📜What Online Sellers Need to File Taxes

Here is a quick guide on what online sellers need to file taxes. CommerceNavigator allows you to track all business income and expenses and appropriately fill out your Schedule C form. Start now.

Online sellers, including those who sell through eCommerce platforms like Amazon and eBay, must report their sales income to the IRS in their income tax returns.

There are a few exceptions for those selling as a hobby or non-business reason, like used personal items sold for less than the original value. However, sellers may have to pay taxes if the items are sold for profit.

If selling items online is a side hustle to complement your 9-5 or a small business with profits, then the same tax rules that any business face likely apply to you. So, here’s what you need for the tax season, especially to fill the Schedule C (Form 1040).

What Online Sellers Need to Fill the Schedule C Form

Schedule C is a tax form for sole proprietors or small business owners, meaning online sellers will fill out this form yearly. Here's some of the necessary information eCommerce business owners should have when filing out the Schedule C form:

1. Business name and industry

2. Business Address

3. Employer ID number

4. Income statement for the tax year: You’ll need this for “Part I: Income” of the Schedule C form.

5. Receipts for Business expenditure: This will appear in “Part II: Expenses” and covers:

6. Balance sheet for the tax year, including Gross Profit and Income.

7. Utilities, phone, computer expenses, office supplies, business insurance, and advertising

8. Interest on loans, mortgages, leases, and other business debts

9. Wages paid, including payments made to non-employees

10. For expenses that are difficult to categorize, there are spaces provided to list them in “Part V: Other Expenses” of the form.

11. Calculations for the cost of goods sold. You’ll need this for “Part III – Cost of Goods Sold.”

12. Any available inventory records

13. Mileage records for vehicles the business uses: You'll need this for "Part IV: Information on Your Vehicle" of Schedule C.

14. Any other business information

The instructions on how to calculate gross profit, cost of goods sold, etc., are stated on the form.

What Online Sellers Should Do Before the Tax Season

Here’s what you should do before the tax season to have a seamless experience filing taxes:

1. Know Your Tax Deadlines: Missing tax deadlines can lead to penalties. So keep track of the important dates because they may change yearly. The IRS Online Tax Calendar has the latest deadlines.
2. Get Your Financial Records and Books in Order: The ease of filing your taxes starts with efficient bookkeeping from the onset. You’ll need your business income, expenses, mileage for business vehicles, and a detailed profit and loss statement. Tracking them from the beginning of the year makes it easier and faster to file taxes, so you don’t miss the deadline.

3. Know the Right Tax Form for You: Online sellers need the Schedule C form to file taxes. Other forms include Form 1065 for multi-member LLCs and partnerships, Form 1120 for C Corporations, and Form 1120-S for S corporations.

Online sellers can use different means to file taxes. For example, you can use a tax preparer or accountant, free IRS forms on the official website, or software like TurboTax.

Enter CommerceNavigator

Online sellers usually find it hard to file taxes. Getting all the business numbers for the entire year at once can be confusing, especially when you might have merged them with other personal expenses.

CommerceNavigator provides an all-inclusive bookkeeping solution for eCommerce sellers to manage their business and personal finances hassle-free. It helps you log and separate business and personal finances from the onset, track vehicle mileage, and also comes with a Schedule C form to smoothen your tax-filling experience. Learn how it works now.