Who this is for
- US store owners who sell on Shopify and keep only its reports
- Stores that also sell on another channel or take payments another way
- Owners preparing for a first accountant, a return or a loan application
Not covered here
- Matching payouts to bank deposits, fees and refunds
- Which states a store must collect sales tax in
- Income tax on online sales and the forms that report it
- Catching up on books that are months or years behind
Does Shopify do bookkeeping or accounting for my store?
No. Shopify records the orders in your store and the money it handles for them. It does not keep the books the IRS expects a business to have: federal law requires every taxpayer to keep the records the IRS prescribes (26 USC 6001), and the IRS says the books must show gross income, deductions and credits (IRS Publication 583). Shopify's own help page says its payments activity report is not a statement of revenue for accounting purposes (Shopify Help Center, vendor documentation). The books are yours to keep, or to hire out.
A store is simple when it sells through one channel, buys little stock, has one owner and keeps up with its bank statements. It stops being simple with sales on more than one channel or payment provider, goods bought for resale, more than one owner, a corporation, or months of books never done. If an accountant or lender has asked for books and you have only Shopify exports, or sales run through several channels, you are past the simple case. The question is no longer which report to export but who builds the books the first return will rest on.
To start, gather Shopify's order and payout exports for the full year, bank and card statements for every account the store touches, supplier invoices, and the business's formation papers.
What do Shopify's payout, activity and finance reports cover?
They cover money that runs through Shopify Payments and Shopify's own financial accounts. Each page states its own limits.
| Shopify page | What Shopify's documentation says it covers |
|---|---|
| Payouts | Funds from orders paid through Shopify Payments and certain accelerated checkouts, sent to the payout account you set up: a checking account or a Shopify Balance account |
| Payments activity report | Balance activity in Shopify Payments for a date range and currency: transactions, fees and payouts. It leaves out Shopify billing fees, third-party payment processors and third-party payment methods |
| Finance overview | Recent transactions on Shopify's own finance products, balances, available financial products, and statements for its Balance and Credit accounts |
The payments activity report reflects balance activity, and Shopify says revenue in its Finance reports is based on orders and sales activity (Shopify Help Center, vendor documentation), so the two may not agree. To match payouts to bank deposits, fees and refunds, see Shopify payouts and bank deposits.
What do Shopify's reports leave out?
Reports built around orders and Shopify Payments do not cover what the rest of the business buys, pays, owes and owns. The IRS's records guidance covers each of these (IRS: What kind of records should I keep; Publication 583).
| Not in the store reports | Where the record usually is | Why the books need it |
|---|---|---|
| Inventory purchases | Supplier invoices, card statements, proof of payment | They set the cost of goods sold, what the goods you sold cost you, and the value of stock at year end |
| Sales tax collected on orders | Sales tax reports, state returns | Sales tax imposed on the buyer, which you must collect and pay over, is not income (IRS Publication 334), so the books keep it apart from sales |
| Rent, ad bills, Shopify plan and app fees, shipping supplies | Account and card statements, invoices, receipts | Supporting documents should show the payee, amount, proof of payment, date and what was bought |
| Payroll and contractors | Payroll reports, deposit records, filed forms | Employment tax records must be kept at least four years |
| Loans | Lender statements | The IRS suggests noting whether each deposit is business income, personal funds or a loan |
| Owner pay and personal transfers | Bank statements | Personal withdrawals should be kept distinct from business payments |
| Equipment and other assets | Purchase invoices | Needed for depreciation and for gain or loss on a sale |
| Sales on another channel or through another payment provider | That channel's reports and the provider's statements | Total sales is the sum of every channel; the payments activity report leaves out other processors |
| Other bank and card accounts, including accounts abroad | Account statements | Each account should be reconciled to the books monthly, meaning every statement line is matched to an entry and the balances agree |
Which states you must collect sales tax in is covered in Shopify sales tax by state; how to record it is in Sales tax journal entries.
Do I need accounting software, or is a spreadsheet enough?
