Amazon and Shopify sellers: know your real profit and your 2026 taxes
Connect your bank via Plaid to categorize sales, fees and inventory costs, then estimate quarterly taxes from what you actually earned.
Where online sellers typically get paid
W-2 or 1099?
Online sellers running a store for profit are self-employed: they report sales on Schedule C and owe self-employment tax on net profit, not on gross sales. Inventory you sell is deducted as cost of goods sold.
1099-K thresholds are back to $20,000
Marketplaces and payment apps only send a 1099-K when you pass both $20,000 in gross payments and 200 transactions in a year. Payment card processors must issue one regardless of amount. All business income is taxable either way.
Gross sales are not profit
Marketplace fees, shipping, advertising, packaging and the cost of the goods you sold reduce taxable profit. Self-employment tax of 15.3% applies to 92.35% of net profit, not gross sales.
QBI deduction for product businesses
Selling goods is generally not a specified service business, so most sellers can claim up to 20% of qualified business income, with limits starting at $201,750 of 2026 taxable income ($403,500 joint).
Solo 401(k) or SEP IRA
Self-employed sellers can defer up to $24,500 into a Solo 401(k) for 2026 plus employer contributions, up to $72,000 total before catch-ups. A Roth IRA allows $7,500 ($8,600 at 50+) if income is under the phase-out.
Online seller questions, answered
Will Amazon or Shopify send me a 1099-K for 2026?+
Marketplaces and payment apps must send one only if you exceed both $20,000 in gross payments and 200 transactions. Payment card processors must report card payments regardless of amount. You owe tax on business profit even with no form.
Do I pay tax on my total sales?+
No. You pay income and self-employment tax on net profit, after cost of goods sold, platform fees, shipping, ads and other ordinary business expenses.
Do I need to make quarterly tax payments?+
If you expect to owe $1,000 or more for 2026, yes. Due dates are Apr 15, Jun 15 and Sep 15, 2026, and Jan 15, 2027.
Can I deduct my home office and storage space?+
If space is used regularly and exclusively for the business, the simplified method gives $5 per square foot up to 300 square feet ($1,500 max). Actual-expense methods may suit larger storage areas.
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