If you've just had yourself a holly, jolly Q4 selling season, then it's time to start looking forward to the next big Amazon season.
No, not back-to-school textbooks. Not even Valentine's Day bundles.
Because the next step for your Amazon business is tax season.
Wait, wait, don't leave!
I completely understand that year-end paperwork isn't half as festive as Christmas presents and Black Friday sales. But the holidays have come and gone, which is exactly why it's time to run the end-of-year reports for your Amazon FBA business.
January is the perfect month to spend some time within Amazon Seller Central, your accounting software, or inventory software like InventoryLab getting your year-end reports downloaded and organized.
But running these reports isn't as scary or time-sensitive as it seems. There's a bit of a myth among Amazon sellers that these reports have to be run at the stroke of midnight on January 1.
If your idea of a good NYE doesn't include refreshing a report on your laptop instead of celebrating (or sleeping!), I don't blame you.
You actually have a few months before tax day in April to gather these reports. But, personally, I like to have everything ready to go in January so that I can hand it off to my CPA (and stop worrying about it myself).
There are a few good reasons to take the time to find (and understand) these year-end reports:
- Your CPA will love you when you hand over your tax documents to her
- If you file on your own, you'll know exactly what numbers to enter into TurboTax
- You'll have a better sense of your business numbers and be ready for the next year of sales
I'm going to show you exactly which reports you'll need to get your year-end paperwork in order. Whether you do your own taxes or use a CPA, you'll need the numbers in these reports.
Remember that it's important to run these reports whether you're a full-time megaseller or a part-time side gigger. There's no such thing as “too small” to report your earnings at tax time!!
If this is your first year as an Amazon seller, this side of the business can feel a little overwhelming. Try to be patient as you work your way through these reports and remember that you can always reach out to a tax professional for help.
On that note, remember that I am an Amazon seller and business owner, not a tax professional. Any tax-related discussion in this post is based solely on my own experience.
Amazon Year-End Essentials
Even if you're lucky enough to be a bit of a numbers nerd, let's face it: no one is running these reports just for fun.
For most Amazon sellers (myself included), I run these reports to avoid any tax day headaches. With that in mind, let's take a look at the basic information you'll need to complete your income tax return.
As a self-employed business owner, you'll likely be filling out a Schedule C on your tax return. This form lets the IRS know how much profit (or loss) your business had for the previous year.
To get this overall profit/loss number, you need to report your Income, Expenses, and Cost of Goods Sold. These represent the first three sections on the Schedule C form. You can view a blank copy of a Schedule C on the IRS website. There are also sections for Vehicle deductions and miscellaneous expenses.
To complete sections 1-3 of your Schedule C, you'll need the following information handy:
1099k from Amazon: This will report your gross sales revenue for the year. Amazon will only send you a 1099k if you had at least $20,000 in unadjusted gross sales and 200 or more transactions in a calendar year. This form will be made available to you by January 31 (you can check the mail or your Tax Document Library).
Sales Report: If you don't receive a 1099k, you still have to report your gross sales revenue on your taxes. To do this, you can run various sales reports in Seller Central and then reconcile those on your own. I'll show you how later.
Expenses: To complete Section 2, you'll need to have a record of your business expenses for the year (and any receipts). Depending on your own business systems, you might be tracking these in accounting software, InventoryLab, or on a spreadsheet.
Cost of Goods Sold: To complete section 3, you'll need to be able to calculate your Cost of Goods Sold. A tool like InventoryLab can be set up to automatically track your Cost of Goods Sold throughout the year. Without InventoryLab, you can run a report in Amazon to get a record of your end-of-year Amazon inventory.
Vehicle Expenses: If you're completing Section 4, you can reference your mileage log or mileage tracker app.
Now that you have a general idea of what information you need, let's go ahead and start gathering paperwork!
Year-End Reports in Seller Central
There are a few reports within Amazon Seller Central that your CPA will want to see. It's good to save copies of these for your own recordkeeping as well.
Amazon Sales Reports
On or before January 31, your 1099k will be available for download in your Tax Document Library. Your 1099k shows your total sales numbers (gross sales), so it's going to look like a huge number. This will not accurately reflect the profit of your business so you probably don't want to pay taxes on that whole amount.
There is a report that you can run that will break down your Amazon income, sales, and expenses (fees). Your CPA will want to see this and you can use it to reconcile your own 1099k. If you don't receive a 1099k, this report should have enough information to use on your Schedule C.
- In Seller Central, go to Reports > Payments.
- Click on Date Range Reports
- Click Generate Report
- In the pop-up box, select Summary for report type with a Custom date range of 01/01/YEAR to 12/31/YEAR
- Press Generate
- Wait 1-2 minutes, press the Refresh link on that report, and then Download the report
This will give you a nice one-page PDF file that shows your Amazon:
- Income: net sales, credits, and refunds
- Expenses: net fees (including service fees, selling fees, FBA fees, shipping, and taxes)
- Sales Tax: Net taxes collected on product sales and services
- Transfers: Net deposits and withdrawals to/from your bank account
Feel free to hand this report directly to your tax professional. If you want to see how you can learn more about your Amazon fees to reconcile your 1099k, you can read this blog post: How To Find The Total Fees Paid To Amazon For Filling Taxes With Your 1099-k.
