Introduction
If you’re a handmade product seller on Shopify, your passion is creativity but what about the numbers behind the craft? Bookkeeping in 2025 is no longer optional. Whether it’s tax filing, sales tracking, or inventory accuracy, sloppy records can cost you real money.
This blog shares actionable bookkeeping tips tailored for handmade sellers, helping you stay IRS-compliant and profit-savvy.
IRS Tax Code References
- IRC §6001 – Recordkeeping requirements
- IRC §162 – Deductibility of business expenses
- IRC §263A – Inventory accounting and capitalization
- IRC §6050W – Third-party payment reporting requirements (1099-K)
Relevant IRS Forms
- Schedule C (Form 1040) – Report income and expenses for sole proprietors
- Form 1099-K – Issued by Shopify for payments over $600
- Form 1040-ES – Estimated tax payment schedule
- Form 4562 – For depreciation on high-value equipment and tools
Example: Bookkeeping Done Right for a Handmade Soap Business
Example: Nisha runs a handmade soap store on Shopify.
In 2024:
- Revenue: $48,000 | Net Profit: $28,500
- Subscribed to Canva Pro, Klaviyo, and QuickBooks
- Used Google Sheets for COGS and expense logging
- Paid quarterly estimated taxes
Tax impact:
- Deducted software subscriptions under IRC §162
- Capitalized raw soap materials under IRC §263A
- Filed Schedule C and 1099-K income
Step-by-Step Bookkeeping Tips for 2025
- Use Cloud Accounting Software
QuickBooks, Xero, or Wave sync with Shopify and help categorize income, expenses, and taxes. - Separate Business from Personal Finances
Open a business checking account and credit card. Mixing accounts leads to disallowed deductions. - Log COGS Monthly
Track materials used in sold products, packaging, and direct shipping under IRC §263A. - Save All Digital Receipts
Google Drive, Dropbox, or Dext can store supplier invoices, bank statements, and shipping labels. - Track All Sales Channels Separately
If you sell on Etsy, Instagram, or in-person markets too, record those revenues independently. - Record Every Expense Immediately
Avoid year-end chaos. Enter each transaction weekly and match it to bank activity. - Watch for 1099-K Matching Issues
Your Shopify 1099-K will show gross revenue. Ensure your books reflect the same, then deduct fees/COGS. - Track and Pay Sales Tax
Shopify can auto-calculate, but you must file and remit based on state rules. Tools like TaxJar help. - Reconcile Bank Accounts Monthly
Ensure no missing transactions and fix duplicate entries or errors. - Hire a Pro for Year-End Review
Let a CPA check your records before filing to avoid errors, missed deductions, or red flags.
Conclusion
Bookkeeping is not just about spreadsheets it’s the financial backbone of your handmade business. Done right, it boosts deductions, smoothens tax filing, and builds lender/investor trust.
Don’t wait for tax season. Set up a system in 2025 that runs year-round and supports your growth.
Call to Action
Feeling overwhelmed by spreadsheets or confused about your Shopify bookkeeping?
Book a consultation with Anshul Goyal, CPA, EA, FCA
Anshul helps handmade business owners:
- Set up accounting systems tailored to Shopify
- Track inventory and COGS correctly
- Reconcile 1099-K and Schedule C reporting
- Automate expense logging and reporting
- Avoid IRS audit triggers with accurate records
Get your books sorted today:
https://calendly.com/anshulcpa/
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.
Top 5 High-Searched FAQs for 2025
1. What software should handmade sellers use for bookkeeping?
QuickBooks or Wave both sync with Shopify and track COGS.
2. Do I need to report income if I didn’t receive a 1099-K?
Yes, income must be reported even without a form.
3. What’s the best way to track COGS?
Log beginning inventory, purchases, and ending inventory monthly.
4. Can I deduct packaging and labels?
Yes, but only when inventory is sold.
5. How often should I reconcile accounts?
At least monthly to catch errors early and stay IRS-compliant.