Filing taxes is an annual pain in the butt that only gets worse when you have your own business to account for.
Not all businesses are created equal. Filing taxes for a business like Amazon Merch is easy, especially if you don't have any advertising spend to account for, because there are no expenses associated with making money through Merch.
You would simply report your Merch royalties for the fiscal year to the IRS & be done with it. Typically you'll receive a 1099-K document in the mail if you passed a certain threshold that lets you know how much income you were reportedly paid out in the fiscal year, and you would key that amount into Turbotax.
To my knowledge, the number on your 1099-K is what should be included on your tax return to avoid increases the likelihood of you being audited by the IRS. The larger the discrepancy, the higher the likelihood of receiving extra attention.
Because POD programs like Amazon Merch & Redbubble pay out a royalty & typically have no expenses associated with using the services, filing taxes is quick & easy assuming you didn't spend money on advertising.
Alternatively, POD platforms like Gearbubble, Printful, & Printify all require you to keep a credit card on file that can be charged when you use them to fulfill a print on demand order. These figures would want to be recorded as cost of goods + shipping expenses.
Amazon FBA on the other hand is a good bit more complicated because of how many different ways they nickel & dime their sellers.
In this article, I'm going to walk you through how to account for all of your expenses from the previous year to deduct from your revenue, leaving you with your net profit (that you'll pay income tax on).
Accounting For Your Expenses
You guys should probably bookmark this blogpost if you're making money selling on Amazon / Etsy / eBay using POD websites such as Gearbubble or Printful in the foreseeable future.
Below I've provided the links to where you can find expense reports that you'll need to deduct from your overall income generated from online sales for each platform that I use!
Don't forget to set the date range to the correct fiscal year while generating expense reports!
Amazon FBA Fees For Taxes:
Amazon is a unique beast because of how many times Jeff Bezos & co. dip into our Amazon profits in order for us to generate sales on his platform.
I personally leverage all of the items listed below - I think a multi-prong attack is optimal to succeed at selling on Amazon.
This means in addition to figuring out how much Amazon order fees to write off on our taxes, we also need to factor in our ad spend from: Campaign Manager + AMS + Coupons + Lightning Deals.
- View Your Amazon Fees: Reports > Payments > All Statements --> "Amazon fees Total"
- View Your Amazon PPC: Reports > Advertising Reports
- View Your Amazon Marketing (AMS): https://advertising.amazon.com/billing/history/ref=ams_head_billing?entityId=[YOUR STORE ID]
- View Your Amazon Coupons: https://sellercentral.amazon.com/sellercoupons/coupons
- View Your Amazon Lightning Deals: https://sellercentral.amazon.com/merchandising/ref=xx_lghtdels_dnav_xx#/dashboard/recently-ended
After account for these figures, you will obviously also need to factor in your inventory costs + your inbound shipping costs.
Etsy Fees For Taxes:
Etsy decided to take mercy on their sellers and lump together all of the expenses that they pass onto us sellers on a single dashboard.
Oh yeah, and make sure your taxpayer ID is set correctly on Etsy.
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- View Your Etsy Fees: https://www.etsy.com/your/account/payments
Ebay Fees For Taxes:
Ebay is a pain because unlike almost all of their competitors, they don't offer a single reference point in the form of an annual report for sellers to view their expenses for a fiscal year.
Instead, they force you to view month-to-month reports to see the individualized expense breakdowns.
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- View Your Ebay Fees: https://my.ebay.com/ws/eBayISAPI.dll?MyEbay&CurrentPage=MyeBayMyAccounts
Printful Fees For Taxes:
Printful recently added the new expenses dashboard just in time for their US-based sellers to do their taxes - thank you! :)
(I was legitimately concerned prior to its existence...
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- View Your Printful Expense Report: https://www.printful.com/dashboard/statistics
Gearbubble Fees For Taxes:
Gearbubble also lumps together all of your expenses in a single view, making it easy on us to know how much we paid them to create, print, & ship our orders.
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- View Your Gearbubble Expense Report: https://www.gearbubble.com/dropship_reports?store=[YOUR STORE ID]&from_date=2018-01-01&to_date=2018-12-31&commit=Filter
How I Track My Amazon FBA Expenses
I developed my own proprietary Google Spreadsheet that is colored coded according to tax categorization in Turbotax.
It's made my life immensely easier when tax season roles around! This is a great example of "past me" doing "future me" a big favor!
I'd be happy to share my tax expenses document with you - shoot me a message on Facebook, or sign up for my email newsletter & respond to one of them asking me to share it with you :)
Before I made it, I would spend way too long figuring out my annual business expenses, & Shifting to a process-oriented, streamlined approach has dramatically improved my tax filing efficiency.
Keeping receipts for tax deductible expenses is important, & most important of all is keeping your wire transfer bank notes as they exceeded 6-figures for me in 2018.
I pay for both inventory & shipping via wire (or "T/T" as they call it in China), and it's not enough to log it on your spreadsheet - you want to keep the actual physical paper receipts someplace safe.
That's my stack of wire xfer receipts from 2018. I keep them in chronological order & I write the following information on the outside for quick reference:
- Date
- Order #
- Supplier Name
- % Paid + Amount Paid
This method of book keeping hasn't failed me yet - just don't forget to add your wire xfer fees to the amount paid when you do your book keeping! I pay a $40 fee to my bank for each wire).
Using Fetcher to Automate My P&L Statement
If you're a regular reader of my blog, you know that I absolutely LOVE Fetcher.
You can read my full Fetcher review here, but my two favorite uses for the tool include:
- Staying on top of my inventory levels (so I know when to re-order SKUs)
- Accounting done for my Amazon business AUTOMATICALLY
Fetcher's especially useful during tax season, because it integrates with my Amazon seller account via API and automatically pulls reports that, when combined with my inputting my expenses & inbound shipping on a per-product basis, is able to calculate my Profit & Loss statement!
P.s. if you sign up for my Amazon FBA course, I share my MASTER spreadsheet with you that will automatically calculate your per-product costs + inbound shipping costs. It's legit!
On the Profit & Loss dashboard, you can access all of the key metrics needed for filing taxes on Amazon at a glance:
Amazon Revenue
- Sales
- Refunds
- Reimbursements
- Promos
Amazon Expenses
- Cost of Goods (you need to input this per-product)
- Inbound Shipping (you need to input this per-product)
- Reshipping
- Recurring Fees
- Order Fees
- PPC
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Once you sign up for Fetcher you're almost off the hook when it comes to calculating your actual Net Profit & Gross Margins for your Amazon business.
You will, however need to factor in the following which DO NOT integrate with Fetcher:
- Amazon Marketing Services (AMS) click here to pull this report
- Amazon Coupons click here to pull this report
- Amazon Lightning Deals click here to pull this report
There's potentially additional non-standard Amazon seller programs that you might have opted into & will want to expense - you'll need to keep track of these if you want to offset your gains during tax filing season.
I hope this helped! If you need help using Turbotax software itself please feel free to reach out to me! I would be happy to help where I can :)
