Does everything seem more expensive all of a sudden?

It’s not all in your head. Inflation is rising, and prices aren’t going down anytime soon. You may notice higher prices on everyday items like gasoline, food, and clothing. While it’s inconvenient to most, it can be very detrimental to individuals already living paycheck to paycheck. Without a plan in place, these individuals may find themselves skipping meals, walking to get places, or falling behind on monthly payments.

At AA Tax & Accounting Services, we understand how frustrating rising costs due to inflation can be. We’ve put together a quick guide to help you combat increasing costs and keep more money in your wallet.

Create a Budget (and Stick to It)

We get it; budgeting isn’t the most fun activity. While we’re big supporters of following a budget all the time, it’s more important than ever that you monitor your money coming in and going out when there are inflated costs on everyday goods.

Create a budget that puts a significant focus on areas where inflation may be causing a spike in costs, such as rent, food, services, transportation, and more. Once you understand how much you have to spend in each of these categories each month, it is time to figure out how you can stretch your dollar a bit more.

Are there any changes you can make to your spending habits? Can you purchase groceries at less expensive stores? Do you have the storage space to buy groceries in bulk from stores like Costco so you can stock up early and avoid paying higher prices later on if they continue to increase?

Are there any underutilized streaming services that can be paused, even if only temporarily? Consider the different ways you can cut down the money leaving your bank account (or racking up debt on your credit cards), and find ways to make your money go a lot farther.

It may be easy to create a budget. The hard part is sticking to it. Make sure you continue following your budget and re-evaluating it throughout the month so you can pivot as needed.

Negotiate Your Everyday Expenses

Even with a set amount set aside each month to pay a specific bill, you can get that bill lowered. Evaluate your monthly expenses and determine if any costs may be negotiated. Consider things like your phone bill or cable bill. Give your provider a call and see if you qualify for any current promotions.

Sometimes, even letting them know you’re considering moving to a new provider will motivate them to give you a better rate to keep you as a customer. The worst thing these providers say is no, and you will continue paying what you’re already spending. We recommend negotiating down your credit card APR, gym membership, phone plans, cable, and any other recurring payments.

Getting more for your money is an excellent way to add value at the same price. If your current provider isn’t willing to lower the cost, you may want to consider switching to a less expensive provider — or cutting the service (i.e, cable) altogether.

Postpone Major Purchases

The rising costs due to inflation won’t last forever, which is why it may be beneficial to wait on some larger purchases if possible. Unless a significant home appliance or car breaks down, you’re likely better off waiting. Because of the current labor shortage and supply chain issues, consumers will be faced with a high price tag if buying now. If you can defer the purchase to a later date, there’s a good chance you’re going to shave some money off the sticker price.

Have Questions About Your Financial Strategy?

AA Tax & Accounting Services is prepared to give you the answers you need. Our team of accountants has the experience of navigating the most effective strategies for financial planning.

The AA Tax & Accounting Services team can help you execute the right financial strategies to save you money and combat inflation. Contact us to schedule an appointment.

Many people dread tax season. Depending on your tax knowledge, it can be very overwhelming and confusing. But with a proper tax planning strategy in place, you can have a stress-free tax season!

Although it can be beneficial to hire a Certified Public Accountant (CPA) to assist, there are plenty of tax planning strategies you can take advantage of on your own.

With tax planning, you can find different ways to reduce your overall tax bill — allowing you to receive your maximum return. Follow along as AA Tax & Accounting Services walks you through the basics of tax planning for you to take advantage of this coming tax season.

What is tax planning?

One of the most significant stressors in life is finances, so tax season can be daunting. Unfortunately, filing your taxes is inevitable, which is why you must have a helpful tax planning strategy in place.

Tax planning refers to the process you use to minimize the amount of taxes you will need to repay at the end of the year. While there are a few ways for you to do this, the most common methods are reducing your overall income, increasing your number of tax deductions throughout the year, and taking advantage of certain tax credits.

