Shipping costs/ 1099k/ deduction

Forum|Forum|3 years ago
March 20, 2023
4 replies
17 views

Hello-

New-ish business owner here. The gross income reported on my 1099-K's (multiple sources) is much more than I ever saw deposited in my bank account. It includes costs such as seller fees, shipping costs and marketing costs. My question is mostly aimed towards shipping costs. When I enter the shipping fees (approx $25,000), it is only deducting around $7,000 from my federal tax due. Why is this? I never see a dime of those shipping monies. Why am I paying tax on "income" I have never seen? Is there a way to enter this so I'm not charged tax on money I never saw?

Thank you for any help.

TurboTax Home & Biz Windows

MinhT1

Level 15

The reason the shipping costs does not reduce your tax due dollar for dollar is because these costs only lower your taxable income, not your tax liability. So generally, your tax die will be lowered by these shipping costs multiplied by your marginal tax rate.

To avoid paying taxes on these shipping costs, you can enter them as a business expense, which your post shows you may have already done.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

taxstressAuthor

Level 2

Thank you for your reply. I still don't understand however. How can the number reported as income include items I never even see cash for? $25,000 worth? It seems like it isn't a good deal for me to ship items at all?

MinhT1

Level 15

As I explained, you can recoup your shipping costs by deducting them on your tax return as a business expense, so you are taxed on what you receive, and not on the money already used as shipping costs.

Let's take an example: Your sell for $150k and receive a 1099-K form for $150k. The company deducts $25k in shipping costs and you only receive $125k in your bank account.

On your tax return, you report $150k in income and $25k of shipping costs as expense, leaving a net amount of $125k, which is the amount you received in your bank account.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"