Ebay For Business Podcast about 1099-Ks

[debitendcredits]

https://podcasts.apple.com/us/podcast/ebay-for-business/id449607385?i=1000549658496

While eBay for Business is no Scavenger Life (and you need to keep in mind that all guests have drunk the kool-aid), it’s a pretty informative show.

This week’s episode discusses the 1099-k and what information is included in it.

@jay As I suspected, the 1099k includes all sales figures EXCEPT sales tax. Suppose you sell a widget for 25.00 + 4.00 shipping. $29.00 of that sale will be included in the 1099-k total. It will be your job to assess all of the shipping and fees paid to eBay as an expense against that income.
In other words, your 1099-k will not reflect the total amount of money deposited in your bank account. Of course, once you account for all of the deductions (eBay fees, store subscription, ad fees, shipping paid to eBay, etc.), the numbers should be pretty close.

It is my understanding that the 1099-K is a guideline, and unlike a W-2, there is no need to reconcile to the dollar. But we should all be saving copies of our invoices from eBay.

Why are they doing this?

I have a theory.

Your eBay managed payments account operates like a personal bank account. After a sale is complete, the gross amount of the sale is deposited to the seller’s managed payment account. Even though eBay will immediately deduct their fees from the balance, the gross amount of the sale was technically an asset that the seller held.

[Jay]

“As I suspected, the 1099k includes all sales figures EXCEPT sales tax. It will be your job to assess all of the shipping and fees paid to eBay as an expense against that income.”

This is good info and makes sense. So nothing has changed. We’ve always had to keep track of shipping and fees. You have thankfully confirmed that the new taxes are not part of the equation.

For a lot of sellers, shipping is actually net income because of the difference between eBay shipping discount and charging the buyer the retail postage cost.

[debitendcredits]

I would recommend everyone listen to the podcast.  There are few surprising things.  From what I understood, returns and discounts are not deducted from the income total.

For example-  I sell a widget for $20.00 and the customer returns it for a full refund.  The $20.00 will still be part of my total income for 2021 and it will be my responsiblity to claim the return as an expense.  In this scenario, I can also claim additional expenses (since a return is usually more costly than a non-sale) but it’s my job to account for them.

I think the general rule of thumb is once, the money is earned, it’s reported to the IRS.  It’s always our job to show the expenses that offset the income.

[Jay]

I think the general rule of thumb is once, the money is earned, it’s reported to the IRS.  It’s always our job to show the expenses that offset the income.

This 100%. eBay or any company does not do our expenses for us. They report to the IRS what money was given to us. That’s why good business people are all about expenses.

[Ryanne]

this is great info, thanks for sharing. as jay said, nothing has really changed. i thought it might, but i guess not. still going to keep track of everything on my end.

[Lukastreasure]

From what I understood, returns and discounts are not deducted from the income total.

I’m glad you mentioned this.  Not sure I’ve been accounting for returns in the past.  I’ll have to double check this.

Thanks for the info.

[ChristineR]

I’m going to chime in and say I will be reporting the exact amount shown on the 1099 just because the IRS is a hot mess. It wasn’t far off from the gross sales amount in my case.

[Author]

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