By taking advantage of these tax strategies, you will better understand your finances and where your money is being spent.

Tax planning strategies for individuals

If you’re new to tax planning, we’ve put together a quick guide on a few basic tax planning strategies that you can utilize when filing your tax return this year. Although this is a great place to start, you’ll begin learning new variations of these strategies as you become more confident filing your taxes, which will help you save even more money.

Understand your tax bracket

Do you know what tax bracket you fall into?

As you head into tax season, it’s helpful to know where you stand. Remember that the tax bracket you fell into last year may be different from this year!

Reduce your income

When it comes to your taxes, one of the most important factors is your adjusted gross income. Your adjusted gross income refers to the income you have remaining after you have made adjustments such as contributions to your 401(k), IRA accounts, paying off student loans, and more.

Take note of the different adjustments that can be used to reduce your income.

Increase your deductions

Along with reducing your income, you may also want to take advantage of increasing your taxable deductions for the year. Deductions can include property taxes, mortgage interest, charitable donations, job expenses, investment expenses, state taxes, and more.

Be sure to keep an organized record of any deduction expenses accumulated throughout the year, so they’re available when filing your taxes.
Take advantage of tax credits
Throughout the year, different tax credits may become available that you qualify for. These tax credits work like incentives to help you reduce the amount of money owed on your tax return. Remember that tax credits do not lower your taxable income but can be deducted from the total owed.

Tax consulting services in Cedar City, Utah

Do you still have questions about tax planning?

If so, AA Tax & Accounting Services can help you navigate the tax planning process. No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

Filing a tax return never seems to be a walk in the park. Instead, there’s always some form missing or a confusing question you’re not sure how to answer — all of which can leave you stressing out about tax season.

Just because this tax season may be a bit stressful doesn’t mean every tax season needs to be moving forward!

Instead of scrambling to find everything you need at the start of each year, we recommend following a tax planning strategy throughout the tax year so you can have peace of mind come tax season. By taking the time to understand how taxes work, which tax strategies you should take advantage of, and how your deductions may impact your tax return, you’ll feel more confident come tax season.

In this beginner’s tax planning guide, AA Tax & Accounting Services shares some tried and true concepts that will allow you to manage your money more effectively and avoid costly tax mistakes.

Maintain an organized filing system

Come tax season, there’s always that one document you need that you can never seem to locate — but that doesn’t always have to be the case! Instead, you should start a filing system that organizes all tax-related documents you acquire throughout the year. This allows you to not only have your documents when you need them for the upcoming tax season, but you can easily refer back to previous years as needed.

Your organization system can be a physical filing cabinet with folders for various tax years, or you may opt for a fully digital filing system. Stick with whichever method you choose for a full year to see how it works out for you (you can always readjust for the next tax season).

Determine tax deduction requirements

The pandemic has brought on many changes to tax deductions available to the average taxpayer. Be mindful of all deductions available to you, and take the time to understand what requirements you need to follow to claim them.

Do this early in the year so you can plan ahead rather than scrambling come tax season. In some cases, you will be able to claim the deduction before filing your tax return.

Understand tax credit requirements

Every year the IRS makes certain tax credits available to taxpayers that can offer significant opportunity savings on income taxes since they reduce your actual tax bill on a dollar-for-dollar basis.

Similar to tax deductions, these credits change each year, which is why you must stay on top of what is being offered and learn if you meet the criteria to claim them.

Utilize an IRA for savings

Where do you keep your savings?

If you answered a traditional bank account, we recommend making a change before the upcoming tax season. We recommend using an Individual Retirement Account (IRA) to hold your savings instead of a traditional savings account.

Using an IRA will help you avoid paying tax on the interest each year since the deposits to an IRA will accumulate tax-free.

Tax consulting services in Cedar City, Utah

Do you still have questions about your tax planning strategy?

