The e-commerce world on Shopify is exciting and awesome, but we are here to talk about something non-glamorous. Yes, running a business may sound very nice, but you cannot forget certain factors like taxes.
Taxes can be reasons for frustration in several cases, especially when you don’t know much about them. But regardless, we would say it is one of the most thrilling parts of an entrepreneur’s journey and, yes, a vital one.
Now, you may think, “Does Shopify have your back when we talk about inevitable tax documents? The short answer is yes, they do. It supports in terms of taxes better than Magento, and that’s also a small reason for Magento users to migate to Shopify.
So it is your time to dive into this blog, behind which we have invested enough hours in researching the Shopify tax documentation in and out and understand whether Shopify offers you tax documents, and if yes, then what is the process?
Let us give you a spoiler alert. It is a pretty seamless process that won’t make you feel frustrated at all. So here, our journey begins.
Key Takeaway :
Yes, Shopify provides tax documents, including the 1099 form, which is important for reporting income earned from sales made through your Shopify store and for tracking your earnings and meeting tax obligations. The 1099 form from Shopify offers vital documentation for tax purposes and helps simplify the tax reporting process for Shopify sellers.
Why is the 1099 Form for Shopify Sellers Important?
You cannot call yourself a serious Shopify seller if you don’t know anything about a 1099 form. This form helps in reporting income earned from independent contract work or self-employment. This includes the sales you make through your Shopify store.
This form holds great vitality as it ensures that you are perfectly reporting your income to the IRS, and this highly helps maintain the integrity of tax systems. This way, you can prevent future tax evasion.
If you fail to report your income perfectly, this may drive penalties and legal consequences. So, it is vital to understand the criticality of this particular form from Shopify.
One of the most shining benefits of this form for Shopify sellers is that it offers documentation of your tax purposes. When you accurately report your income in this form, it becomes convenient for you to track your earnings and meet tax obligations.
Now, if you plan to have some loans or mortgages in the future, this document can greatly help you. Besides reporting income, the 1099 form also permits you to deduct various business expenses.
We know that every single Shopify seller has to face some expenses linked to shipping, advertising, packaging material, etc. When you deduct these expenses on this form, you conveniently reduce your tax income and decrease your overall tax liability as well. This saves thousands of dollar to many Shopify Plus users every month!
What is the 1099 Form, Though?
The other name for the 1099 form is the Miscellaneous Income form. This form’s core purpose is to report income you receive from various sources except traditional employment.
If you are a Shopify seller, you are actually considered a self-employed person, and hence, you have the responsibility to report your income via 109 inform.
This form holds vitality as it helps the IRS track and leads to your income verification. This further ensures that you pay appropriate taxes considering your earnings. Without this form, the IRS will find it pretty difficult to access your income and ensure whether you are meeting all tax regulations perfectly or not.
You need to understand that whatever you earn via your Shopify seller account can be reported on this form. The IRS wants you to report your income that passes $600 in one calendar year.
Also read: How to Put Icon Images in Shopify Footer: Expert’s Guide
Now, it is easy to understand that you don’t need to file this form if your income is below that. However, you need to keep a sharp eye on your income because if it is $600 and you haven’t filed 1099 information, this can be an issue for you.
We would also love to mention that 1099 information isn’t just helpful for reporting income for any Shopify seller. It is helpful in reporting various sorts of income. You have rental income, investment income and freelance work.
Now, if you have too many sources of income, we highly recommend you file multiple 1099 forms to report every single source separately rather than creating any clutter. Pay heed to consult with a tax expert to determine what sort of reporting you will have to undergo.
Why Get a 1099 Form from Shopify?
If you are a Shopify seller and planning to receive a 1099 form from Shopify, then let us tell you you will benefit from more than one direction. First, it will simplify your tax reporting process by offering a very clear breakdown of the income you earned via Shopify.
This form includes all vital information such as refunds, total sales you generated, fees that Shopify deducted from your account, and more, which adds ease in accurate reporting of your income and expenses. Besides that, this form also indirectly helps you track your business performance and understand your sales patterns to the depths. This way, you are able to make more informed decisions related to your Shopify store.
