Introduction
Whether you’re selling on Amazon, Etsy, eBay, Walmart, or Shopify, you’re running a real business in the eyes of the IRS. Most marketplace sellers unknowingly leave money on the table every tax season by missing key deductions or filing with errors. In 2025, IRS enforcement is stronger—and compliance must be precise. This guide reveals one of the most overlooked deductions, explains relevant IRS forms, and walks through your action plan to save on taxes while staying audit-ready.
IRS Tax Code Reference
These Internal Revenue Code (IRC) sections apply directly to marketplace sellers:
- IRC §61(a): All gross income from online sales is taxable.
- IRC §162(a): Business expenses that are ordinary and necessary can be deducted.
- IRC §6050W: Third-party payment processors (Amazon, PayPal, Shopify Payments) must issue Form 1099-K for gross payments over $600.
Relevant IRS Forms
- Form 1099-K: Reports sales from payment processors and platforms.
- Schedule C (Form 1040): Used to report your business income and deductions.
- Form 4562: For depreciation of business property and equipment.
- Form 8995: Qualified Business Income deduction.
- Form 8829: Deduct a portion of your home if used for business.
Real-Life Example: Marketplace Tax Deductions
Case: Nina, Multi-Marketplace Seller (Amazon + Etsy)
- Total gross sales: $150,000 (across Amazon and Etsy)
- Expenses:
- Product cost: $60,000
- Packaging & shipping: $10,000
- Marketplace fees: $9,000
- Ads (Etsy, Amazon PPC): $7,000
- Software subscriptions: $1,200
- Home office: $2,400
- Business phone: $1,000
- Laptop depreciation (Form 4562): $1,000
Total expenses: $90,600
Net income: $150,000 – $90,600 = $59,400
QBI deduction (Form 8995): 20% of $59,400 = $11,880
Taxable income after deduction: $47,520
Nina legally reduces her tax burden by tracking business expenses and leveraging QBI.
Step-by-Step IRS Compliance Guide
- Download all 1099-K forms from platforms and payment processors.
- Separate business vs. personal expenses in your accounting software.
- Complete Schedule C to report income and deductions.
- Use Form 4562 for business equipment depreciation.
- File Form 8995 to claim QBI deduction.
- Use Form 8829 if you qualify for the home office deduction.
- File your return using Form 1040, ensuring all attachments are correct.
Conclusion
Marketplace sellers often focus on growing revenue but overlook the tax advantages that reduce taxable income. In 2025, the IRS expects accurate income reporting—but also allows you to deduct legitimate business expenses. By using the right strategy, forms, and records, you can stay compliant and protect your profits.
Call-to-Action and Disclaimer
Ready to claim the deductions you deserve and avoid tax headaches?
Schedule a meeting with CPA Anshul Goyal to review your 2025 marketplace tax strategy.
Book here: https://calendly.com/anshulcpa/
Disclaimer: This blog is intended for informational purposes only. It does not constitute tax or legal advice. Always consult a licensed tax professional regarding your specific circumstances.
Anshul Goyal, CPA EA FCA is a U.S.-licensed CPA, IRS Enrolled Agent, and cross-border tax expert helping American marketplace sellers and Indian founders in the U.S. comply with IRS requirements and save on taxes.
Top 5 FAQs
1. Do I need to file taxes if I sell on multiple platforms?
Yes. You must report all income regardless of the platform.
2. Can I deduct marketplace fees and shipping costs?
Yes. These are ordinary business expenses under IRC §162.
3. What if I receive multiple 1099-K forms?
Report total gross income across all platforms and match it with your records.
4. Do I qualify for the QBI deduction?
If you’re a sole proprietor or pass-through entity with qualified income, yes.
5. Can I deduct part of my home used for business?
Yes, if you use it exclusively and regularly for your online business, use Form 8829.
About Our CPA
Anshul Goyal, CPA EA FCA is a U.S. Certified Public Accountant, IRS Enrolled Agent, and Chartered Accountant (India). With over 15 years of experience, Anshul has saved his clients over $200 million in taxes. He specializes in working with digital sellers and online entrepreneurs to structure their businesses, ensure IRS compliance, and reduce tax liability.
Email: anshul@kkca.io
Schedule a meeting: https://calendly.com/anshulcpa/
Website: www.kkca.io