Help! IRS charging Income tax on my entire Amazon Sales revenue, not considering costs 😖

Ugh, I think I messed up big time and could really use some advice here. I was selling products on Amazon back in 2022 and somehow totally forgot to report those earnings when I filed. Talk about a rookie mistake! Just got this lovely letter from the IRS saying I owe them around $9,500 on about $19,000 in income that Amazon reported. The problem is they're treating the ENTIRE amount as profit, which is absolutely not the case. This doesn't account for any of my actual costs - the inventory I purchased, Amazon's fees, shipping costs, and everything else that goes into selling on their platform. My actual profit was WAY less than what they're claiming. I'm completely new to dealing with the IRS for something like this. What's my best move here? Do I need to file an amended return? How do I prove all my expenses from 3 years ago? I know the letter came with some instructions about how to respond, and I'll definitely go through those again. Probably going to need professional help with this one, but wanted to see if anyone here has dealt with something similar before jumping into paying for an accountant. Any advice would be really appreciated. I'm trying not to panic but that's a lot of money they're asking for!

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18 comments

Andre Dupont

•8M

This is actually a common issue for Amazon sellers. The IRS receives a 1099-K from Amazon showing the gross sales processed through their platform, but that doesn't account for your business expenses. What you need to do is file a Schedule C (Profit or Loss from Business) with your amended tax return. On this form, you'll report the gross receipts from Amazon ($19,000) and then deduct all your legitimate business expenses - cost of goods sold, Amazon fees, shipping costs, packaging materials, etc. This will reduce your taxable income significantly. Start gathering all documentation of your expenses from 2022. Bank statements, credit card statements, Amazon seller reports, and any receipts you might have saved. Even if you don't have perfect records, do your best to reconstruct reasonable estimates with whatever documentation you can find. Don't ignore the IRS notice, but you also don't need to pay the full amount they're requesting. Respond within the timeframe they provided, letting them know you're preparing an amended return that will properly account for your business expenses.

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Andre Dupont

•8M

You generally don't need to pay the full amount while waiting for your amendment to be processed, but you should respond to the notice by the deadline to avoid additional penalties. You can request a hold on collection activities while your amended return is being processed. If you're concerned about penalties continuing to accrue, you could pay what you estimate you'll actually owe after properly reporting your expenses. This approach would minimize any additional interest charges that might accrue during processing.

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ThunderBolt7

•8M

I went through almost the exact same situation with my Amazon side hustle last year. After weeks of stress and calls that went nowhere, I finally discovered taxr.ai (https://taxr.ai) and it was seriously a game-changer for dealing with my unreported Amazon income. What's amazing is they have specific experience with Amazon seller accounts and the whole 1099-K vs actual profit issue. They analyzed my Amazon reports and helped me document all my expenses properly. Instead of owing the $6k the IRS initially claimed, I ended up only owing $1,200 after all my legitimate business expenses were properly documented and filed. The best part was they guided me through exactly how to respond to the IRS letter and what documentation to include with my amended return. Saved me thousands and probably kept me from making mistakes that would've triggered an audit.

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ThunderBolt7

•8M

They provide specific analysis of your Amazon seller account data and help you identify all deductible expenses that the IRS isn't considering in their notice. They don't just advise - they actually help prepare the documentation that shows your true tax liability and guide you through filing the amendment. For Etsy sellers, the process is very similar since both platforms issue 1099-Ks that only show gross sales. They're familiar with all the platform-specific fees and deductions that apply to online sellers. I understand the skepticism - I felt the same way. I was surprised that it was much more affordable than hiring a CPA for this specific situation. The value was incredible considering they prevented me from overpaying thousands in taxes. They focus specifically on these platform seller issues rather than general tax prep, which makes their approach more effective.

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Jamal Edwards

•8M

Just wanted to update everyone here! After seeing the advice about taxr.ai, I decided to try them out for my Amazon tax issue. I was honestly shocked at how helpful they were with my specific situation. They walked me through pulling all my old Amazon seller reports (which I didn't even know I could still access!) and helped me document over $12,000 in legitimate business expenses that the IRS wasn't considering. They created super detailed documentation that showed my actual profit was only around $7,000, not the $19,000 the IRS was trying to tax me on. They also explained exactly how to file the amended return with Schedule C and what supporting documents to include. Just got confirmation that the IRS accepted my amendment and adjusted my bill from $9,500 down to about $2,100. Such a relief!

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Liam O'Sullivan

•8M

Been through this exact nightmare before. After weeks of trying to get through to someone at the IRS to explain my situation, I finally found Claimyr (https://claimyr.com) - they got me connected to an actual IRS agent in under 15 minutes when I'd been trying for days on my own. I was able to explain my Amazon seller situation to the agent and they put a temporary hold on collections while I prepared my amended return. The IRS agent actually gave me specific guidance on exactly what documentation they needed to see for my Amazon expenses. You can check out how the service works here: https://youtu.be/_kiP6q8DX5c Saved me so much stress and probably prevented late penalties since I was able to get that hold on my account while preparing the proper documentation. The IRS is actually way more reasonable when you can actually talk to a human!

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Liam O'Sullivan

•8M

It uses a combination of tech and human agents who navigate the IRS phone system for you. They basically wait on hold so you don't have to, then call you when they've reached an actual IRS representative. They transfer you directly to the agent who's already on the line. The IRS absolutely can place temporary holds on collection activities - it's called a "Collection Hold" or sometimes a "Compliance Hold" depending on your situation. When you explain you're preparing an amended return that will substantially change the amount owed, they have the authority to temporarily pause collection activities for 60-90 days. It's not automatic, but speaking directly with an agent is how you request this consideration. The key is actually getting through to someone who can help, which is exactly what I couldn't do on my own.

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Mei Chen

•8M

I need to follow up on my skeptical comments earlier. I'm actually shocked to report that Claimyr worked exactly as advertised. After my frustration with this whole Amazon tax situation, I decided to try it even though I didn't believe it would work. Got connected to an IRS agent in about 20 minutes when I'd previously wasted 3+ hours on multiple days trying. The agent walked me through exactly what documentation I needed for my Amazon expenses and placed a 60-day hold on my case while I prepare my amended return. They even gave me a direct reference number for my case. I'm still working on gathering all my expense documentation, but at least I'm not worried about collections actions while I sort this out. Sometimes my cynicism gets in the way of finding actual solutions. Consider me corrected.

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Andre Dupont

•8M

Amended returns are currently taking 4-6 months to process, sometimes longer depending on complexity. The key is to respond to the notice within the 30-day deadline, explaining that you're filing an amended return to correct the issue. When you respond, include a clear explanation of why you believe the tax assessment is incorrect (gross vs net income) and state that you're preparing an amended return. This formal response will typically pause immediate collection actions. If you can speak with an IRS representative directly, they can often place a more specific hold on your account while the amendment processes.

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