Introduction
Whether you’re selling on Amazon, eBay, Shopify, Etsy, or Walmart, bookkeeping is not optional. In 2025, the IRS is increasing scrutiny on e-commerce sellers. One wrong move like poor recordkeeping, can trigger audits, penalties, or missed deductions. This blog highlights one game-changing bookkeeping habit, outlines required forms, and gives you a step-by-step plan to keep your books IRS-ready.
IRS Tax Code Reference
These IRC sections are crucial for eCommerce sellers managing accounting and deductions:
- IRC §6001: Requires taxpayers to maintain accurate records for income, expenses, and deductions.
- IRC §61(a): All income is taxable, including from online stores.
- IRC §162: Business expenses that are ordinary and necessary are deductible when properly documented.
Relevant IRS Forms
- Schedule C (Form 1040): Reports income and expenses.
- Form 1099-K: Payment processors must issue for payments over $600.
- Form 4562: To claim depreciation on business assets.
- Form 8829: For home office deductions.
- Form 8995: For Qualified Business Income deduction.
Real-Life Example: eCommerce Bookkeeping in Action
Case: Ryan, Shopify + Etsy Seller (North Carolina)
- Gross sales in 2024: $95,000
- Expenses:
- Product sourcing: $42,000
- Ads: $6,000
- Shopify + Etsy fees: $4,800
- Shipping: $5,000
- Software (QuickBooks, Canva): $1,200
- Home office: $1,800
- Depreciation (laptop, camera): $900
With detailed monthly bookkeeping:
- Ryan identified $1,400 in double-paid advertising charges, caught via reconciliation.
- His clean financials let him file faster, claim a QBI deduction of $7,200, and avoid audit flags.
Step-by-Step IRS Compliance Guide
- Choose an accounting method: cash or accrual (most eCommerce sellers use cash).
- Use cloud-based software like QuickBooks Online or Xero.
- Set up expense categories (COGS, shipping, ads, tools, subscriptions).
- Reconcile transactions monthly to bank/processor statements.
- Retain digital records: receipts, invoices, statements.
- Log inventory purchases and cost of goods sold (COGS).
- Use reports to complete Schedule C and claim deductions via proper forms (4562, 8829, 8995).
Conclusion
Bookkeeping isn’t just a back-office task it’s your first defense during an IRS audit. In 2025, marketplace sellers who track income and expenses accurately will not only stay compliant but also pay less tax. If you’re serious about growth, proper accounting is non-negotiable.
Call-to-Action and Disclaimer
Need help setting up your eCommerce books for tax success?
Schedule a meeting with CPA Anshul Goyal today to build an audit-proof accounting system that keeps you stress-free all year long.
Book here: https://calendly.com/anshulcpa/
Disclaimer: This blog is for informational purposes only. It does not serve as financial or tax advice. Please consult a licensed tax professional before making decisions.
Anshul Goyal, CPA EA FCA is licensed in the U.S., admitted to practice before the IRS, and specializes in helping American eCommerce sellers and Indian founders in the U.S. with tax filings, audits, and strategic accounting.
Top 5 FAQs
1. Do I need bookkeeping if I only sell part-time?
Yes. All income is taxable, and expense tracking is required even for part-time sellers.
2. What’s the best software for eCommerce bookkeeping?
QuickBooks Online and Xero are popular, with integrations for Amazon, Shopify, and PayPal.
3. Can I deduct software and tools?
Yes. Tools used for your business Canva, QuickBooks, and photo editors, are deductible under IRC §162.
4. What records should I keep for taxes?
Receipts, invoices, bank statements, payment processor reports, mileage logs, and inventory tracking.
5. How long should I keep financial records?
At least 3 years for IRS audits. For asset purchases and depreciation, retain for 7 years.
About Our CPA
Anshul Goyal, CPA EA FCA is a U.S. Certified Public Accountant, IRS Enrolled Agent, and Chartered Accountant from India. He has helped eCommerce businesses across Amazon, Shopify, eBay, Etsy, and Walmart streamline their books and stay IRS compliant. With 15+ years of experience and over $200M in tax savings delivered, Anshul is your go-to expert for marketplace tax strategy and accounting.
Email: anshul@kkca.io
Schedule a call: https://calendly.com/anshulcpa/
Website: www.kkca.io