Also read: 14 Best Landing Page builder Apps for Shopify
When you receive a 1099 form from Shopify, you find your business more organized, and you are able to keep perfect track of your financial records. Now, you have a formal document to show your income and expenses. This means you can easily find this data whenever you are in need, especially while applying for loans or mortgages.
This is also helpful in saving time while providing your tax details and creating business-related financial statements.
This form offers you a sense of professionalism and legitimacy. Don’t forget you are receiving a formal document from a highly reputed platform like Shopify.
So, this is directly going to add credibility to your business. This fills your customers and partners with confidence. This is highly helpful for Shopify owners who seek partnerships as they can transparently show income sources and how much profit they are generating from their business currently.
Also read: How to Connect Shopify Forms to HighLevel
How to Get a 1099 Form from Shopify?
It is easy for you to get a 1099 form from Shopify to help you correctly input your income regarding taxation. Here’s a step-by-step guide:
- Access Your Shopify Account: Log into Shopify using your username and password. After that, you should log into the dashboard.
- Go to Settings: Click on the “settings” tab located under the Shopify dashboard.
- Select Payments: For this, click on Payments or Billing, which are found under settings.
- View Payouts: Search for the part on dividends or financial statements. This implies that Shopify often presents a section to see your payouts or financial statements from where you can get the required data for tax reporting.
- Select the Year: Pick a tax year for which you have 1099 data. Financial data is grouped according to years in Shopify.
- Download or View Statements: It depends upon the interface of Shopify. You should see a drop-down menu where there is an option that reads “download/view my financial statements for a selected year.” The income statement that will be used in tax reporting.
- Consult Shopify Support: In case of difficulties, just send an email to Shopify support with detailed questions for assistance. The accountant can act as a guide and help you avail necessary tax data.
- Verify the 1099 Information: Ensure that the information on the downloaded document is synonymous with your records before using them for tax filing. Tax compliance requires accuracy.
If you adhere to these guidelines, you will easily get financial data that you can use to fill in a 1099 form, hence meeting all tax laws appropriately. However, remember that there are different tax laws; meet a tax consultant who will advise accordingly considering your case in particular.
Does Shopify Send You a 1099?
On any occasion, there are never enough surprises in relation to the IRS as they have a passion for keeping taxpayers on edge. Do you know anything about the $600 1099-K threshold? Any person engaging in and earning through online platforms will require this. These were, however, simpler and much more lenient before this year. You’d only receive a 1099-K if you:
- Made at least $20,000
- Had at least 200 transactions
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Common Mistakes to Avoid
Shopify targets to offer perfectly accurate and dependable 1099 forms, but we cannot deny the fact that there can be errors or mistakes. To avoid those while filing your taxes with your 1099 Shopify form, always double-check all the information you provided in the form.
Ensure that all of your sales figures match your records perfectly because if not, you can face certain rough situations. Put some time into reviewing and confirming that whatever expenses or deductions are there are perfectly recorded.
Be thorough and proactive during your review. This way, you can minimize the chances of the tax filing process going wrong for you. Now, let’s catch up with all you need to know about how to file taxes, Shopify sales tax requirement, self-employment taxes, form 1099-k, and a lot more tax document.
Conclusion
Hence, if you’ve got an online store on Shopify, and worried about tax return filing or don’t have adequate knowledge about sales tax or overall tax rates, this guide on Shopify 1099 tax form must have helped you out.
Shopify proves to be very helpful in terms of tax documents, but sometimes it proves to be a daunting task, and we wish it gets more manageable.
Put those into their user-friendly platform that simplifies the process and offers you vital documentation to help you with your financial responsibilities.
So, while you are on a ride on the road of your online entrepreneurship journey, you can rest assured that Shopify isn’t backing you up for sales but also supporting you through less glamorous but equally important aspects of running a money-grossing online business. Now, hope all of your doubts about the 1099-k form are clear.
