Understanding Amazon 1099-K Form - Your Ultimate Guide

As an Amazon seller, tax season inevitably comes with some complexity when it’s time to collect all the necessary Amazon seller tax documents and report your full income and expenses.

One of the key Amazon tax documents you’re likely to receive from Amazon itself is the 1099-K form detailing total sales and transactions processed through your Seller Central account.

For those who don’t know, navigating the specifics of what a 1099-K represents, who receives one, how to reconcile it, and more can be confusing. This ultimate guide explains everything Amazon sellers need to know about 1099-K reporting to stay compliant with Amazon seller taxes.

We’ll cover what’s included on these forms, typical timelines for issuance, and tips for reconciling 1099-K gross sale amounts with your net profits when filing your Amazon seller tax return. Let’s get to it!

What is a 1099-K?

A 1099-K is a specific IRS tax form that reports payment transactions processed by third-party settlement organizations. So, in Amazon's case, any sales and transactions are conducted via Amazon Seller Central payment processing.

The IRS introduced Form 1099-K as part of the Housing Assistance Tax Act of 2008 to help collect taxes on Amazon income earned from online retail, auction sites, payment processors, and more.

It provides gross transaction volume details to complement other standard Amazon tax reporting forms small businesses receive.

Does Amazon Issue a 1099 to Sellers?

Yes. As a third-party payment processor, Amazon is legally required, per Internal Revenue Service (IRS) regulations, to provide tax reporting on seller transaction activity meeting specific criteria. This reporting comes in two forms:

• 1099-K - Reports gross payment processing volume
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• 1099-MISC - Reports non-sales income

Depending on your selling activity for the year, you may receive one or both from Amazon.

What is an Amazon 1099-K Form?

Amazon 1099-K is a tax form that Amazon sends to some of its sellers who use Amazon Payments to receive money from their customers.

Amazon Payments is a service that allows you to accept payments from credit cards, debit cards, or other online payment methods on websites other than Amazon.com, such as your website, or a third-party platform like Shopify or eBay.

The 1099-K tax form focuses exclusively on detailing gross payment processing transactions on the Amazon Seller Central platform tied to your tax ID, separate from a general 1099-MISC.

Specifically, it discloses the total gross sales dollars and number of transactions processed on your behalf by Amazon for the given tax year. This allows the IRS to confirm you are correctly accounting for associated income on tax returns.

However, 1099-K does not show your actual income or profit because it does not include your expenses, fees, refunds, or taxes.

What Information is Included in an Amazon 1099-K?

Some critical details reported on your annual Amazon 1099-K include:

• Box 1a: Gross sales processed
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• Box 1b: Card not present transactions
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• Box 3: Total number of transactions
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• Business Information: Your registered business name and EIN/SSN
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• Date Range: Period covered
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• Monthly Breakdown: Sales totals segmented by each month

Does a 1099-K Include Sales Tax?

Yes, the gross sales total reported on your 1099-K does include any sales tax collected on transactions. This is a common area of confusion for many sellers.

As a seller, this amount should not count toward your taxable income. Be sure to properly deduct sales tax when reconciling your 1099-K reporting with a tax professional to avoid overpaying.

How to Get a 1099-K From Amazon

Amazon tax forms, including the 1099-K, can be accessed through your Seller Central account once available leading up to and after tax season:

1. Log in to Seller Central.
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2. Navigate to the “Reports” section.
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3. Click on “Tax Document Library”.
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4. Select the appropriate tax year.
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5. Download the PDF copy of your 1099-K.

Easy enough! Just be sure your business and contact information is up-to-date so it reaches your inbox.

Who Receives an Amazon 1099-K?

High-volume third-party Amazon sellers are most likely to receive a 1099-K directly from Amazon if they exceed the company's mandated thresholds for gross payment processing. Lower-volume sellers may not hit the dual minimums for Amazon FBA taxes.

When is an Amazon 1099-K issued?

As an online retail payment processor, Amazon must issue 1099-K forms by January 31st to any sellers meeting both of the following criteria in gross payment processing volume across all connected Seller Central, Amazon Webstore, and other associated accounts under the same tax ID (EIN) in the prior tax year:

• $20,000+ in total retail sales
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• 200+ orders processed

This is based on current 2023 IRS 1099-K reporting regulations for third-party settlement organizations like Amazon.

Note that there are upcoming changes to the 1099-K thresholds in future years:

• The threshold will lower to $5,000 in sales & transactions for tax year 2024, according to the recent IRS Nov. 21, 2023 announcement.
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• The threshold was set to lower to $600 in sales & transactions for 2023, but this change has been delayed.

So, the current dual $20,000 & 200 transaction threshold for 1099-K reporting still applies for Amazon and other online marketplaces at the time of writing.

When Does Amazon Send 1099-K?

To reiterate, given the importance, you can expect 1099-Ks to be made available electronically in your Seller Central account by January 31st, following the tax year being reported.

