9 mins laughs
11 January 2023
Etsy sellers who make more than $600 per year from online sales receive a 1099-K form as part of their Etsy self-employment tax documents. State and local governments have different requirements and thresholds for submitting this form.
Whether you're worried about income tax for your Etsy hobby or you're a professional Etsy seller in your online marketplace, we can help. Here's everything you need to know about completing the 1099-K form.
Index
Why is Etsy 1099-K important?
Etsy 1099-K requirements
How to get 1099-K from Etsy
How to archive Etsy 1099-K
Consider FreshBooks for business expense tracking
Main Conclusions
frequently asked questions
Why is Etsy 1099-K important?
Using a 1099-K form, an Etsy seller reports total gross sales made on the platform for the year. Basically, you need this form to report your Etsy sales to the Internal Service Revenue (IRS) when filing your federal and state taxes.
Sales tax form 1099-K includes all of your shipping fees, card processing, refunds, sales tax, and canceled orders. The rule is the same for everyone, whether you sell as a hobby or run professional Etsy shops.
If you've worked as an employee or employee in the United States, you're probably familiar with the W-2 form. Well, the 1099-K form is just as important. But unlike the W-2 issued earlier in the year, the 1099-K doesn't list wages for your salary or a constant hourly rate. Instead, it lists your transactional sales being processed by Etsy.
Form 1099-K may also be required to pay state income tax, depending on the freelancer's location. Different states have their own 1099-K sell limits. Some states also require Etsy to send federal copy 1099-K.
Here is an overview of the threshold for states that require one:
- Arkansas - 2.500 US-Dollar
- Alabama - $1,500
- Missouri - $1,200
- New Jersey - $1,000
- Illinois - $1,000 or more from four transactions
- District of Columbia, Maryland, Mississippi, Massachusetts, Virginia und Vermont – 600 $
Etsy 1099-K requirements
Beginning in 2022, all businesses selling products on Etsy will be required to fill out a 1099-K form when their deals reach $600.
As an independent contractor, when considering the eligibility of Form 1099-K for your business, it is important to consider the following:
- 1099-K reports apply to US dollar sales only. Non-US business owners who do not file a tax return will not receive this form.
- The only Etsy revenue that counts for the IRS is sales from Etsy Payments. For example, if you receive money in your PayPal account, that income does not contribute to 1099-K sales. PayPal will send you a separate 1099-K form if you make more than $600 on this platform.
- Etsy calculates the combined shop totals using the Employer Identification Number (EIN). You can also use your CPF number if you have multiple trades on the platform.
Business owners preparing to fill out the 1099-K form must meet a few additional requirements.
Here are the accepted tax identification numbers for Form 1099-K:
- Federal Social Security Number (SSN)
- Federal Employer Identification Number (EIN)
- Individual identification number
For US businesses using EIN, you may need to enter your business name under "Legal name and address" on Etsy's legal and tax information page.
IRS-registered corporations that file their taxes as a corporation must use the EIN and company name that they registered with the IRS. They should also refer to the IRS letter they received after EIN registration. You can find the relevant taxpayer information (Name and EIN).
Finally, companies that declare their income tax as individuals can be exempted from the procedure and be considered a "disregarded entity".
Individuals using the SSN or EIN must enter their legal name for individual entities. This means that a sole proprietor uses the name that appears on their social security card.
You must have the same taxpayer information on your digital 1099-K form. Otherwise, you can update your CPF to receive an updated form before March 14, 2023. After this date, Etsy will no longer accept changes to your tax information for 2022.
You will also receive the updated form if you update your taxpayer information between January and March 14, 2023.
How to get 1099-K from Etsy
Etsy processes all credit card payments through the Etsy Payments selling system. The platform provides a 1099-K form to any seller who makes more than $600 in a calendar year. This includes all Etsy Payments gross receipts. Examples include credit card transactions, gift cards, bank transfers, and more.
Etsy provides this form in digital format. You can find yours by following the steps below:
- Sign in to your Etsy account.
- Go to Store Manager.
- From there, open “Finance”.
- Click on "Legal and tax information".
- Click Download 1099-K.
If you prefer to have your copy sent by post, you can also get your copy this way. Just follow the steps below:
- Sign in to your Etsy account and go to Shop Manager.
- Go to "Finance" and press "1099-K Settings".
- Next to the statement that you want to receive 1099-K in paperless form, toggle the switch to off.
The form will be available in your Etsy account by January 31 of the previous tax year. You would have to wait a little longer to get the file to your mailing address.