The IRS does not require software. Except in a few cases the law requires no specific kind of records, and you may use any system that clearly shows your income and expenses (Publication 583). The IRS treats an electronic accounting program as one option, held to the same principles as paper books (IRS: What kind of records should I keep).
Whatever you use should do four things:
- Summarize every business transaction in books, such as journals and ledgers.
- Keep the supporting documents behind each entry.
- Reconcile to the bank statement each month.
- If it is a computerized system, produce records that reconcile with the books and the return and point back to the source documents.
A Shopify export is a list of sales, not those books. A spreadsheet can meet the test for a store with one channel, few purchases and one owner. The IRS sets no sales level for the choice; the strain comes from inventory, several channels or several owners. For posting each order versus posting payout summaries, see Every order or payout summaries.
Do I need a separate business bank account?
Publication 583 tells a new business to open a business checking account, keep it apart from the personal account, use it for business only and deposit all daily receipts (IRS Publication 583). The tax law asks for records, not a particular account, but a mixed account forces you to sort every deposit and payment by hand.
Shopify sends payouts to the account you set up with Shopify Payments (Shopify Help Center, vendor documentation), so that choice decides how clean your sales are from the first payout. If payouts already land in a personal account, see Fixing commingled business and personal funds.
Cash or accrual, and what does carrying inventory change?
Carrying inventory generally means accrual for purchases and sales: when inventory is needed to show income, that is the rule (Publication 538). A small business taxpayer is excepted (26 USC 471(c)): one that is not a tax shelter and whose average annual gross receipts for the three prior tax years are $32,000,000 or less, counting related businesses together (IRS Bulletin 2025-45, the section 448(c) test). It may skip formal inventory by treating inventory as non-incidental materials and supplies, or by following its applicable financial statement or, if it has none, its books and records. A tax shelter includes an entity, other than a C corporation, that has offered interests for sale in an offering required to be registered, or that allocates more than 35% of its loss for the year to limited partners or to owners who do not actively help run it. Owners who actively manage the business, and certain family members and former managers, do not count in that second test. An entity may elect to test the prior year's allocation instead, by a statement attached to its timely filed original return (extensions included); a partnership or S corporation makes the election itself and cannot revoke it (26 USC 448(d)(3); 26 USC 461(i)(3); 26 USC 1256(e)(3); 26 CFR 1.448-2).
The two basic methods differ in timing. Under the cash method you report income when you receive it and usually deduct or capitalize expenses when you pay them. Under accrual you generally report income when you earn it and deduct or capitalize expenses when you incur them. The method must clearly show income. Publication 583 says to use the same method to figure taxable income and to keep your books; the regulation also expects records that reconcile any differences between the books and the return (26 CFR 1.446-1(a)(4)), which is how some businesses keep accrual books for a lender and file on cash. You choose the tax method with your first return, and changing it generally needs IRS approval (Publication 583).
What the inventory method can be, and whether you fit, are covered in Inventory or supplies for small sellers. Which entities may use cash, and how to change method, are covered in Switching from cash to accrual accounting.
What does my accountant need from a Shopify store at tax time?
Sales and payment records from every channel, plus the cost side that store reports do not hold: purchases, expenses, accounts and the entity's papers.
| Gather | What it settles |
|---|---|
| Order and sales export for the full year, with refunds, for every channel | Gross sales |
| Payout reports and the payments activity report | Which deposits were sales payouts and which were other money |
| Every Form 1099-K | The gross amount is not reduced for fees, credits, refunds, shipping or discounts, so your records must support those adjustments |
| Bank and card statements for every account used | For most small businesses, the business account is the main source for entries in the books |
| Supplier invoices, proof of payment and, if you keep inventory, a year-end stock count | Cost of goods sold and ending inventory |
| Receipts and invoices for expenses | Deductions |
| Payroll, contractor, loan and equipment records | Wages, interest and depreciation |
| Sales tax returns and reports | Tax collected versus tax paid |
| Formation papers and prior returns | Which return applies, which method was used before |
A Form 1099-K does not decide what is taxable: a reported payment is not necessarily taxable, and income is reportable even when no form arrives (IRS: What to do with Form 1099-K). Shopify says only the store's account owner can view the Finance overview (Shopify Help Center, vendor documentation), so check what your accountant can see and export the order and payout reports yourself if they cannot.
