Tax season is here, and with tax season comes financial statements. If you have a merchant account, it’s very likely that you will soon be receiving your IRS form 1099-k from your processor. In a recent blog post we spoke about what the 1099-k is, what they show and what they don’t. Since the 1099-k only reports gross payments we wanted to discuss some of the ways you can reduce your tax liability from this income by deducting some of these common expenses:
Credit Card Processing Fees
All of the fees paid on your merchant account are deductible. Interchange, transaction fees, monthly fees, etc. Since the 1099-k reports unadjusted gross sales, you can reduce this amount by deducting any fees that were paid during your fiscal year.
Credits and Returns
It’s inevitable that most, if not all, businesses have processed a return or refund on a credit card processing account. As the amount reported on the 1099-k is not adjusted for credits, refunds or returns. These transactions reduce your income and are deductible.
Nobody likes chargebacks. They’re costly, they come up suddenly, and they’re a pain to resolve. One good thing about them is they’re deductible. Since the money is a loss on your part, you are able to deduct it.
Equipment & Software
As Point-of-Sale systems are a business purchase for the purpose of accepting payments, all or part of the expense may be deductible. Software and online services used to accept credit card payments can also be deductible. On these it may be best to consult with your accountant.
While these expenses are deductible we would advise that you speak with your tax professional on how best to report these expenses.
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