If so, AA Tax & Accounting Services can help you better understand the tax planning process to minimize stress and maximize your tax refund. AA Tax & Accounting Services is prepared to give you the answers you need.

No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

Filing your taxes is another task that gets added to your seemingly never-ending to-do list, and when you aren’t adequately prepared, it can be stressful and time-consuming.

So, it’s no surprise that most taxpayers dread tax season. Instead of scrambling at the last minute to get everything you need together and organized, take some time to prepare for the upcoming tax season.

Not sure where to start?

AA Tax & Accounting Services wants you to be confident as you navigate tax season. Follow along for strategic tax tips that will help you get your finances to successfully file your tax return this coming April.

Organize your tax documents

This may seem like a no-brainer, but gathering all your tax documents throughout the year as you receive them can save you time in the long run. Instead of looking through various stacks of documents in your home office, you’ll know exactly where to go to grab your tax information. Use a folder that has multiple compartments inside so you can divide your tax documents into respective sections, such as W-2s from employers, 1099-INTs from the bank, and 1099-NECs from contract work.

If you have opted to receive all your tax documents electronically instead of through the mail, use a similar digital method to keep track of all the information you gather.

Evaluate the past year

When it comes to filing your taxes, you must consider anything that has occurred throughout the past year that can impact your taxes.

Have any changes could be tax-deductible?

Have you gotten married, bought a house, changed jobs, or moved across state lines?

Consider all expenses related to any significant life changes that may be tax-deductible.

Donate to charities

If you’re looking for a way to earn a few more tax deductions for this year’s tax return, it may be time to go through your closets and determine if there is anything you can donate. From old appliances to clothing, you can donate these unused items to charity and get a tax deduction for a charitable donation.

This is one of the fastest and easiest ways for taxpayers to earn a tax deduction you can take advantage of when filing your taxes.

Check tax credits

Did you take advantage of any tax credits over the last tax year?

The pandemic has brought on quite a few considerations for taxpayers due to Economic Relief Payments, as well as tax credits such as the Child Tax Credit. If you received a tax credit in 2021, make sure you have all the necessary documentation needed to properly claim them when filing.

With so many changes and additions to tax credits and deductions in recent years, we recommend researching which credits or tax deductions you qualify for and what you need to do to get them.

Tax Consulting Services in Cedar City, Utah

The past few tax seasons have been a bit complicated, and this upcoming tax season isn’t any different — but there’s no need to get stressed out. Use these tips to guide you through your tax deductions, so you feel confident and prepared for tax season.

No one should go into tax season with their questions unanswered. So, if you still have questions about your taxes, AA Tax & Accounting Services can help. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

As a college student, you likely have a lot on your plate. From juggling a full course load and spending countless hours in the library to working a part-time or full-time job, the last thing you want to worry about is filing taxes.

Your college years are a transitional period, and while you may not start as a freshman that files your taxes if your parents claim you as a dependent, you may find yourself filing them by your senior year.

Since your schedule is jam-packed with schoolwork and extracurricular activities, it can be easy to put off filing your tax return. But if you miss the deadline, you may find yourself paying additional fees.

To help you navigate what may be your first tax season and make sure you’re getting the largest tax refund possible, AA Tax & Accounting Services has put together a few quick tips for you to follow.

Understand if you’re being claimed as a dependent

During your college years, you may still be considered a dependent of your parents. You can be claimed as a dependent if your parents pay more than 50% of your expenses, and you will be under the age of 24 at the end of the tax year. Even if you decide to file your taxes, you cannot claim your exemption if someone claims you as a dependent.

Your specific situation will determine if you or your parents should claim your exemption. If you pay for nearly 50% of your expenses, you may want to up what you pay for to claim your exemption amount. However, you should also consider your parent’s tax bracket to receive a bigger benefit from the exemption.

If you’re not sure if you should be claimed as a dependent or file your taxes, a tax consultant can help you determine which method will be the most effective.

