How to Prepare and File 1099s as an Ecommerce Business

There are two kinds of 1099 in an ecommerce seller's year. One arrives in your mailbox and the other one you have to send. Confusing them is how sellers either double-count income or miss a filing deadline.

Two forms, two directions

The word "1099" covers a family of forms. For an ecommerce business, two matter, and they move in opposite directions.

• 1099-K comes to you, from marketplaces and payment processors. It reports the gross payments they processed for you.
• 1099-NEC goes from you, to contractors you paid for services. It reports what you paid them.

The 1099-K is informational. You do not file it; you receive it and reconcile it. The 1099-NEC is your filing obligation. Treating them as the same form is the root of most 1099 confusion.

1099-K: the form you receive

A 1099-K reports the gross amount of payment transactions a third party settled for you during the year. For ecommerce, that means forms from Amazon, Shopify Payments, Walmart, eBay, PayPal, Stripe, and similar processors and marketplaces.

Two things sellers get wrong about it:

It reports gross, not net. The 1099-K shows the total processed before fees, refunds, and adjustments. Your Amazon 1099-K can be far larger than the cash you actually received, because it does not subtract referral fees, FBA fees, advertising, or refunds. Your books, reconciled from settlement reports, are the real income figure. The 1099-K is a cross-check, not your revenue number.

The reporting threshold has been in flux. The dollar threshold at which processors must issue a 1099-K has changed and been delayed repeatedly in recent years, with phased figures announced and revised. Because the threshold has moved, treat any specific number as verify-current for the tax year in question. What does not change: your income is taxable whether or not a 1099-K is issued, and you report actual income from your reconciled books regardless of the form.

What to do with a 1099-K

1. Collect every 1099-K you receive from each marketplace and processor.
2. Reconcile each to that channel's gross sales in your books.
3. Confirm the gap between the gross 1099-K figure and your net deposits is explained by fees, refunds, and reserves, all of which should already be recorded.
4. Hand the forms to your CPA so reported income on your return reconciles to the forms the IRS also received.

1099-NEC: the form you send

If your business paid an independent contractor, freelancer, or unincorporated service provider $600 or more during the year for services, you generally must issue them a 1099-NEC and file a copy with the IRS. Common ecommerce examples: a freelance designer, a virtual assistant, a contract bookkeeper, a photographer, a copywriter, or a marketing consultant who is not incorporated.

How to prepare 1099-NECs

• Collect a W-9 from every contractor before you pay them. The W-9 gives you their legal name, address, taxpayer ID, and entity type. Chasing W-9s in January is the single biggest 1099 headache, and it is avoidable.
• Track payments by vendor all year. You need the total you paid each contractor for services.
• Exclude payments made by card or third-party processor. If you paid a contractor through a payment card or a platform that issues its own 1099-K, those amounts are reported on the 1099-K, not your 1099-NEC. Do not double-report them.
• Skip most corporations. Payments to a C corp or S corp are generally exempt, with limited exceptions such as attorneys. The W-9 tells you the entity type.
• File by the deadline. The 1099-NEC is due to recipients and to the IRS at the end of January following the tax year. Confirm the exact current-year date, since it can shift when it falls on a weekend.

Why clean books make this trivial

Both sides of the 1099 work depend on accurate, reconciled records. The 1099-K reconciliation needs your gross sales by channel and the fees and refunds that explain the gap to cash. The 1099-NEC prep needs accurate vendor payment totals with the right payments excluded.

ConnectBooks reconciles settlement data from Amazon, Shopify, Walmart, eBay, and TikTok Shop into QuickBooks or Xero, with fees and refunds broken out, so your gross sales tie to the 1099-K figures and your net income reflects reality. Plans start at $149/mo. For the broader year-end sequence, see /blog-posts/year-end-accounting-checklist-ecommerce.

What is the difference between a 1099-K and a 1099-NEC?

A 1099-K reports gross payments that a marketplace or processor settled for you, and you receive it. A 1099-NEC reports payments you made to a contractor for services, and you send it. The 1099-K is informational and gets reconciled to your books; the 1099-NEC is a filing obligation you owe when you pay a non-corporate contractor $600 or more.

Why is my Amazon 1099-K bigger than what I actually received?

Because the 1099-K reports gross processed payments before Amazon subtracts referral fees, FBA fees, advertising, refunds, and reserves. Your real income comes from your reconciled books, where those deductions are recorded. The 1099-K is a cross-check against your gross sales, not your net revenue.

Do I report income only if I get a 1099-K?

No. Your income is taxable whether or not a 1099-K is issued. The reporting threshold for processors to send the form has changed in recent years, but that only affects whether you receive paperwork, not whether the income counts. You report actual income from your books regardless.

When are 1099-NEC forms due?

To both recipients and the IRS at the end of January following the tax year. The precise date can shift when it lands on a weekend, so confirm the current-year deadline. Collecting W-9s as you onboard contractors, rather than scrambling in January, is what keeps the deadline manageable.

Do I issue a 1099-NEC to a contractor I paid through PayPal?

Generally no. Payments made through a payment card or a third-party network like PayPal are reported on a 1099-K by that processor, so you should not also report them on a 1099-NEC. The 1099-NEC covers direct payments such as cash, check, or ACH. Tracking payment method by vendor keeps you from double-reporting.

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