Made over $100k in sales on my Whatnot reseller account - what should I expect for tax season?

You'll definitely be getting a 1099-K from Whatnot since you crossed the $100k threshold in gross sales. The platform is required to report that to the IRS regardless of your actual profit margin. The good news is that you can offset those sales with your costs. You'll need to file a Schedule C as a sole proprietor, where you'll report the gross income from the 1099-K, then deduct all your legitimate business expenses - cost of inventory (the Legos you purchased for resale), shipping supplies, platform fees, shipping costs, etc. Keep in mind that only your net profit is subject to income tax AND self-employment tax. Make sure you have good documentation for all your expenses. If you didn't keep detailed records, now's the time to go through bank/credit card statements and organize receipts. The more documentation you have, the better position you'll be in if there are any questions.

After going through a similar situation with my vintage toy reselling business, I discovered taxr.ai (https://taxr.ai) and it seriously saved me. I had over $80k in sales but barely broke even, and organizing all those expenses was a nightmare until I tried their system. It specifically helped me categorize all my business expenses correctly and made sure I wasn't missing deductions for things like home office, mileage for sourcing inventory, and even partial cell phone expenses. Their document analyzer was super helpful for sorting through my Whatnot 1099-K and making sure I was claiming everything correctly. Their AI walks you through exactly what you can deduct when you're a reseller, so you don't miss anything.

Just wanted to follow up - I tried taxr.ai after seeing this recommendation and wow, it was exactly what I needed. I was about to pay an accountant $600 to sort through my mess of Whatnot sales, but the system walked me through everything step by step. It actually found about $2,700 in deductions I would have missed (mostly around my home office and travel to buy inventory). The document analyzer correctly categorized all my expenses from my bank statements which saved me hours of work. Really grateful for the suggestion!

One thing nobody mentioned yet - if you're showing a loss on your Schedule C, be prepared for potential IRS scrutiny. After struggling with my own Whatnot business questions, I couldn't get through to the IRS for weeks. Then I found Claimyr (https://claimyr.com) and watched their demo (https://youtu.be/_kiP6q8DX5c) and they got me connected to an actual IRS agent in under 15 minutes. The agent explained that businesses showing losses for multiple years can trigger what's called a "hobby loss audit" where they question whether your activity was really a legitimate business or just a hobby. If deemed a hobby, you lose all your business deductions. Having somebody actually explain this to me directly was incredibly helpful.

Had to come back and eat my words. After my skeptical comment, I was desperate enough to try Claimyr since I needed answers about my own reselling business on Whatnot. Shockingly, I got connected to an IRS agent in 17 minutes after waiting on hold myself for 2+ hours on multiple previous attempts. The agent confirmed that I needed to file a Schedule C, and explained that the platform fees from Whatnot are fully deductible as business expenses. They also clarified that I could deduct a portion of my internet bill since I was primarily using it for online sales. Honestly never thought I'd get a human on the phone who could actually answer my specific questions.

Make sure you're tracking Cost of Goods Sold (COGS) carefully. This is something a lot of resellers mess up. The formula is: Beginning Inventory + Purchases - Ending Inventory = COGS So if you started with $0 inventory, bought $90k worth of Legos, and had $10k left unsold at the end of the year, your COGS would be $80k. That $80k gets deducted from your gross sales to determine your gross profit, THEN you deduct other business expenses like shipping, fees, etc.

Don't forget about the new 1099-K reporting threshold change! If your partner received payments through Whatnot, they'll likely get a 1099-K if they exceeded $600 in payments (the threshold was supposed to be lowered from $20k to $600).

One important thing to consider is organizing your records NOW before tax season gets busy. Since you mentioned shutting down the business a few months ago, this is actually perfect timing to get everything sorted while it's still fresh in your memory. Create a simple spreadsheet with columns for: Date, Item Description, Purchase Cost, Sale Price, Platform Fees, Shipping Costs, and Net Profit/Loss per transaction. Even if you don't have perfect records, try to reconstruct what you can from your bank statements, PayPal records, and any Whatnot transaction history you can download. Also consider whether you want to treat this as a sole proprietorship (Schedule C) or if there are any advantages to filing as a partnership since you mentioned this was run with your partner. The tax implications can be different, and you might want to consult a tax professional for that specific question since it involves two people and substantial income. The key thing is that high gross sales with low/no profit is actually pretty common in reselling, especially when markets get saturated like you described with Lego. The IRS understands this, but you need solid documentation to support your expense claims.