Since Dec 22, I’ve been on an Amazon FBA vacation and spent time with my brother and went on a short trip to Lincoln City, Oregon. While there, I was able to find some shoes to resell but other than that, I haven’t done anything Amazon-related.
Yesterday my brother flew home and now it’s time to get busy again. Today I spent a couple of hours processing my shoes and thinking about the upcoming year. Shoes will be a main part of my business in 2016 and I’ll write more about that in a future post.
Today though, I want to talk about taxes because tax season is coming up soon.
In Amazon FBA Blogs and Groups, you are often advised to get a CPA. But besides finding a CPA, what else do you need to do? In this post, I’ll go over what I plan on doing to prepare for my CPA appointment.
Even if you choose to do your own tax return or use a tax service such as H&R Block, please be aware that running year-end reports, doing bookkeeping and organizing all of your tax-related information still needs to be done regardless of who will be doing the actual tax return.
** Please remember that I’m not a tax or legal professional. The information that I’m sharing in this post is based on my own personal experiences.
Year-End Inventory Reports
Amazon doesn’t know your inventory value (purchase price of unsold inventory) because we don’t submit our buy costs to them. But Amazon does have reports about your inventory that will help you calculate your year-end inventory value. The reports that I’m going to download and save are:
- Amazon Fulfilled Inventory
- Monthly Inventory History
- Received Inventory
All of these reports can be found in Seller Central -> Reports -> Fulfillment -> Inventory.
For those of you that purchased Steven Smotherman’s book, The Reseller’s Guide to a Year in FBA, he goes into more detail about these reports in his December chapter.
My personal plan is to take either the Fulfilled Inventory or Monthly Inventory History report and copy the data into an Excel Spreadsheet and insert a “Buy Cost” column in it. Then I’ll get all of my buy costs from InventoryLab and manually input them into the spreadsheet to get the total purchase price of my unsold inventory.
I’ll compare that number to the Dec 31 balance in my Inventory Asset account in QuickBooks. If the numbers don’t match, then I’ll figure out why and make corrections.
Payment Summary Report
This is my favorite Amazon report as it shows you your total sales income, amazon fees, transfers to your bank account and how much in sales tax that you collected. I run this every month but in this case, I’ll run it for the full year.
To run the report, go to Payments -> Date Range Reports. Then generate a summary report using the custom date range of January 1, 2015 to December 31, 2015.
Since I want to be sure that I capture all of my December 2015 activity, I’ll run this report in January 2016.
When Do You Need to Run Your Reports?
You don’t need to stay home on New Years Eve and run your reports at midnight (though that’s what I’ll probably do). Amazon allows you to select date ranges for most reports so don’t worry if you have more fun things to do that night.
The Fulfilled Inventory Report is a little different though as it doesn’t allow you to select a custom date range. If you go to that report page, you’ll see a list of dates and times to choose from:
Since it appears that my reports are generated at random times, I’ll go to this page around midnight (if I’m still awake) and generate a new report. If I’m asleep, I’ll just use the report that was generated the closest to midnight.
Setup a Meeting with My CPA
For me, this was easy because I didn’t have to do anything. I already have a CPA that has done my taxes since 1999 and his office already sent me a note with my scheduled meeting date and time.
For those of you that don’t have a CPA and want to use one, then I suggest that you start searching for one right away.
Finish December Financials
I do my bookkeeping monthly and at this point, I only have to finish up my December entries. I’ll be doing this in January and will:
- Manually add in my Amazon Sales Income and Fees into QuickBooks
- Get my Cost of Goods Sold amount from InventoryLab and enter this into QuickBooks
- Make sure that all of my bank and credit card registers are up to date
- Complete all of my sales tax returns that are due in January
Dec 2016 Update: You can also get your COGS amount from Caleb Roth’s Tracking Spreadsheet.
Review & Verify 2015 Financials
I like to start with running my Profit and Loss statement for the year as I’m always curious to know if I made or lost money.
As a side note, when I first started this blog (and started selling on Amazon), I shared my income reports. I no longer do so but please check this income report post if you’re curious to see how my Profit and Loss Statement is formatted in QuickBooks.
Since it’s year-end, I’m going to click on every income and expense category and verify that all income and expenses have been categorized properly. For example, I want to make sure that my “Education” category shows my Amazon Boot Camp purchase but does not show my BQool subscription fee.
Next, I’ll run a Balance Sheet and for me, it’s important that I have more assets (cash and inventory) than liabilities (debt).
Again, I no longer share my current numbers but you may check out my Balance Sheet post to see how my Balance Sheet is formatted in QuickBooks. Back then, I was upside down but I’ve turned that around today.
But as for taxes, my accountant always looks at my Balance Sheet and wants me to prove all of the amounts listed. For example, if my December 31 Balance Sheet shows that I have $2000 in savings on December 31, then I better have an actual bank statement that shows on ending balance of $2000.
Therefore, I’ll gather up my bank and credit card statements and make sure that the amounts match.
To be honest, I don’t anticipate spending much time on this part because I review my financials monthly so most of the work has already been done.
My CPA is not my bookkeeper and he is not my data entry clerk. Therefore, I’m not going to hand him a shoe box full of inventory receipts and unorganized papers and tell him to sort it out and figure it out.
I do as much front-end work as possible before meeting with him. I’ll have my 2015 financials completed and reviewed. I’ll have copies of all of my year-ending statements. I’ll have my mileage report. Everything that I give him will be neat and organized.
Also, I’m not planning on bringing him my inventory receipts. He doesn’t care to see every Walmart and Target receipt. However, if asked, I know where they are stored and I can email him a copy within minutes.
Get Training or Hire a Bookkeeper if You’re Overwhelmed
I have always been organized with my paperwork but I can’t say the same about my husband. I know that if he were to start an Amazon FBA business (without me), he would hire a bookkeeper to help him.
For those that are more like my husband, I recommend finding all of your statements and receipts and organizing them by month. Then go out and find a bookkeeper to help you out.
Another option is to get training. You may find local training or online training. I recently saw in the Accounting We Will Go Facebook group that there is a QuickBooks training course coming up soon.
For those that want to use GoDaddy, Jessica Larrew has a GoDaddy tutorial that I reviewed in this blog post.
Meeting with CPA & How Much Does it Cost?
My appointment is in February and during our meeting, we’ll review all of the paperwork that I’m bringing him and he’ll ask me about my plans for 2016 and give me advice. His office will then do the tax return. Once that’s done, he’ll call me and also send a followup letter with any additional advice that he has for me.
Last year, I paid him $340.00 to do my tax return. I don’t know if this is high or low, but it’ll give you a comparison number. Keep in mind, I’m not paying him or his office to do bookkeeping or to sort through a years worth of receipts.
I’m not saying my system is the “right” system but it’s what works for me. We all use different systems to track our business and have different levels of expertise.
In closing, I wish each of you the best of luck with getting your system and taxes going. Also, as always, feel free to ask me any questions in the comment form below or on Facebook.