Take advantage of education tax breaks

As a college student, there are several tax breaks for education that you may be able to take advantage of:

• American Opportunity Credit – Utilizing this tax credit will pay for up to the first $2,000 on tuition, fees, books, supplies, and equipment. You can also receive 25% of the next $2,000 back as a credit, for a total credit of up to $2,500 if you qualify.
• Lifetime Learning Credit – Another option is this tax credit that gives you equal to 20% of your tuition and certain related expenses up to $10,000. The credit maximum is $2,000.
• Tuition and Fees Deduction – Last but certainly not least, you can also take advantage of a deduction of as much as $4,000, which is taken as an adjustment to income.

Navigating tax breaks can be confusing if you’re doing it for the first time. A tax consultant can help you take advantage of any tax breaks available to you to make sure you’re maximizing your tax breaks.

Plan for additional taxes if you attend an out-of-state school

If your physical home address is located in a different state than the school you attend, you may need to pay taxes in multiple states — especially if you have a job while also attending school.

Certain states do not require you to pay income tax, such as Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

Tax consulting services in Cedar City, Utah

Do you still have questions regarding tax planning for college students?

If so, AA Tax & Accounting Services can help you better understand the tax breaks available to you, if you should be claimed as a dependent, and more. No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for college students with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

It seems as though 2021 went by in the blink of an eye, which means that tax season is almost upon us! Understandably, many individuals are feeling a bit nervous about the upcoming tax season because it was another weird year that involved stimulus checks, child income credits, and other changes. Taking action now can help alleviate some of the stress you feel when tax filing in 2022.

To help you become a confident taxpayer, AA Tax & Accounting Services, LLC has outlined some important actions for you to take, including answers to common questions related to Economic Impact Payments and advance Child Tax Credits.

As we close out 2021 and head into the new year, keep these key factors in mind so you can feel less stress about the upcoming tax season.

Advance Child Tax Credits

If you have children under 18 and earn less than $75,000 annually or $150,000 for a married couple filing jointly, you are eligible to receive the advance Child Tax Credit payments this year. A benefit of this tax credit was that you did not need to wait until you filed your 2021 taxes to receive it — advance payments were sent to eligible households every month starting in July through December 2021 on the 15th of each month. Then the remainder of the tax credit will be claimed once the taxpayer files their 2021 taxes.

Before filing your 2021 taxes, take a look at the amount you’ve received from the advance payments so far and compare it to the total amount of the Child Tax Credit that can be claimed on your tax return. This allows you to determine if you will be able to claim the remaining tax credit or repay some if you received more than you’re eligible for. Understanding where you stand before filing your taxes allows you to set aside the payment in preparation for any amount you may need to repay.

If you are eligible for the Child Tax Credit and did not receive the monthly payments beginning in July 2021, you can opt to receive the payment when filing your tax return.

Economic impact payments

At the beginning of 2021, eligible taxpayers received a third Economic Impact Payment, also referred to as a stimulus check. If you were eligible and received a stimulus check, you will not be required to pay taxes on the payment when you file your tax return this year. Additionally, your stimulus payment will not be counted as income used to determine your eligibility for government assistance.

If you did not qualify for the third Economic Impact Payment or didn’t receive the full amount you were owed, you may be eligible for the Recovery Rebate Credit when filing your 2021 taxes as it is based on your 2021 tax information.

To receive the Recovery Rebate Credit, you must file a 2021 tax return.

Payment plan installment options

Filing your taxes can be a stressful time — especially if you’re expecting to owe money. If it is determined that you owe money to the Internal Revenue Service, you have the option to pay back the taxes through an IRS payment plan over time through short-term or long-term payments.

In most cases, you can determine the amount you want to pay directly to the IRS each month to pay off your tax bill. The only stipulation is that the payment amount needs to ensure that you will back off the debt within 72 months.

Tax consulting services in Cedar City, Utah

The past few tax seasons have been complicated, and this upcoming tax season isn’t any different.

