Dealing with Returns for Creators Going Global on Amazon 

Introduction

Are you a digital creator selling globally on Amazon merch, books, print-on-demand products, or private label items? As exciting as global reach can be, returns and refunds across international markets create complex tax, inventory, and reporting issues in 2025.

If you’re not tracking refunds correctly, you could overreport income, misstate COGS, or run into currency conversion errors that draw attention from the IRS or trigger platform penalties.

This guide breaks down how global creators on Amazon can handle returns efficiently while remaining tax-compliant and audit-ready.

IRS Tax Code References

• IRC §162 – Deductible ordinary and necessary business expenses
• IRC §263A – Capitalization rules for inventory and returns
• IRC §6050W – 1099-K reporting implications for refunds
• IRC §988 – Currency exchange treatment for international refunds
• IRC §6001 – Recordkeeping requirements for returns and adjustments

Relevant IRS Forms

• Schedule C (Form 1040) – To report income and deduct return-related costs
• Form 1099-K – Issued by Amazon, shows gross income without netting refunds
• Form 4562 – Depreciation on equipment used for product refurbishing or restocking
• Form 1040-ES – Estimated taxes; adjust quarterly if return volume impacts profit
• Form 1116 – If claiming a foreign tax credit from a country where you refunded VAT

Example: A Global Creator Handling Returns

Example: Leon is a U.S.-based content creator who sells branded merchandise and books globally through Amazon.

In 2024:

• He earned $180,000 in gross Amazon sales
• $25,000 worth of products were returned (Europe, India, Canada)
• Return shipping fees and restocking costs totaled $4,700
• Amazon issued a 1099-K for $180,000 (without subtracting refunds)

Tax Strategy:

• Leon deducts return shipping and restocking under IRC §162
• Adjusts inventory values per §263A
• Accounts for foreign VAT losses (where applicable) and files Form 1116
• Updates his estimated taxes using Form 1040-ES mid-year

Step-by-Step Guide to Return Handling for Global Amazon Creators

1. Track Returns by Country and SKU
   Use Amazon’s Seller Central return reports. Segment returns by region, SKU, and return reason. This is essential for COGS adjustment and fraud prevention.
2. Reconcile Returns Against Your 1099-K
   Amazon’s Form 1099-K reports total payments not refunds. Subtract refunds from your books before reporting income on Schedule C.
3. Restock or Write Off Returned Goods

• Restockable: Add back to inventory under IRC §263A
• Damaged/Unusable: Write off as a business loss or adjustment to inventory

4. Deduct Return-Related Costs
   Return shipping fees, customer service labor, inspection time, packaging replacement, and repackaging supplies are deductible under IRC §162.
5. Apply Foreign Currency Adjustments (IRC §988)
   If you’re refunding in foreign currency, record gains/losses from exchange rate fluctuations. Use consistent conversion rates based on date of transaction.
6. Track VAT Refunds and Local Taxes
   If you refunded VAT to customers (UK, EU), keep records and consider Form 1116 for a foreign tax credit if taxes were previously included in reported income.
7. Adjust Estimated Taxes If Return Volume Spikes
   A sudden increase in global returns affects net income. Use Form 1040-ES to recalculate quarterly tax payments and avoid overpayment or penalties.
8. Document Return Resolutions
   For audit safety, keep screenshots of Amazon return approval, customer messages, refund confirmations, and photo evidence (if applicable).
9. Review Return Policy by Country
   Each Amazon marketplace has slightly different return windows and policies (e.g., 30 days in U.S., 14 days in EU). Set alerts or automation accordingly.
10. Separate Domestic vs. International Returns
    Maintain separate logs for U.S. and global refunds to help allocate shipping costs, COGS, and identify marketplace-specific risks.

Conclusion

Returns are a pain point but for global Amazon creators, they can also become a tax trap. Mismanaging international refunds may inflate income reports, distort profit, and create complex reconciliation issues with IRS and VAT authorities.

In 2025, the smartest creators are the ones who plan for returns as carefully as they plan for launches.

Call to Action

Struggling to track Amazon refunds across multiple countries? Unsure how to reflect foreign returns in your U.S. tax filings?

Book a 1-on-1 consultation with Anshul Goyal, CPA, EA, FCA
He helps global creators:

• Deduct international return expenses properly
• Reconcile 1099-Ks to net income
• Apply currency conversion correctly
• Handle VAT refund implications
• Avoid income overreporting during audits

Schedule your session now: https://calendly.com/anshulcpa/
Protect your global brand. Reduce your tax burden.

About Our CPA

Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.

Disclaimer

This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.

Anshul Goyal, CPA, EA, FCA, is a licensed Certified Public Accountant in the United States, admitted to practice before the IRS as an Enrolled Agent. He also represents clients in IRS litigation and specializes in helping U.S. and Indian businesses meet complex tax compliance requirements.

Top 5 High-Searched FAQs for 2025

1. Does Amazon 1099-K subtract returns?
No. It reports gross payments, so you must manually subtract refunds when reporting taxable income.

2. Can I deduct international return shipping?
Yes. Return labels, repackaging, and customs fees are deductible under IRC §162.

3. How do I account for currency exchange loss on refunds?
Track it under IRC §988 and report any gains/losses tied to refund value conversion.

4. What if I refunded VAT to a foreign customer?
You may qualify to claim a foreign tax credit via Form 1116 if VAT was previously reported as revenue.

5. Do I need to report returns separately per country?
Not on your federal return, but tracking by country is key for inventory control and foreign tax documentation.