Amazon Inventory Reports
Section 3 of your Schedule C is all about Cost of Goods Sold. As the name suggests, Cost of Goods Sold (COGS) is the total value of your sold inventory.
To calculate COGS on your Schedule C, you'll be asked for the value of your inventory at the end of the year. To do that, you'll need to know what inventory you have in stock at Amazon Warehouses (for FBA).
You can generate a Monthly Inventory History report for December of the appropriate tax year to get a list of inventory currently on hand at Amazon Fulfillment Centers.
- In Seller Central, go to Reports > Fulfillment
- Click “Show more…” in the Inventory section on the left
- Select Monthly Inventory History
- Switch to the Download tab
- Select “exact months” in the dropdown with a date range of: December (lastyear) to December (lastyear)
- Press Request Download
- Wait 1-2 minutes and then Download your report
This will generate a Text document (.txt file). To make this easier for you or your CPA to read, copy all of the data in the .txt and then paste it into a blank spreadsheet (Excel and Google Sheets both work great).
*If you run this report and get the message “No Data Available”, don't panic. There is sometimes a slight delay on this report and it might not be available until the 6th-10th of the following month. That means that if you are an ambitious report runner and trying to view this on January 2nd, it might not be ready yet. Hang tight and check again in a few days!
Since you've run the report for the month of December, you'll be interested in the value in the “End Quantity” column. This will reflect all inventory that was in stock at an Amazon FC as of 12/31. You can even sort your whole spreadsheet by this column so that all of your “0” inventory goes to the bottom of the list.
Once you know what inventory you had on hand at the end of the year, you can manually (if needed) calculate the value of your year-end inventory.
Note: some businesses using the Cash method for accounting may not have to report their inventory in this way. Please talk to your CPA about this decision to see if your COGS should be tracked using the Cash or Accrual method.
In addition to inventory on this report, don't forget about other inventory that might not have been at an Amazon FC on 12/31:
- Merchant Fulfilled inventory (in your home/office)
- Inbound FBA inventory
- Inventory that you ordered that's still in transit to your home/office
- Inventory that you intend to send to FBA but it's still currently in your home/office
Year-End Reports from InventoryLab
If you use InventoryLab and have been entering your purchase prices as you list, a lot of the reports you need can be automated.
InventoryLab even offers a Taxes Checklist where you can follow along with their suggested year-end to-do list.
Don't have InventoryLab yet? Click here to see why it's one of our top 3 favorite money tools.
Here are two quick reports that you can run in InventoryLab that will save you a lot of manual calculation time.
Although it's still a good idea to get a copy of the Monthly Inventory History report in Seller Central, InventoryLab can automate the process of valuing your year-end inventory.
From the main InventoryLab dashboard, just go to Reports > Inventory Valuation. From there, change the date to 12/31/YEAR and press “View”. You can then export the data to a spreadsheet to send to your CPA.
Cost of Goods Sold
If you want to quickly view your Cost of Goods Sold figure for the year, you can do this with a quick report too.
Head to Reports > Profit & Loss in InventoryLab. Change the view to Yearly, select the relevant year, and press “View”. Then you can scroll down to the line item for “Cost of Goods Sold.”
Other Business Expenses
If you stopped with these current reports, you'd have an accurate look at your Gross Sales and two of your biggest expenses: Amazon Fees and Cost of Goods Sold.
However, if you want to further reduce your taxable income, there are other expenses that you can track and report. Looking at the Schedule C, you'll see space to list expenses for Travel, Supplies, Professional Services, Vehicles, and many others.
Hopefully, you've been tracking these expenses somewhere like GoDaddy (what I use for taxes), Quickbooks, or InventoryLab so that you can claim them on your taxes. If you haven't, let this be a good incentive to go ahead and implement a tracking system for the new year!
I highly recommend putting some bookkeeping systems into place so that you can have a clear picture of your business's financial health….plus save yourself a big headache in April!
Ok, I hope that wasn't too painful. I know that reports, receipt filing, and expenses aren't the most fun part of running an Amazon business. But if you want to make money doing FBA, you've got to treat it like a real business!
If you've got these reports in hand and the thought of doing your own taxes is too much, you're not alone. I can highly recommend working with a local CPA (who has experience with e-commerce or inventory-based business) or using a remote CPA who's already fluent in Amazon like The Bottom Line.
Even if you think you're “too small” or that a CPA is too expensive, just know that the right, experienced CPA can save you money in the long run.
However you choose to file your taxes, I know that having these reports ready to go is going to save you a ton of time!
What else are you doing as part of your year-end business prep? Share your best tips in the comments because it might really help another seller out!
Already Selling On Amazon? Grab OurTop 5 Tools For Savvy Amazon Sellers Checklist!
Make sure you aren't missing out on any of the BEST tools for Amazon Sellers