If you don't sign up for electronic delivery, Amazon also mails a printed 1099-K copy to your listed business address. This also happens by January 31st. So watch your inbox!

My Amazon 1099K Doesn't Match My P&L - What Do I Do?

A typical scenario many Amazon sellers face is finding that their 1099-K gross sales total needs to cleanly match up with net income as shown on their profit and loss statement (P&L).

The reason typically boils down to one critical distinction - the 1099-K reports total gross sales before deductions, while your P&L shows net profit after expenses and other deductions.

What are common discrepancies between accounting software like Xero or QuickBooks and Amazon?

When syncing Amazon with accounting platforms like QuickBooks or Xero, discrepancies often arise due to differences in how each system processes and records financial data. 

By using automation tools like Link My Books, you can reduce errors and ensure your accounting records are accurate and aligned with Amazon’s reports. Regular reconciliation and proper configuration of your software will help avoid many of these common issues.

Here's a detailed breakdown of the most common issues:

1. Timing Differences in Revenue Recognition

One of the most frequent discrepancies is related to how and when revenue is recognized between Amazon and your accounting software.

• Cash vs. Accrual Basis: Amazon may report sales on a cash basis, while your accounting software might operate on an accrual basis. This difference impacts the timing of revenue recognition.
• Payment Processing Time: Amazon typically takes time to process payments (e.g., with Amazon Pay), meaning sales may show up in your bank account up to two weeks later, which could differ from your software’s accounting periods.
• Cut-off Dates: Amazon’s reporting period may not align with your accounting software’s cut-off dates, causing revenue to be recognized in different periods.
• Time Zone Differences: Transaction times may vary based on time zone differences between Amazon and your accounting software, resulting in slight variances​.

2. Differences in Handling Returns and Refunds

Amazon and your accounting software may handle returns and refunds differently, resulting in discrepancies in sales figures.

• Gross Payment Volume (GPV): Amazon does not adjust the GPV when refunds are issued. For example, the 1099-K form reports gross sales without deducting refunds, which may not align with how your accounting software records net sales.
• IRS Requirements: Amazon is required to report unadjusted gross payments, but your software might be recording net figures, causing mismatches​.

3. Shipping and Handling Charges

Shipping and handling charges can cause discrepancies due to the way they are categorized between Amazon and your accounting software.

• Included in Sales Revenue: Amazon’s 1099-K may include shipping and handling charges as part of your gross sales. Your accounting software likely separates these into distinct categories, causing mismatches.
• Expense Categorization: Your accounting software might treat shipping costs differently from Amazon’s 1099-K, leading to discrepancies in reported expenses.
• Tax Treatment Differences: The way Amazon and your software handle taxes on shipping versus product sales may also cause variances​.

4. Amazon Fees and Charges

Amazon’s platform deducts various fees and charges from your earnings, which may not always sync properly with your accounting software.

• Referral Fees: Amazon charges sellers a referral fee for each sale, but these fees may be misclassified or not synced properly with your software.
• Subscription Fees: Monthly fees for professional selling plans or other subscriptions may not be recorded consistently.
• Fulfillment Fees: Charges for Amazon’s Fulfillment by Amazon (FBA) program, such as storage and shipping, may be categorized incorrectly if not tracked carefully​.

5. Missing Transactions

Sometimes, discrepancies arise from missing transactions that fail to sync between Amazon and your accounting software.

• Missing Individual Transactions: Some sales or refunds may not sync correctly, causing income or expenses to be underreported.
• Cut-off Differences: Timing issues can result in transactions being recorded in different periods, leading to mismatches in financial reports​.

6. Incorrect Setup of Accounting Software

If your accounting software isn’t set up properly, it can cause numerous issues.

• Incorrect Configuration: Issues with account configuration can lead to misclassified income or expenses.
• Integration Problems: Incomplete integration between Xero, QuickBooks, and Amazon’s API can result in missing transactions or errors in your financial records.
• Misclassified Entries: Income and expenses might be categorized incorrectly, particularly if your software uses an inappropriate chart of accounts or fails to map Amazon transactions accurately​.

7. Reconciliation Issues

Not reconciling your accounting software regularly can cause discrepancies, especially when preparing for tax time.

• Bank Reconciliation Errors: Issues reconciling bank statements with your accounting software can lead to misstated cash balances.
• Duplicate Entries: Duplicate transactions can appear due to manual errors or configuration issues, leading to inflated income or expenses​.

If you would rather avoid all this you can connect your Amazon account directly with Xero or QuickBooks using Link My Books integrations. 

It takes only 15 minutes to do, and you can try it for 14 days free of charge!

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How to Reconcile Amazon 1099-K

The most effective way to reconcile your 1099-K with accounting records and bookkeeping processes is to carefully audit relevant Seller Central reports and your P&L to itemize expenses not being captured on the 1099-K, including:

• Selling fees
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• FBA fees
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• Advertising spend
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• Reimbursements
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• Refunds issued
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• Inventory costs
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• Shipping costs

Quick note: Check out our complete guide to learn more about Amazon fees.

