1099-K misunderstandings
A 1099-K shows gross payments processed, not what you earned. Refunds, fees, and cost of goods sold still need to be accounted for before you know your taxable profit.
Insights
What the numbers are trying to tell an online seller.
Short explainers on the topics sellers bring to Cindy most often. General information only, not tax advice for your situation.
Inventory accounting
Buying inventory spends cash, but the cost generally hits the income statement when the product sells. Mixing the two makes margins swing wildly month to month.
Sales tax versus income tax
Sales tax is collected from customers and owed to states; income tax is on your profit. They follow different rules and different calendars, so keep them separate in the books.
Marketplace fees
Referral, fulfillment, storage, and advertising charges are deducted before payout. Recording them separately shows which costs are eating into margin.
Tax planning for sellers
Reviewing results during the year leaves time to adjust estimated payments and consider entity questions before the year closes.
Cash flow for inventory businesses
Growth usually needs more inventory before it brings in more cash. Planning purchases against cash keeps a good sales month from becoming a tight one.
Reading e-commerce financial statements
Start with gross sales, then fees and returns, then cost of goods sold. The gross margin line tells you whether each sale is really working.