.
Initially, the lower threshold was to start during the 2022 calendar year. However, the IRS had to delay the implementation. This was due to the overwhelming administrative burden of a short implementation period between the law enactment and the form distribution timeline.
Several states also require third-party payment processors to file 1099-Ks with state taxing authorities. Most states that require 1099-K filings have the same deadline for filing as the IRS.
What income is included on a 1099-K Form from Amazon?
Several types of transactions may trigger a 1099-K from Amazon. Common transactions are:
- Sales of products (or services) make through the Amazon Marketplace.
- Adjustments for chargebacks or returns.
A 1099-K includes the third-party processor’s name, address, and tax ID. It will also have the seller’s name, address, and tax ID. In addition, the form includes the total sales for the year and a breakdown of sales by month. Form 1099-K will also show any federal or state taxes withheld by Amazon from the seller. However, this only happens in very limited circumstances (such as when the seller has provided an invalid tax ID).
Note that your 1099-K may not include all of your business income. For example, if you accept payment outside of Amazon’s platform, such as cash or checks, the income will not appear on your 1099-K. Additionally, if you participate in the “Fulfilled by Amazon” (FBA) program but take payments for your goods outside the platform, the payments will not appear.
You are responsible for reporting all of your business income, whether the income is included in a 1099-K.
What should I do if I don’t receive a 1099-K form from Amazon?
If you expect a 1099-K from Amazon but have yet to receive one, you should log in to your Amazon portal. That way, you can see if it’s available online. Form 1099-K is due to the IRS by February 28th each year, so the form may not be available early in tax season.
You will only receive a 1099-K if your sales through the platform reach $600. However, Amazon can issue 1099s to sellers with transactions totaling less than $600, even if they are not required to do so.
If the deadline has passed and your sales exceed $600, you should contact Amazon to determine why the 1099-K has yet to be issued. Again, it’s important to verify the figures on your 1099. This ensures that it matches your records. If the figures are different than you are expecting, you should contact Amazon and ask them to issue a corrected 1099-K.
How to report income if you don’t receive a 1099-K form
If you do not receive a 1099-K form from Amazon (and should have), you must still report your income from Amazon sales on your tax return. You should report your income based on your records. Use records such as sales reports from Amazon’s seller central dashboard or any other record-keeping system to do this. You can also recreate your income by reviewing your bank statements. If you need to recreate your income, it’s important to note that deposits to your account will be after Amazon takes its fees. This means they may not represent your gross sales.
You must accurately report all of your income from Amazon sales, even if you do not receive a 1099-K form from Amazon. Failing to report all of your income can result in penalties, fines, or other IRS action.
Closing Thoughts on Amazon 1099 Forms
It’s important to monitor the news this year for changes in the 1099-K reporting requirements. The IRS may delay the implementation of the lower thresholds again. However, based on current rules, anyone who sold more than $600 of goods or services through Amazon should expect to receive a 1099-K starting in 2023.
Your business should completely and accurately report all income. All income should be reported regardless of whether you receive a 1099-K or not. You should be tracking your sales throughout the year. This is to verify the accuracy of any 1099-Ks you receive at the end of the year. This will also serve as a backup in the event that you do not receive a 1099-K.
Because of the lower threshold for receiving a 1099-K, Amazon will issue many more 1099-Ks this year. Therefore, you should review your 1099-K for accuracy. Then contact Amazon if you note an error in your form as soon as possible.
Worried you may not have reported back earnings because you weren’t receiving 1099ks before? Worried about what your taxes will look like next year with the added 1099k earnings from Amazon? We can help. Click here to contact us and set up a complimentary strategy session.