Or check out our step-by-step with screenshots on How to match your 1099K figures up with Xero or QuickBooks.

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Documenting all categories of business deductions and expenses not reflected in your gross sales total will allow you to derive your final taxable net income number from the 1099-K correctly when filing.

Tools like Link My Books can automate this reconciliation process by seamlessly connecting your Amazon transaction data with leading small business accounting platforms.

This automatically imports, organizes, and categorizes all your seller fees, reimbursements, refunds, and other deductions in QuickBooks, Xero, or other accounting systems of choice. Check out our detailed article on the QuickBooks integration with Amazon.

[Disclaimer: This article is for informational purposes only. Whenever dealing with tax regulations or requirements, seek guidance from a licensed tax professional, as we cannot provide definitive tax advice or be held liable for any information presented.]

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How Link My Books can automate your reconciliation and make Amazon accounting simple 

Link My Books offers a seamless solution for automating Amazon reconciliation and streamlining your accounting workflow, especially when integrated with platforms like Xero or QuickBooks. Here’s what you can expect:

1. Automated Data Import: Link My Books directly connects with your Amazon Seller Central account, automatically importing sales, fees, and refunds. This eliminates manual data entry, reducing the risk of errors and saving you time.
2. Accurate Transaction Categorization: The platform categorizes all transactions, including Amazon fees, shipping costs, and refunds, ensuring that your financial records are accurate and reflect your true income and expenses.
3. Effortless Reconciliation: With automated reconciliation, Link My Books matches your Amazon payouts to the corresponding sales, refunds, and fees, ensuring that your accounts are always up to date. The 1099-K reconciliation report that’s built into Link My Books takes it a step further. Making reconciliation quick and 100% accurate. 
4. Multi-Currency Support: If you sell on Amazon marketplaces in different countries, Link My Books supports multi-currency transactions, ensuring accurate reporting and conversion rates in your accounting software.
5. VAT Automation: For VAT-registered sellers, Link My Books automatically applies the correct VAT rates to your sales, helping you remain compliant with tax authorities like HMRC or EU VAT systems.
6. Simplified Tax Filing: By keeping your financial records organized and up-to-date, Link My Books makes it easier to file your taxes, ensuring that all income and expenses are accounted for accurately.

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Frequently Asked Questions (FAQs)

Now that we’ve covered the basics let’s dive into some common questions sellers have:

Does Amazon Report to the IRS?

Yes! Amazon must submit 1099-K forms directly to the IRS by January 31st for any third-party seller meeting transaction minimums ($20,000 in gross sales receipts and 200 or more transactions) across their whole account in a calendar year.

This reporting allows the IRS to analyze if sellers accurately declare associated sales income on tax returns. Falling under either minimum provides income tax reporting exemption. However, you must still voluntarily report by self-filing a Schedule C tax form.

Do I Have to Report 1099-K Income?

Yes. You must report all gross sales detailed on the 1099-K on your return. Failing to report 1099-K income leaves you at risk of penalties, fees, or tax notices for seemingly undeclared income.

Remember to reconcile it properly with your expenses and deductions before stating your final taxable income number.

What is the threshold for a 1099-K on Amazon?

To recap, the 1099-K thresholds across all your Amazon selling accounts are:

• $20,000+ in retail sales
• 200+ customer orders

Why did I get a 1099-misc from Amazon?

If your Amazon business earned other supplemental income last tax year outside of just direct sales, like interest, reimbursements, or incentives, you likely received both:

• A 1099-K form reporting gross retail sales
• A separate 1099-MISC covering those additional earnings

How do I get my tax information from Amazon?

All Amazon seller tax forms, including the 1099-K and 1099-MISC, can be accessed directly through your Seller Central account. Just navigate to the ‘Reports’ section, open ‘Tax Document Library,’ select the appropriate tax year, and download the form(s). Easy access.

Interested in more Amazon guides?

• Ultimate Guide on Amazon Restocking Fees
• How to Use The Amazon Seller App
• Amazon 1P vs. 3P
• FBA vs. FBM
• Best accounting software for Amazon FBA
• How to do bookkeeping for Amazon sellers

Get Started with Link My Books for easy Amazon Accounting

You now understand precisely what 1099-Ks represent, who receives them, when they’ll arrive, how to access them, and tips for proper reconciliation when filing your Amazon tax return.

If you’re looking to simplify your cross-channel retail tax preparation and financial workflows, Link My Books can make a big difference:

• It automates the import of your 1099-K data, syncing it with your accounting software like Xero or QuickBooks.
• It helps you easily reconcile expenses by factoring in fees, refunds, and other costs, ensuring that your net profits are accurately calculated for tax purposes.

By automating reconciliation and eliminating manual data entry, Link My Books saves you time and reduces the risk of errors, making it easier to stay compliant with tax regulations.

Try Link My Books to simplify 1099-K reconciliation and get your accounting in order, quickly and efficiently.

It can save you major time, headaches, and accounting fees.