Amazon 1099-K Tax Form: What It Is & How to Handle It
If you work a regular job, you’re probably familiar with the W-2 form. But if you’ve ventured into side hustles like Amazon FBA, swing trading, or rental property investing, you might come across tax forms you’ve never seen before — one of those being the 1099 form.
Among the different types of 1099 forms, the 1099-K is specifically designed for reporting income from payment card transactions and third-party networks like Amazon and eBay. In this article, we’ll break down exactly what the 1099-K is, why it matters, and what steps you need to take when you receive one.
What is a 1099-K?
The 1099-K is a tax form issued by the IRS that reports income received through payment card transactions or third-party payment networks, covering platforms like Amazon and eBay. It’s one variation of the 1099 series, distinct from forms like the 1099-MISC, which reports other types of income such as interest and dividends.
This form became a requirement after the Housing and Economic Recovery Act of 2008 was passed in response to the global financial crisis. The new reporting rules took effect in 2011, with the first 1099-K forms sent out in 2012. Its primary goal is to reduce tax fraud and underreporting by online sellers and marketplaces.
Who Gets an Amazon 1099-K?
Previously, Amazon would issue a 1099-K if your account had at least $20,000 in gross sales and 200 or more transactions within a year — both conditions had to be met.
However, starting January 1, 2023, new IRS rules came into play. Now, any U.S.-based seller who makes more than $600 in gross sales on Amazon in a year will receive a 1099-K, regardless of the number of transactions. For earnings before 2023, the older $20,000 and 200 transaction threshold still applies.
Breaking Down the 1099-K Sections
Receiving your first 1099-K from Amazon can feel overwhelming, so let’s quickly walk through what each part means:
- Box 1a: Total amount Amazon collected from your customers during the year.
- Box 1b: Same as Box 1a for Amazon sellers since transactions are always card-not-present.
- Box 2: Merchant category code (usually left blank for Amazon sellers).
- Box 3: Total number of payment transactions — this may differ slightly from your total orders due to split charges.
- Box 4: Federal tax withheld, typically zero unless backup withholding applies.
- Boxes 5a-5l: A month-by-month breakdown of Box 1a.
- Boxes 6-8: State-related tax information.
Additional sections include your personal details (name, address, and tax ID) as well as Amazon’s contact information as the Payment Settlement Entity (PSE).
Why Is the Amount on the 1099-K Higher Than What Hits Your Bank Account?
If you’ve ever noticed your 1099-K amount is greater than what you actually received from Amazon, don’t worry — that’s expected. The amount reported includes everything charged to your customers: product price, shipping fees, and sales tax.
However, expenses like FBA shipping, storage fees, referral fees, and other seller charges are deducted by Amazon before depositing your earnings. These costs aren’t reflected on your 1099-K, so you’ll need to track them separately for accurate bookkeeping and tax filing.
How to Match and Reconcile Your 1099-K?
First, double-check your 1099-K for any discrepancies — mistakes can happen. Next, log in to Amazon Seller Central and generate a Date Range Report. This report is crucial as it provides the detailed figures your tax advisor will need.
Steps to Generate a Date Range Report
Follow these steps in Seller Central:
- Navigate to Reports > Payments.
- Click the Date Range Reports tab.
- Select Generate Report.
- In the pop-up, choose Summary as the report type and set your custom date range.
- Click Generate and wait a few minutes for the report.
Once it’s ready, you’ll be able to view figures like product sales (FBA and non-FBA), shipping credits, gift wrap credits, promotions, refunds, and tax collected. Add these amounts together — they should match the figure shown in Box 1a on your 1099-K.
Final Thoughts on the Amazon 1099-K
Running an Amazon FBA business comes with the same responsibilities as any other business — including taxes, paperwork, and financial tracking.
The good news is that an online business like this offers the flexibility to work from home and, in some cases, without even handling products yourself. Regardless of your business model, it’s crucial to stay on top of your taxes. Understanding and correctly managing your form is an important part of that process.
