Solved

How are purchases made with gift cards handled in the 1099-K form?

Rennes
Shopify Partner
6 1 1

I've read documentation about how Shopify accounts for gift card balances (a liability when issued, recouped when used-- makes sense) but I can't find any information about how this factors into the 1099-K form for tax purposes.  I want to make sure we're not going to be on the hook for income that never actually happened.

 

Let's say I issue a gift card to a customer with a nominal value of $1,000.  No purchase, just issued directly, so there's no actual payout or anything.  Then the customer "spends" the $1,000.  (Again, no payout, no actual money involved.)  My question is, will the 1099-K form I get from Shopify show $1,000 more in the " Gross amount of payment Transactions card/third party network transactions" box than if that "payment" had never happened?  And if so, how can I deal with that, since that money never actually existed?

Accepted Solution (1)

Rennes
Shopify Partner
6 1 1

This is an accepted solution.

I chatted with a support person and got the answer: it's treated as income on your 1099-K form (despite there being no actual income) and there's no simple way to automatically account for that.  You have to remember to subtract the value of those "purchases" on a separate line when doing your taxes.  Despite this, they suggest issuing gift cards for things like store credit, with no mention of this complication with the accounting.  Oh well.

View solution in original post

Reply 1 (1)

Rennes
Shopify Partner
6 1 1

This is an accepted solution.

I chatted with a support person and got the answer: it's treated as income on your 1099-K form (despite there being no actual income) and there's no simple way to automatically account for that.  You have to remember to subtract the value of those "purchases" on a separate line when doing your taxes.  Despite this, they suggest issuing gift cards for things like store credit, with no mention of this complication with the accounting.  Oh well.