Do you still have questions regarding the upcoming tax season?

Not sure if a payment plan is the right option for you?

AA Tax & Accounting Services can help you better understand the stimulus check process, child tax credits, and other variables and how they impact your tax returns. AA Tax & Accounting Services understands how pandemics, natural disasters, and legislative developments impact your tax return and are prepared to give you the answers you need.

No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

Over the years, we find ourselves with hoards of belongings in our homes. It’s easy to keep adding to your belongings, but if you don’t purge anything, you will find yourself with little room for activities in your own home.

Instead, you may turn to the wonderful world of eBay, where you can resell some of your old belongings — freeing up space in your home while simultaneously filling your wallet!

Making some extra money on the side through eBay is an exciting venture, but it’s important to remember that taxes aren’t automatically deducted from your earnings, unlike a standard paycheck. This doesn’t mean that you are exempt from paying taxes on your eBay earnings. It just means you have a different process to follow.

The Internal Revenue Service (IRS) distinguishes you as a self-employed individual as an eBay reseller. This means that you are required to cover your income tax and self-employment tax when filing your taxes each year. If you aren’t prepared for this, you may find yourself with a large tax bill that you can’t afford.

AA Tax & Accounting Services, LLC has put together a quick guide on the tax implications of starting an eBay reseller account to help you prepare for taxes.

Utilize your 1099-K form

If you are selling items on eBay, you need to use a 1099-K form, a sales reporting form that includes the gross amount of all reportable payment transactions throughout the year. However, this is not something you need to fill out independently. The online platform, eBay, where you are selling your belongings, will fill out the 1099-K form if you meet the criteria.

You will receive the 1099-K form from eBay by January 31st each year if you have received payments above the minimum IRS reporting thresholds in the previous calendar year:

• You received more than $20,000 in gross payments
• You had more than 200 payment transactions

The provided 1099-K will include the gross amount of all reportable payment transactions and does not include any adjustments, for example, credits, discounts, fees, refunds, or any other adjustable amounts. As a result, there is a chance the gross amount reported on your 1099-K does not match the final reportable amount on your tax return. When this happens, you should consult a tax advisor for financial reconciling.

We’d also like to note that certain states have minimum reporting thresholds lower than those outlined above. If you live in one of these states as an eBay reseller, it is recommended that you consult a tax advisor to understand which threshold applies in your state.

Form 1099-K and multiple eBay accounts

Depending on the items you are selling on eBay, you may find yourself with multiple accounts associated with the same Tax ID. If you have multiple eBay accounts, your annual thresholds are calculated by combining all payment transactions from each account.

If your combined sales across your accounts exceed these thresholds, you will receive a 1099-K for each account (even if the individual accounts don’t meet the thresholds).

Deductibles come in handy

Since you are viewed as a self-employed individual by the IRS when selling items on eBay, you should be mindful of the different deductibles available to you when filing your taxes.

Hold onto any invoices or receipts for business transactions related to the following deductions:

• Cost of goods sold
• Shipping costs
• Home office costs
• Mileage
• Donations
• Subscriptions
• Related education courses
• Software for taxes and inventory
• Advertising materials
• Employee salary and benefits
• Consultant fees

Tax consulting services in Cedar City, Utah

We recommend consulting certified public accountants like AA Tax & Accounting Services to understand how much you should be paying to the IRS quarterly, especially if you’re new to eBay selling.

The AA Tax & Accounting Services team can help you execute the right self-employment tax strategies for peace of mind. Contact us to schedule an appointment.

The last year has flown by, which means that next year’s tax season is right around the corner. As a business owner, you need to begin considering how you can save money when filing your tax return.

From tax deductions to tax credits, there are a variety of ways for businesses to lower their taxable income in time for tax season. To ensure your business starts the new year on a high, follow along as ​​AA Tax & Accounting Services, LLC shares business tax tips you need to know.

Set up a retirement plan

Do you have a funded retirement plan for yourself or your employees?

