Shopify is one of the best and most popular eCommerce companies facilitating businesses and entrepreneurs to set up their online retail stores and align retail POS systems. Shopify was founded in 2006 in Canada and has become an all-in-one business suite having services like marketing, payments, customer engagement, shipping, etc.
According to the statistics, more than 2.5 million stores have been opened on Shopify during 2020-2022. It shows the increasing trend of the use of Shopify’s platform for retail stores. The fever of Shopify was even higher when the COVID-19 pandemic hit the world, and most businesses had to work on their online presence.
It wouldn’t be wrong to say that Shopify has been becoming the giant for entrepreneurs entering the eCommerce market. Unlike eBay, the customers of Shopify have full freedom of how they want to design their stores. However, the sellers’ tax filing matters and tax documents are similar on both eCommerce platforms.
We have prepared this comprehensive guide to help Shopify store owners about filing their taxes and get the necessary documentation from Shopify. We will answer all of your questions regarding the relevant tax documents, filing your taxes, and frequently asked questions.
So let’s get into it.
- Form 1099 is a symbolic term for all the tax documents that IRS calls information returns. Form 1099-K is mostly considered when freelancers, independent contractors, online sellers, or unincorporated business entities are concerned. Any business entity doing business with such individuals or entities will send Form 1099-K to them for reporting the gross incomes.
- You will receive Form 1099 from Shopify depending on whether you have carried your business via Shopify.
- The minimum threshold implies that if any business entity has paid $600 or more in a tax year to any independent contractor, an unincorporated entity, or freelancer, he will file and send Form 1099-K to the individual.
What Is Form 1099?
Form 1099 is a symbolic term for all the tax documents that IRS calls information returns. The form 1099 can be for various types of payments or sources of income of individuals filing tax returns. Whether you’re a business owner or an investor, you will have to file one of the forms from the series of Form 1099.
The common and popular forms of 1099 are 1099-A, 1099-B, 1099-K, 1099-DIV, SA-1099, etc. The form, etc. For instance, Form 1099-A is used to record real estate transaction income. The tax filer can also use Form 1099-A for debt cancellation. If a person sold his home for less than the mortgage debt, he could get a forgiving mortgage by filing form 1099-A.
What Is Form 1099-K?
Form 1099-K is mostly considered when freelancers, independent contractors, online sellers, or unincorporated business entities are concerned. Any business entity doing business with such individuals or entities will send Form 1099-K to them for reporting the gross incomes.
Form 1099-K is often referred to as the tax form for self-employed individuals and business entities. Form 1099 reports all payment transactions made to your business entity by a third-party company. It can be the credit card processing company, payment wallets, or the platforms like Shopify.
Purpose and Who Needs To File?
The primary purpose of any Form 1099 is to track the non-employment income generated from different sources. If we talk about the purpose of Form 1099-K specifically, self-employed individuals can track the total amount of income they have earned through different sources.
On the flip side, taxpayers also have the opportunity to report accurate figures of their income as self-employed individuals or entities.
When it comes to who needs to file, it depends on the minimum threshold defined by the IRS. The minimum threshold for 2021 and 2022 was $20,000 and up to 200 transactions. However, the minimum threshold for 2023 is $600 or more in a tax year.
The minimum threshold implies that if any business entity has paid $600 or more in a tax year to any independent contractor, an unincorporated entity, or freelancer, he will file and send Form 1099-K to the individual.
It means the payer has to file Form 1099 if he has done business of $600 or more with a freelancer in a tax year. The $600 threshold is applicable to rental payments, prize money, notional principal contract, etc.
Besides the business payments, any business entity like financial institutions, lenders, and state & federal tax authorities will also file and send 1099 forms to individuals who received $10 or more in terms of brokerage payments or royalties.
Do You Get a 1099 From Shopify? Short Answer
Now to the main question every other seller and Shopify store owner has to ask: Do I get 1099 from Shopify? Which type of Form 1099 will I get?
So, the answer to the first question is:
Yes, you will receive Form 1099 from Shopify depending on whether you have carried your business via Shopify. Regarding the form type, Form 1099-K is sent to the Shopify store owners if they have met the minimum threshold prescribed by the IRS for 2023.
It means if any Shopify store owner has sold products worth $600 or more during a tax year, Shopify will send them a 1099-K.
What Is The Process To Get Form 1099 From Shopify?
The next important concern is about the process of getting Form 1099-K from Shopify before the tax return filing.
So the answer is good news, actually!
You don’t have to worry if you just joined Shopify during last tax year and are unsure about the procedure to get your 1099-K. You will receive your Form 1099-K automatically from the Shopify team until you meet the IRS minimum threshold.
As a Shopify store owner, you will receive a CSV file of your Form 1099-K from the company. If you don’t know where to access the Form 1099-K, here is how to view and download the form:
Log in to your Shopify Account > Shopify Payments Settings > Payments > Choose Tax Documents > Download 1099-K. Your Form 1099-K will be available in the payment section by Jan 31st of every tax year.
Shopify management will also email you a copy of your 1099-K by Jan 31st if you have qualified for it.
What Is Information Included On Form 1099-K?
You might have to file a 1099 for any freelancer or independent contractors you have hired for your business entity. You might not always be on the receiving end of Form 1099. Therefore, you must know what information is provided by Form 1099-K.
Here are the details of the information included on Form 1099 for any business entity:
- The name, address, country, postal code, etc., of the filer
- The status of the filer(payment settlement entity, EPF, or any other third party.
- The Taxpayer Identification Number of the filer and payee
- The gross amount of payment made or processed and the number of transactions
- Federal income tax withheld
- Payee’s information like name, address, telephone, foreign postal code, etc
- Account number
- The calendar year for which Form 1099-K is being filed
- State income tax withheld
What If I Didn’t Receive Form 1099-K From Shopify?
If you didn’t receive your Form 1099-K from Shopify despite making sales of $600 or more, it’s time to double-check. Check your email address to see if you have received the email in the junk folder.
And if you’re still not able to find the Shopify Form 1099-K, you should contact the Shopify team and ask them to send your Form 1099-K. You can either contact the Shopify team via email support or via the chat option of Shopify Support.
FAQs About Shopify 1099-K
Does Shopify send you a 1099 Form?
Yes, if you’re a store owner on the Shopify platform, you will receive Form 1099-K from the Shopify team if you have made sales of over $600 during the current tax year.
Does Shopify include PayPal?
PayPal is one of the default payment processors of Shopify. It is connected to the store owner’s email address. Therefore, you will get a PayPal Express Checkout account if you have Shopify.
Why did I get a 1099-K from PayPal?
Payment processing companies like PayPal are also required to send Form 1099-K to individuals who have processed over $600 via a PayPal account.
Therefore, if you received Form 1099-K from PayPal, it means you have processed over $600 from your account.
Does Shopify pay tax automatically?
No, Shopify will not file or remit sales tax on behalf of the customers having Shopify stores. As a business, you will need to register and file your local and federal tax returns, including the sales tax.
How do Shopify customers pay taxes?
Shopify customers pay taxes by following these steps:
Shopify Admin > Settings > Market Pages > Preferences Option > Your Country’s Tax > Save Changes.