How a CPA Can Help Prepare Your Amazon Businesses’ Tax Returns

As an Amazon business owner, it can be easy to become overwhelmed with tax returns. Not only are there rules regarding multi-state tax filings, but there are also specific forms you must ensure you file, which differ from the requirements of traditional businesses. Having a CPA take care of your tax returns will allow you to do what you do best: running your business seamlessly. To learn more about this process and how our team can help you navigate the complex tax codes and each of the steps ahead, continue reading and speak with our team today. Our team, though based in New York, represents sellers across the United States. As such, we will work to ensure that everything in your business is running as smoothly as possible. We want you to succeed. Here are the reasons why you may want to hire a Certified Public Accountant to assist you with your tax returns as a business owner:

Why Amazon Sellers Benefit From Hiring a CPA for Tax Preparation

If you sell on Amazon, you understand that your fulfillment programs, refunds, shipping costs, and state filing requirements can impact how much your business and income are taxed. As such, filing your returns can be an overwhelming and confusing experience. That is why working with a CPA who is familiar with Amazon operations is in your best interest. Not only can this ensure that you find deductions you may have missed, but it can also help keep your record organized and ensure your operation meets the necessary federal and state tax requirements.

A CPA Helps You File Accurately and Avoid Costly Mistakes

• Review your Amazon 1099-K form, disbursement reports, and fee statements to ensure your reported income matches what the IRS sees
• Ensure you do not overpay on taxes
• Sort out confusing tax rules and regulations
• Answer any of the questions you may have about your tax returns
• Help you decide whether your business structure can reduce your tax liability as your business expands
• Allow you to find peace of mind knowing your personal and business tax returns are prepared by a financial expert
• Ensure you provide the correct information to avoid audits and other legal issues
• File your tax returns electronically to ensure that you receive your tax refund quickly
• Advise you of any potential tax deductions

Understanding Amazon Seller Tax Responsibilities

It’s important to understand that how your business is structured can have a considerable impact on how you are taxed and the forms you must file. Because each type of business that may operate on the site, like LLCs, sole-proprietorships, and corporations, all have different tax implications and reporting requirements, a CPA can help you understand the impact these matters can have. For example, if you have partners, you’ll need to file a partnership tax return and issue K-1s, while a sole proprietorship will move everything to Schedule C and result in paying self-employment taxes

Federal Income Tax Requirements for Amazon Sellers

As an Amazon seller, one of the most important things you must keep in mind is that all earnings you make from selling on the site are treated as taxable business income. However, your filing obligations will depend on how you operate your business:

• Sole proprietorship
• Single- or multi-member LLC
• Partnership
• S- or C-corporation

Your structure will then impact:

• Your self-employment tax liability
• Payroll requirements
• Deductions
• Long-term tax planning opportunities

Multi-State and Marketplace Sales: When Amazon Sellers Must File in Multiple States

Though your business may be solely based in and run from your home state, you may be surprised to learn that your business activity warrants tax obligations in multiple states. In general, this is the result of inventory stored in Amazon fulfillment centers or sale thresholds. For example, though your business may be based in New Mexico, if you have inventory held in California or New Jersey, you may have filing obligations in those states. Unfortunately, if you are unaware of your reporting responsibilities, you may underpay and face state-issued tax penalties. However, a CPA familiar with Amazon’s rules can help ensure you and your business remain in compliance.

Situations in Which Amazon Sellers May Have Multi-State Tax Obligations

• Economic nexus created by exceeding state sales thresholds
• Inventory is stored in Amazon fulfillment warehouses throughout different states
• Remote employees or contractors
• Differences between income and sales tax responsibilities

Common Tax Deductions Amazon Sellers May Be Eligible For

Unfortunately, you may find that as a seller, you have activity happening across multiple platforms and programs, from your Seller Central and payment processors to your advertising dashboards and shipping platforms. As such, you may overlook valid tax deductions, as many sellers only take their bank account into consideration. However, a CPA can help you locate these potential deductions to help ensure you are not paying more than necessary in taxes.

Examples of Common Amazon Seller Deductions

• Cost of goods sold (COGS) and inventory purposes
• Amazon seller fees and fulfillment center charges
• Packing and shipping costs
• Software tools and e-commerce applications
• Professional services (like accounting and tax preparation)
• Advertising and marketing expenses
• Business mileage and vehicle costs
• Home office expenses when applicable

How a CPA Reduces Audit Risks for Amazon Sellers

Because there are many discrepancies between your gross revenue and disbursements, refunds, and seller fees, ensuring your records are accurate is critical to avoiding legal consequences. As such, working with a CPA can help ensure that your documentation is organized and accurate in the event you are audited by the IRS.

Ways in Which a CPA Helps Reduce Amazon Seller Audit Exposure

• Ensures accurate record keeping
• Reconciles Amazon 1099-K forms
• Ensures fees and adjustments are properly reported and documented
• Maintains organized records in the event of an audit

Contact Our Experienced E-Commerce Accounting Firm Today

As an Amazon seller, tax time can be incredibly overwhelming. That is why working with the team at eBiz Accounting is in your best interest. Our firm understands how difficult these matters can be to navigate, which is why we will do everything in our power to help guide you through these difficult matters. While our team is based in White Plains, New York, we proudly represent sellers across the United States with their Amazon business tax returns. When you need assistance, contact our firm to learn how we can represent you.