Setting up and funding a retirement plan can save your business money on taxes. To benefit from a funded retirement plan, you need to make sure that it is a qualified plan recognized by the Internal Revenue Service (IRS) to allow deferment of taxes on earnings until the earnings are withdrawn.

This includes IRAs, as well as a 401(k) or 403(b). A qualified tax professional can assist you in determining which type of retirement plan best aligns with your business goals and needs.

Utilize tax credits

An effective way to lower your business income before tax season is to take advantage of the different tax credits available to you through the federal government. Tax credits are a way for the government to reward businesses doing things that affect the greater good.

Your business may be a candidate for tax credits for employee recruitment, green initiatives, disability initiatives, and more. Your business accountant can walk you through the list of tax credits available to you.

Understand tax write-offs

If you are planning to make any large purchases to benefit your business in the coming months, such as investing in new equipment, machinery, or vehicles, you may be able to take tax write-offs on these purchases.

Look into Section 179 deductions and bonus depreciation which can be utilized during the first year that a business owns and uses the vehicles, machinery, or equipment. If you’ve recently purchased any major assets or are planning to in the coming months, your business accountant can determine if you qualify for any related tax write-offs.

Deduct the cost of gifts

Depending on the nature of your business, you may provide customers or vendors with gifts — especially around the holidays. If you plan on gifting this year, keep all the related documentation because businesses can deduct up to $25 per person for the costs of gifts.

Reduce your taxable income

One of the easiest ways to lower what your business will owe come tax season is to reduce your taxable income. Spend some time towards the end of the year reviewing your accounts to check if there are any outstanding debts.

If you think any debts are unlikely to be paid, you can write off the amounts owed to your business as bad debts and deduct them from your business income.

Hire a tax advisor

Navigating tax season can be tricky, and this year is a bit trickier than most, with so many changes to tax credits and advantages for businesses. To ensure you’re getting the most money back and lowering what you owe, it can be extremely beneficial to hire a qualified tax advisor who can guide any decisions that may affect your business tax return.

Tax Consulting Services in Cedar City, Utah

We recommend consulting certified public accountants like AA Tax & Accounting Services when making any decisions or changes to your business tax return. We have the experience to guide businesses on the best strategies for maximizing their deductions and tax credits with our accountant services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money come tax season. Contact us to schedule an appointment.

It feels like 2021 flew by, which means that tax season will be here before you know it. With the effects of the COVID-19 pandemic still looming, filing your taxes may be a bit more complicated than usual. From stimulus checks and tax credits, there are many variables that you need to be aware of that can impact your final tax return.

Instead of dreading tax season this year, you can go into it feeling prepared for what’s to come. To ensure you feel confident about filing your taxes, AA Tax & Accounting Services has compiled the ultimate guide for getting ready for 2022 taxes.

Tips to prepare for tax season

No one should feel stressed when filing their taxes — but we understand that it’s not many people’s favorite activity. To give yourself peace of mind, follow these tips to feel prepared come tax season.

Perform quarterly tax checkups

There is usually nothing major for you to stress over when it comes to your taxes, but it makes it a bit more daunting because you don’t likely look into your financials for a year. Instead of waiting an entire year, perform quarterly or a mid-year tax checkup, so you have visibility into how the year is shaking out for you.

By performing a tax projection based on the variables that may impact your taxes, such as tax credits, you’ll have a better idea of how your taxes will look different from the previous year. Looking into your taxes mid-year allows you to gain peace of mind or identify an issue and pivot accordingly.

If you don’t feel comfortable or confident checking in on your taxes quarterly yourself, you can rely on the experience of a tax professional to ensure everything is looking as it should.

Keep your tax documents organized

One of the easiest ways to alleviate some added stress around tax season is to have all of your important documents and information organized and readily available. Come tax season, you don’t want to be searching high and low throughout your house for important information strewn about — especially if you wait until the last minute to file your tax return.

