As a CPA, if my clients bring me a 1099K, that has been provided to the IRS, then I suggest to them that we need to disclose the transaction. How I disclose the transaction is not something that I'm going to discuss here as it depends on everyone's business entity and how they report. The IRS is looking for a match on the tax return for the gross on the 1099K. It is up to the client to provide me with information for all the additional expenses that they can use to lower the gross amount to the taxable income. As a reminder, the 1099K also includes income not paid to you in EOY December since Amazon has to report all that they have received on your behalf but more than likely the last payment is made in January of the new year. The 1099K also includes all income since this is triggered from what they receive....Sale + Tax + Shipping Collected.

In the end, non-disclosure of a tax document provided to the IRS will more than likely result in a CP-2000 mismatch notice within 1-2 years after the fact. Personally, I double my prices to deal with new clients that bring me issues such as this on returns they personally prepared since it takes me that much time to unravel the mystery and then put the puzzle back together. Generally I have to amend a tax return and address the IRS notice.

I imagine with a $20k 1099K you probably need to prepare yourself for a tax balance unless you have been making estimated tax payments to cover your tax liability plus the self-employment tax liability on the net income. (Caveat here is the method you have been claiming your COGS for the year...I don't encourage expensing all purchases in the current year as this is a mismatch of income/expense but it can save you in a bind but will bite you in the future).