Hello everyone! I’m reaching out for your guidance regarding my tax situation this year, as I’ve encountered an issue with my online business sales. I sold electronics through an online platform (Amazon), but my account was suspended indefinitely, and their final decision was not to release any payouts. As a result, I lost over $11,000 in sales revenue, and I’m unsure how to properly handle this in my tax filings for the year. Here are the key details of my situation:
1099-K Issued: The platform issued me a 1099-K showing over $11,000 in gross sales, even though I did not receive any of these funds due to the account suspension.
Goods Sold: I sold approximately $9,200 worth of goods on Amazon, and all of these goods were shipped to customers. However, I never received the payout for these transactions due to the account suspension.
Tax Filing: If I'm using the cash method of accounting, so I know that I should only report income I’ve actually received. Since the platform withheld the payouts, I believe I shouldn’t report the $11K from the 1099-K as income. However, I also need to figure out how to handle the cost of goods sold (COGS) for the $9,200 worth of inventory I purchased but didn’t receive payment for.
My main questions are:
How should I handle the 1099-K gross income? Should I report it as income even though I did not receive any of the payouts, or should I exclude it entirely since I didn’t receive the funds?
How should I report the cost of goods sold (COGS)? Since I shipped and sold the goods, can I still deduct the cost of those goods even though I didn’t receive payment for them, and how?
Is there any possibility of claiming a business loss related to the unpaid payouts and the unsold goods due to the platform’s suspension and final decision?
I’m hoping to file my taxes as soon as possible, but I want to ensure that I’m handling everything correctly and in compliance with IRS rules. If you could provide guidance on the best way to approach this situation, it would be greatly appreciated.
Thank you for your time, and I look forward to your advice.