How long do I keep the records?
Generally 3 years, and longer in listed cases. The IRS says to keep records that support an item on a return until the period of limitations for that return runs out, meaning the time you can amend it for a refund or the IRS can assess more tax (IRS: How long should I keep records?).
| Situation | Keep the records |
|---|---|
| General rule | 3 years from the date you filed; a return filed early counts as filed on the due date |
| Claim for credit or refund filed after the return | 3 years from filing or 2 years from payment, whichever is later |
| Claim for a bad debt deduction or a worthless securities loss | 7 years |
| Income left off the return is more than 25% of the gross income shown; for a business, gross income is sales before the cost of goods sold (26 USC 6501(e)(1)(B)) | 6 years |
| Income from a foreign financial asset, such as an account abroad, is left off and exceeds $5,000 | 6 years (26 USC 6501(e)(1)(A)) |
| No return filed, or a fraudulent return | No end date |
| Employment taxes | At least four years after the tax is due or paid, whichever is later |
| Equipment and other property | Until the limitations period ends for the year you dispose of it |
The duty to keep records is yours, not the platform's (26 USC 6001). Download and file your own copies of each year's order, payout and tax reports, and keep copies of filed returns. Sales tax records follow state rules, which can be longer; see Shopify sales tax by state. Lenders and insurers may ask for records longer than the IRS does.
When is it worth hiring a bookkeeper for a Shopify store, and what does a CPA add?
Help is worth it when the books fall behind or the store outgrows the routine: a second channel, inventory, several owners, employees, sales tax in several states, or a lender who wants statements. The IRS sets no sales level for this; the test is whether the records are complete, reconciled and on time. For who does what and what it costs, see Bookkeeper, accountant or CPA and Ecommerce bookkeeper cost and scope.
A bookkeeper keeps the records current. Someone must also prepare the return and settle method and inventory choices that are hard to undo. To weigh doing it yourself, see Doing your own books or hiring a bookkeeper.
Example
Illustrative US dollars only.
A solo owner with only Shopify exports
A sole proprietor sells $90,000 of goods in a year and keeps only Shopify's order and payout exports. The exports show the $90,000. The $35,000 of inventory purchases and $8,000 of ad bills sit in supplier invoices and a business card statement the owner has not gathered. A return built from Shopify alone would leave out those costs, so the accountant would first rebuild them from the statements and invoices, then prepare the return.
Two LLC owners add a second sales channel
Two owners run a store taxed as a partnership. Shopify's order report shows $120,000 of sales for the year. A new second channel pays out separately, and its own order report shows $30,000 of sales. Assume no refunds or sales tax. Neither report shows the $150,000 total. The books record gross sales from both channels, record processor fees as expenses, and tie each channel's payouts to the bank deposits before the partnership return uses the total.
A lender asks for statements
An owner applies for a $50,000 loan, and the lender asks for a profit and loss statement and a balance sheet. Shopify's Finance overview page describes recent transactions, balances and statements for its own Balance and Credit accounts (Shopify Help Center, vendor documentation), not a profit and loss statement or a balance sheet for the business. Publication 583 names those two statements as products of good records, so the books come first and the statements follow. The lender sets its own list, so ask it what it will accept.
Different for you?
- Your first accountant asked for books and you have only Shopify exports, or sales run through several channels: the books have to be built before the first return, and the method and inventory choices made on it are hard to undo. Bring the exports, statements and formation papers to Bookkeeping.
- You have no books for past years, or a return is overdue: the books are usually rebuilt from statements before the return is prepared. See Catching up on overdue books and Rebuilding books from bank statements, then bring the statements to Bookkeeping.
- A corporation, or an LLC taxed as one, owns the store: the entity has its own tax return, and the formation papers and elections decide which one. Bring them with the statements to Bookkeeping.