With more factors to consider than a typical year, you will want to not only have your W-2s and other standard documents available. Still, you will need to quickly find stimulus numbers, child tax credit information, and unemployment benefits to streamline the tax process.

Whether you prefer to store your documents digitally or in a physical folder, save documents throughout the year as they become available to you, so they are ready to go come tax season.

Tax consulting services in Cedar City, Utah

The past few tax seasons have been a bit complicated, and this upcoming tax season isn’t any different. Do you still have questions regarding the upcoming tax season?

If so, AA Tax & Accounting Services can help you better understand the stimulus check process, child tax credits, and other variables and how they impact your tax returns. AA Tax & Accounting Services understands how pandemics, natural disasters, and legislative developments impact your tax return and are prepared to give you the answers you need.

No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.

Whether you resell items on Amazon as a full-time job or have picked it up as a side hustle over the last year, you’ve probably loved being your own boss and have some extra money in your wallet.

When you take on a business venture such as selling items on Amazon, you won’t have taxes automatically taken out of the money you earn — but you aren’t exempt from paying taxes on these earnings.

As an Amazon reseller, the Internal Revenue Service (IRS) views you as a self-employed individual, which means that you need to be prepared to cover your income tax and self-employment tax when tax season rolls around.

Without the proper planning throughout the year, you may find yourself with a hefty tax bill come tax season. To help you avoid this, AA Tax & Accounting Services, LLC has put together a quick guide on the tax implications of starting an Amazon reseller account.

Utilize your 1099-K form

A 1099-K form is a sales reporting form that includes the gross amount of all reportable payment transactions throughout the year. As an individual online reseller, you are not required to fill out this form yourself. When selling items on an online platform, such as Amazon, they will fill out the 1099-K form if you meet the necessary criteria.

For Amazon to provide you with a 1099-K form by January 31, you must meet the following criteria:

• Completed more than 200 transactions
• Generated more than $20,000 in unadjusted gross sales

If you haven’t completed more than 200 transactions or earned more than $20,000 in unadjusted gross sales as an Amazon reseller but have completed more than 50 transactions, you will not receive a 1099-K form from Amazon.

However, you are still required to submit your tax information to the Internal Revenue Service (IRS). If your tax information is not submitted to the IRS, you could lose your Amazon seller status.

File a Schedule C

Depending on where you live, you may need a business license to act as an Amazon seller. However, the rules vary from state to state and differ between those selling that have a team helping versus those running a one-person operation.

If you are required to get a business license and operate as a business, you will need to file a Schedule C, also known as Form 1040. This reports both your income or loss where you practiced as a sole proprietor of your Amazon reselling business.

Be mindful of sales tax

One of the trickiest aspects of starting an Amazon reseller account is managing sales tax collection in all states where you have nexus. Nexus means that your business has a physical presence in that state, such as an Amazon warehouse that stores the physical products you are selling.

You will not only have nexus in the state where you reside and operate your business but will be considered to have nexus anywhere you are fulfilling orders from. Make sure you are accounting for sales tax in all the areas in which you have nexus.

Deductibles come in handy

As a self-employed Amazon reseller, there are a variety of deductibles you can claim when filling out your taxes. These include a range of things, including home office expenses to mileage to education costs.

Keep track of all of your receipts for business transactions for the following possible deductions:

• Cost of goods sold
• Shipping costs
• Home office costs
• Mileage
• Donations
• Subscriptions
• Related education courses
• Software for taxes and inventory
• Advertising materials
• Employee salary and benefits
• Consultant fees

Tax consulting services in Cedar City, Utah

If you’re operating an Amazon reseller account, we recommend consulting certified public accountants like AA Tax & Accounting Services to better understand what you will owe come tax season and how much you should be paying to the IRS quarterly.

The AA Tax & Accounting Services team can help you execute the right self-employment tax strategies for peace of mind. Contact us to schedule an appointment.