Again, please note that the 1099-K form is only for sellers who make $600 or more on Etsy in a year.
The best way to find out how much you've earned is to follow the steps below:
- Open Etsy and go to Shop Manager.
- Go to "Settings", "Options" and "Data Download".
- Select “Etsy Payments Sales” as CSV type and press “Download”.
- Review the downloaded file and add the year-to-date total in the "Gross" column.
After preparing this part, you can start filling out the form for your Etsy shop.
How to archive Etsy 1099-K
Anyone who makes money from their Etsy shop, including hobbies with Etsy income, is required to file taxes using a 1099-K form.
If you file your taxes yourself, you should familiarize yourself with the process in detail. You can always use accounting software like FreshBooks, but you should still learn about the ins and outs of the process.
There are several steps you need to follow:
- Calculate your gross income.
- Make a list of "Etsy Editions".
- Prepare an "Agenda C".
- Examine quarterly payroll taxes.
If you receive a 1099-K from Etsy, first verify the tax ID. Next, you want to review your total gross sales for your monthly and yearly sales. Again, the Etsy Payments CSV file is useful for data reconciliation.
Etsy sellers should review the information on the 1099-K form and their business expense records when filing their taxes.
If you need help from Etsy, Customer Support can help you with the following:
- Correction of taxpayer information ahead of March 14 deadline
- Gross sales amount on the form
- Technical problems related to downloading forms
- Download data about your store in a CSV file to calculate gross sales
- Find data like refunds, fees, and more
- Form 1099-K Waiver if You Eligible or Operate Your Business Outside the United States
As an Etsy seller, you can contact Etsy's tax experts about:
- swell
- IRS Taxpayer Information Updates
- tax declaration
- reports andcost tracking.
However, please note that the Etsy team cannot provide tax or legal advice.
Consider FreshBooks for business expense tracking
A great software to keep track of your business expenses is FreshBooks. Theaccounting softwarecovers all your expenses on Etsy or any other platform.
The software is relatively easy to use and you can get it even if you are not a qualified accountant. Your Etsy sales tax will be much easier to track and you won't have to worry about calculating your self-employed taxes.
Software like FreshBooks can help you avoid a big tax bill and automate your long-term bookkeeping needs. When tax season kicks off, you'll be ready to make payments without the stress.
Main Conclusions
All Etsy sellers making more than $600 per year receive a 1099-K on behalf of the platform. This requirement is mandatory as this is the main document you give to the IRS when paying your taxes. Given the different limits in certain states, it's worth checking the details of the 1099-K requirements in your state. Etsy customer service can also be of great help with additional information. Coupled with an accounting software like FreshBooks, keeping track of your expenses and filling out the 1099-K form will never be a problem.
frequently asked questions
Does Etsy submit the 1099-K form?
Etsy will send you the 1099-K form for your Etsy sales earnings. If you have one or more Etsy shops, you'll receive the form based on the total amount of revenue from all your Etsy shops.
When does Etsy submit the 1099-K form?
Etsy mails downloadable 1099-K forms for the previous tax year to all eligible sellers by the end of January each year. If you choose to receive your copy in the mail, it may take a few more weeks.
How much do you have to make on Etsy to claim against your taxes?
Every Etsy seller must pay taxes if they receive payments over $600 per year. Taxable income may vary by state, but Etsy must send you a 1099-K if you earn more than the above threshold.
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FAQs
What do I do if I didn't make enough for a 1099? ›
If you file your return and later receive a Form 1099 for income that you did not fully include on that return, you should report the income and take credit for any income tax withheld by filing Form 1040X, “Amended U.S. Individual Income Tax Return.”
How do you fill out taxes on Etsy? ›Beginning with tax year 2023, if more than $600 is processed and paid to you through Etsy as a third-party payment processor, the amount should be reported to you on Form 1099-K. If you do not receive a tax form, you can look up your annual sales by signing into your Etsy.com account and downloading it.
How much should I set aside for taxes from Etsy sales? ›Taxes You Will Need To File As A Seller On Etsy
Self-employment tax equals about 15.3% of your net earnings. To quickly figure out how much you'll owe, use our 1099 tax calculator.
Since the 1099 form you receive is also reported to the IRS, the government knows about your income even if you forget to include it on your tax return.
Will I get caught not filing a 1099? ›Chances are high that the IRS will catch a missing 1099 form. Using their matching system, the IRS can easily detect any errors in your returns. After all, they also receive a copy of your 1099 form, so they know exactly how much you need to pay in taxes.