- The owner lives outside the US, or you pay suppliers or hold accounts abroad: foreign accounts and currencies add records and filings. See Foreign-currency accounts in US books and Foreign-owned single-member LLC filing, then bring the statements to Bookkeeping.
- A lender wants statements: see Financial statements for a bank loan and Proving income to a lender.
- Your payouts do not match your deposits or the sales report: use Shopify payouts and bank deposits.
- You sell in more than one state: see Shopify sales tax by state.
- You want to know what tax your online sales create: see Online seller income tax.
- Personal and business money are mixed: untangle them with Fixing commingled business and personal funds.
- You just formed an LLC: decide the method, tax year and accounts first with Setting up books for a new LLC.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| US employment tax record retention Minimum, counted from the date the tax becomes due or is paid, whichever is later | Four years | IRS: Publication 583, Starting a Business and Keeping Records Checked |
| Small-business inventory gross-receipts test Average annual gross receipts for the three prior tax years under section 448(c); other conditions apply to the inventory-method exception. | $32,000,000 Tax year 2026 | IRS: Internal Revenue Bulletin 2025-45 Checked |
| Share of losses allocated to limited partners or limited entrepreneurs that makes an entity a syndicate Applies to partnerships and other entities other than C corporations; losses means deductions over income for the year. An annual election may test the prior year's allocations (Reg. 1.448-2(b)(2)(iii)). | More than 35% | eCFR: 26 CFR 1.448-2 Checked |
| General income-tax supporting record retention period Generally after filing or the return due date, whichever is later; longer periods apply in specified cases. Property-basis records last through the limitation period for the taxable disposition year; unfiled and fraudulent returns have no limitation period. | 3 years | IRS: Publication 583, How Long To Keep Records and Table 3 Checked |
| Record retention period when you file a claim for credit or refund after the return Counted from the date you filed the original return or paid the tax; a return filed before the due date counts as filed on the due date. | 3 years from filing or 2 years from payment, whichever is later | IRS: How long should I keep records? Checked |
| Record retention period for a bad debt deduction or worthless securities loss claim Keep records this long if you file a claim for a loss from worthless securities or a bad debt deduction; counted from the filing date. | 7 years | IRS: How long should I keep records? Checked |
| Omitted income that extends the IRS record retention period to 6 years Keep records for 6 years if unreported income is more than this share of the gross income shown on the return | 25% | IRS: How long should I keep records? Checked |
| Record retention period when unreported income exceeds the omitted-income threshold Keep records this long if income that should have been reported is left off the return and is more than 25% of the gross income shown on it; counted from the filing date. | 6 years | IRS: How long should I keep records? Checked |
| Omitted income from a foreign financial asset that extends the assessment period to 6 years The IRS has 6 years after the return was filed to assess tax if the taxpayer omits more than this amount of income attributable to a foreign financial asset (one reportable under section 6038D, or that would be without its dollar thresholds and exceptions). | $5,000 | US Code: 26 USC 6501(e)(1)(A)(ii) Checked |
Primary sources
- Shopify Help Center: Overview of your financial information (vendor documentation)
- Shopify Help Center: Payments activity report (vendor documentation)
- Shopify Help Center: Shopify Payments payouts (vendor documentation)
- US Code: 26 USC 6001
- US Code: 26 USC 471
- US Code: 26 USC 448
- US Code: 26 USC 461
- US Code: 26 USC 1256
- IRS: Publication 583, Starting a Business and Keeping Records
- IRS: What kind of records should I keep
- IRS: How long should I keep records?
- IRS: Publication 538, Accounting Periods and Methods
- IRS: Publication 334, Tax Guide for Small Business
- US Code: 26 USC 6501
- eCFR: 26 CFR 1.446-1
- eCFR: 26 CFR 1.448-2
- IRS: Internal Revenue Bulletin 2025-45
- IRS: What to do with Form 1099-K
About this guide
Published by Cloud Accounting under standing professional approval. This version has no separately recorded personal review. It explains general rules for the tax year shown. It is not advice for your situation.
Changes
- : First published.