Why are there discrepancies in my Shopify 1099-K report?

Accounting & Taxes

Topic summary

Users report significant discrepancies between Shopify’s 1099-K reports and IRS requirements for gross payment reporting.

Core Issue:

  • IRS requires reporting gross transaction amounts without deductions for fees, discounts, or refunds
  • Shopify’s exported 1099-K data (via Payouts > Transactions > Export) reflects net amounts paid out, not gross sales
  • This creates a fundamental mismatch with tax reporting requirements

Specific Problems Identified:

  • Shop Pay Installment transactions are inconsistently included depending on export method
  • No clear indication which installment orders are interest-bearing
  • Finance Summary’s “Total Payments” doesn’t reconcile with Total Sales or Net Sales
  • Missing transactions in Payout reports (at least 3 confirmed in one month)
  • Adjustments for out-of-stock items incorrectly use original pricing

User Impact:

  • One user spent 50+ hours attempting reconciliation without success
  • Multiple export methods produce different figures for the same period
  • Comparison to competitors (Square) shows other platforms provide accurate, reconcilable reports

Status: Unresolved, with users expressing frustration over Shopify’s inability to provide compliant tax reporting.

Summarized with AI on November 1. AI used: claude-sonnet-4-5-20250929.
1

I have spent over 50 hours, going through transactions, reports, reconciling them back to previous year 1099s, and the 1099-k rules are as follows FROM THE IRS.

“Box 1a. Gross Payment Card/Third Party
Network Transactions
Enter in box 1a the gross amount of the total reportable
payment card/third party network transactions for the
calendar year. Gross amount means the total dollar amount
of total reportable payment transactions for each participating
payee without regard to any adjustments for credits, cash
equivalents, discount amounts, fees, refunded amounts,
shipping amounts, or any other amounts. The dollar amount
of each transaction is determined on the date of the
transaction.”

This statement is from a Shopify employee. “The 1099-K report typically represents your gross sales, not what Shopify pays out to you. If there’s a discrepancy, it’s important that we address it. Let’s continue to investigate this.”

This is NOT what Shopify does. They tell us to go to “Payouts”>Transactions>Export>1099-k Transactions.

(WHAT SHOPIFY PAYS US)

This is where the discrepancies start.

First of all, Shopify PAYOUTS INDEED include the net sale amount. (Order Price after order transaction fees, after the order discount), and they also include “some” SHOP PAY INSTALLMENTS, otherwise where else does that money go? TO OUR PAYOUTS, yet the Shopify 1099-K says GROSS SALES. What we are PAID by Shopify, is not OUR GROSS SALE amount.

Now. going back to 2022 1099-K. If we use this method “Payouts”>Transactions>Export>1099-k Transactions

This is NOT our gross sales, again, this is what Shopify has PAID to us, via the orders, after the discount and after transaction fees. However that doesn’t match our gross sales. Therefore, its not our gross sales. Then if we use the method of Payouts>Transactions>export by date, Same available on date range, it includes ALL Shopify installments so the numbers are different, in Charges, Fees, and Net, and doesn’t match our net sales.

For example, Shopify Installment orders, which orders do we know are interest bearing or not? Nowhere in the order does it specify this.

Then to further confuse us, in finance summary, what numbers make up Total Payments? As our Total Sales does not match this Total Payment category. Total Sales should equal Net sales/Net Payments, but again, these numbers do not match, and there is no way I can get them to, after spending more hours upon hours adding and subtracting, different sales, by date, by payout etc, to match these numbers up. This is absolutely insane Shopify.

2 Likes
2

I agree it’s an insane mess. I have spent days reconciling reports to 1099 and they do not match. I just found out that the Payouts reports is missing 3 transactions in a single month and they were not cancelled. I made adjustments to out of stock items and yet it takes the original price of the item that was out of stock. It is beyond me how Shopify cannot get this straight. Square reports are exact to the cent.