Understanding Shopify's 1099 Forms: What You Need to Know for Tax Season

Understanding Shopify’s 1099 Forms: What You Need to Know for Tax Season

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As a Shopify merchant, understanding your tax obligations is crucial for running a successful business. One of the essential tax forms you’ll encounter is the 1099 form, which reports various types of income to the IRS. So, how to find 1099 on shopify?, this comprehensive guide will walk you through everything you need to know about Shopify’s 1099 forms, ensuring you’re prepared for a smooth tax filing process.

Table of Contents

What is Form 1099-K?

Form 1099-K, officially titled “Payment Card and Third Party Network Transactions,” is an IRS informational form used to report payment transactions processed by third-party payment networks (TPPN) or payment settlement entities (PSE). In simpler terms, if you use a payment processor like Shopify Payments to accept payments, those transactions are reportable to the IRS on Form 1099-K.

This form reports the gross amount of reportable payment transactions processed for your business during the calendar year. Both you and the IRS receive a copy of this form, making accurate reporting essential.

Shopify Payments and Form 1099-K:

When you use Shopify Payments as your payment gateway, Shopify acts as the PSE and is responsible for issuing the 1099-K form to eligible merchants. You’ll receive a shopify 1099k form directly from Shopify if your sales meet the specified thresholds.

Who Receives a 1099-K Form from Shopify?

You might be wondering, “Will Shopify send me a 1099?” The answer depends on whether you use Shopify Payments and the volume of your transactions.

Only merchants who meet specific criteria based on their sales activity through Shopify Payments will receive a shopify 1099.

2023 1099-K Thresholds:

For the 2023 tax year, you’ll receive a 1099-K form from Shopify if you meet both of the following conditions:

  • $20,000 or more in gross sales processed through Shopify Payments.
  • 200 or more transactions processed through Shopify Payments.

These thresholds apply exclusively to transactions processed through Shopify Payments. If you utilize other payment providers in addition to Shopify Payments, those transactions will be reported separately by those providers.

Future Changes to Thresholds:

Tax regulations and reporting thresholds can change from year to year. It’s crucial to stay informed about potential changes to the 1099-K requirements. You can find the most up-to-date information on the IRS website or by checking Shopify’s Help Center.

When to Expect Your 1099-K Form

Typically, PSEs like Shopify are required to provide 1099-K forms to merchants by January 31st of the year following the tax year. So, for transactions processed in 2023, you would generally expect your 1099-K form by January 31st, 2024.

Potential Delays:

Sometimes, PSEs like Shopify obtain filing extensions from the IRS, which can delay the delivery of 1099-K forms. If this happens, you’ll usually receive your form by the end of February.

Staying Updated:

Shopify will notify you via email when your 1099-K is available. Be sure to check your email and your Shopify admin for any updates regarding the availability of your form.

Where to Find Your 1099-K Form on Shopify

If you’re wondering, “How do I get my 1099 from Shopify?” you can easily find and download it from your Shopify admin.

To access your shopify 1099, follow these simple steps:

  1. Log in to your Shopify admin.
  2. Go to “Settings” > “Payments”.
  3. Click on “Documents”.
  4. Locate and download your 1099-K form.

Manually Calculating 1099-K Data

If you need to confirm the figures on your 1099-K form or you’re experiencing delays in receiving it, you can manually calculate your 1099-K information using data from your Shopify reports.

Here’s a step-by-step guide using the Transactions report:

  1. Go to “Analytics” > “Reports” in your Shopify admin.
  2. Under the “Finances” section, select “Transactions”.
  3. Choose the date range for the tax year you’re calculating. It’s best to include a few days before and after the tax year to ensure you capture all relevant transactions.
  4. Export the report to a spreadsheet format (CSV or Excel).
  5. Sort the spreadsheet by the “Available On” column, which shows the settlement date, not the order date.
  6. Delete any rows with an “Available On” date outside of the tax year.
  7. Sort the spreadsheet by the “Type” column and delete all transaction types except “Charge”. This means removing refunds, adjustments, chargebacks, etc., as the 1099-K only reports gross processing totals.
  8. Calculate the sum of the “Amount” column. This will give you your gross sales for the year, which should correspond to the amount reported on your 1099-K.
  9. Count the number of rows (excluding the header row) to determine your total number of transactions.

Shop Pay Installments and 1099-K Reporting

Shop Pay Installments (SPI) is a convenient feature that allows customers to pay for their purchases in installments. However, the way these transactions are reported on your shopify 1099k can be a bit confusing.

“Split Pay” Transactions:

Non-interest bearing SPI transactions, also known as “Split Pay,” are included on your 1099-K. The form will report the full order amount, even if the customer hasn’t paid back the entire amount by the end of the tax year.

Interest-Bearing Transactions:

Interest-bearing SPI transactions (even those with 0% interest) are not included on the 1099-K issued by Shopify. This is because these transactions are essentially loans processed through a third-party banking partner and are subject to separate reporting requirements.

What to Do if Your 1099-K Is Incorrect or Missing

If you believe the information on your 1099-K is incorrect or if you haven’t received your form and believe you should have, it’s essential to contact Shopify support immediately. They can investigate the issue and file a corrected form with the IRS if necessary.

Important Note: You are not responsible for submitting your 1099-K form to the IRS. Shopify handles that for you. You also do not need to wait for your 1099-K to arrive to file your taxes. You can use the information from your Shopify reports to prepare and file your return. Any corrections made to your 1099-K by Shopify will be backdated if needed.

FAQ Section

Do I need to wait for my 1099-K to file my taxes?

No, you can use the data in your Shopify reports to file your taxes, even if you haven’t received your 1099-K form yet. Shopify will backdate any necessary corrections to the form.

I use a payment provider other than Shopify Payments. Will I get a 1099-K from Shopify?

No, you will receive your 1099-K form from your specific payment provider. If you’re looking for information on your shopify 1099, make sure you’re logged in to the correct payment provider account.

The numbers in my 1099-K don’t match my Shopify reports. What should I do?

Immediately contact Shopify support. They will investigate the discrepancy and re-file a corrected 1099-K form with the IRS if needed.

Will Shopify send me any other 1099 forms?

You might receive a 1099-NEC form from Shopify if you’ve earned at least $600 in referral fees through the Shopify Affiliate program. This form reports non-employee compensation.

I missed the tax filing deadline. What should I do?

File for an extension with the IRS. A tax professional can provide guidance and help you determine any potential penalties.

Conclusion

Understanding Shopify’s 1099 forms is crucial for fulfilling your tax obligations as a merchant. This guide has equipped you with the knowledge you need to navigate this process confidently. Remember to stay updated on any changes to tax regulations or reporting requirements by checking the IRS website and Shopify’s Help Center.

For further assistance or specific questions about your shopify 1099k, don’t hesitate to contact Shopify Support or consult a qualified tax professional.