Amazon, Shopify, Etsy, eBay, Walmart, Stripe and PayPal all report gross payments processed. The form knows nothing about your cost of goods, platform fees, ads, shipping, refunds or chargebacks, and reconciling it is most of the job.
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Payment apps and online marketplaces must issue a Form 1099-K when payments for goods or services exceed $20,000 in more than 200 transactions. Payment card processors report card transactions without that threshold, and a platform may send you a form below it anyway.
None of that changes what is taxable. If you made the money, you report it: form or no form, cash, check, ACH or crypto.
Why your 1099-K looks bigger than your bank account
Marketplace deposits arrive net of selling fees, payment fees, advertising, fulfillment, refunds, chargebacks and reserves. The 1099-K starts from gross. Both numbers are right; they are just measuring different things, and your return has to bridge them.
Reporting the money that landed in your bank is the single most common error we see, and it quietly deletes every fee you paid from your deductions.
Returns, refunds, chargebacks, discounts and sales tax are then handled separately, not silently netted off the top.
Here is the same year of trading seen two ways. The left column is what your books and your Form 1099-K have to reconcile.
| Line | Amount |
|---|---|
| Gross customer payments | $150,000 |
| Platform and payment fees | -$18,000 |
| Refunds and chargebacks | -$7,000 |
| Net into your bank | $125,000 |
Report $125,000 as your sales and you have just thrown away $25,000 of legitimate deductions, while the IRS holds a form saying $150,000.
A product business normally has to keep inventory and compute cost of goods sold. There is an exemption for smaller businesses that covers nearly every seller reading this, and it is misunderstood in both directions.
If your average annual gross receipts over the prior three years are at or below the section 448(c) threshold ($32 million for 2026, indexed each year), you are a small business taxpayer. That exempts you from the full section 471 inventory requirements and from UNICAP under section 263A, and gives you two simplified routes: treat inventory as non-incidental materials and supplies, or follow your own books and records.
What it does not give you is a write-off for stock you have not sold
Under the materials and supplies method, inventory is treated as used and consumed in the year you provide it to a customer, in other words when it sells. Twelve thousand dollars of unsold product sitting in a warehouse on December 31 is still an asset, not a deduction.
The books and records route can reach a different answer where your accounting genuinely expenses purchases as incurred, but it has real limits: you cannot capitalize a cost in your books and then expense it for tax. This is a conversation to have before you file.
Opening inventory, plus purchases and product costs, plus freight-in and landed costs, minus closing inventory, equals cost of goods sold.
One genuine simplification under the exemption: only direct material costs need capitalizing. Direct labor and indirect costs come off when incurred.
Sales, refunds, fees, advertising, fulfillment, reserves, reimbursements, sales tax and transfers, channel by channel.
Sales go in at gross with the deductions recorded separately, so nothing gets buried inside a deposit.
Settlement reports matched to actual deposits, including timing differences, reserves and inter-account transfers.
Purchases, freight, units sold, closing stock and damaged goods, treated consistently year to year.
Each form against the books, chasing duplicates, wrong names and personal transactions that landed in a business account.
The first review is free. Tell us where you sell, roughly what you turn over and what state the books are in, and we will tell you what needs doing. If there is work, the fee comes in writing first, with no hourly billing.
Sellers are rarely near an office and rarely free during office hours, so platform reports, settlement files and bank statements all come through an encrypted portal and the whole engagement runs online.
Upload documents through an encrypted portal built for the job. Nothing sensitive travels by email, and everything stays in one place you can log back into.
Meet your preparer by video call or phone. No travel, no waiting room, and no taking a morning off work.
Review your return and sign authorizations electronically. Nothing needs printing, scanning, or mailing.
We file in every state and work with clients living outside the United States. A different time zone is not a problem; we schedule around yours.
Prefer to sit across a desk from someone?
You can. Four walk-in offices: Bronx, Jamaica Queens, Buffalo, and Totowa NJ. Virtual is the default because it is faster for most people, not because it is the only option.
Monthly books that record gross sales and platform fees separately, so nothing important disappears inside a marketplace deposit.
Setup, cleanup and multi-channel reconciliation in QuickBooks, including settlement files that never quite match the bank.
Return preparation and planning for the entity behind the store, from Schedule C sole proprietors to S corporations.
Whether you are on one platform or five, we will tell you what is missing and what it takes to fix it. First review is free.
Nothing on this page is tax advice for your specific situation; outcomes depend on facts we would need to review with you. Information on this page is general and current as of July 30, 2026, including the section 448(c) threshold of $32,000,000 for 2026 under Revenue Procedure 2025-32. Inventory method, entity choice and multi-state obligations depend on your own facts and records.
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