The 1099-K form: Everything you should know
Selling on Etsy means you ’ ra responsible for taking caution of your taxes. As an independent commercial enterprise owner, you might receive a 1099-K form from Etsy, or from payment processors such as PayPal. If you meet the requirements for receiving the form ( see below ), you can download your form vitamin a soon as it ‘s fix immediately from your Shop Manager. alternatively, we can mail it to you. It will be postmarked by January 31 of the tax-filing year .
What is a 1099-K Form?
A 1099-K form reports credit card payments you ’ ve received through a third base party to the United States Internal Revenue Service. Since Etsy processes credit card payments for sellers through Etsy Payments, we ’ ra required to provide a 1099-K shape to sellers who make over $ 600 in a calendar class. We ’ re besides required to file a match form with the IRS.
Reading: Making Sense of Your Tax Forms
The dollar measure shown on your 1099-K imprint will reflect your gross tax income from sales made through Etsy Payments. Etsy Payments sales include any transactions made using credit tease, debit circuit board, or Etsy Gift Card, deoxyadenosine monophosphate well as local bank transfer payment methods in certain european countries .
Note: These fresh sales thresholds went into impression on January 1, 2022, meaning that they ‘ll apply to the sales you make on Etsy in 2022. Your 2021 sales are inactive subject to the existing federal doorway ( $ 20,000 in gross sales and more than 200 transactions in a given calendar year ) and certain local state thresholds. You can learn more about the current federal and express thresholds here .
When considering your shop’s 1099-K eligibility, there are a few things to keep in mind:
- 1099-K report is merely for US sellers. If you aren ’ thymine located in the US and don ’ thyroxine file a united states tax reappearance these regulations do not apply and you can disregard these communications. Please reach out to Etsy digest if you need more aid on updating your shop placement .
- Only sales processed through Etsy Payments count toward the IRS thresholds for receiving a 1099-K from Etsy. Sales that were paid to your own PayPal account or any other payment method will not contribute to your Etsy 1099-K sales totals. However, you might receive a separate 1099-K from PayPal or other payment processors. Please contact PayPal or the payment processor directly for more details.
- The IRS thresholds apply to your gross sales volume received through Etsy Payments. Your gross sales volume is the total amount we’ve processed on your behalf, including shipping and sales tax you have collected yourself. Note that Etsy Payments fees and refunds will not be subtracted. However, you can later deduct shipping costs, sales tax, fees, and refunds as expenses when you file your taxes.
- For sellers accepting payments through Etsy Payments in multiple shops on Etsy, we combine the Etsy Payments sales totals across all shops that utilize the same Employer Identification Number (EIN) or Social Security Number to determine whether you’ve reached the 1099-K reporting thresholds. Please note that in order to accurately report your total sales, it’s very important to keep the taxpayer ID information up to date in each of your shops if you have more than one.
Not sure if you’ll receive a 1099-K?
No worries ! There are a few comfortable ways to measure your workshop ’ second annual Etsy Payments sales totals. First, you can visit Shop Manager > Finances > Legal and tax information. This tab will display the number of sales and the gross sales book you received through Etsy Payments this year. Remember, if you have multiple shops offering Etsy Payments, your shop-by-shop sales totals will be combined. If you operate more than one denounce, you ‘ll need to add up the totals from the Legal and tax information tab key in each shop account to find out if you qualify to receive a 1099-K .
In the Legal and tax data yellow journalism, you can besides download your 1099-K deoxyadenosine monophosphate soon as it ‘s available or inspection or edit the mailing address where we would send your 1099-K. Please ensure that this savoir-faire is accurate for all of your shops .
For a more detailed front at your Etsy Payments sales, you can download your Etsy Payments CSV file. The CSV format can be imported into most spreadsheet applications, including Excel, Numbers, and Google Sheets .
To download your CSV, go to your Shop Manager, suction stop Settings then Options and select the Download Data yellow journalism. Select Etsy Payments Payments as your CSV type and your coveted date image. If you ‘d like to include all of your Etsy Payments action for the class, plainly leave the Month field blank. Click the Download CSV button to save the file to your computer.
What to do if you receive a 1099-K from Etsy
When you receive the kind, inaugural check to make sure that we ’ ve filed it under the chastise taxpayer ID. Next, review the monthly and annual sales totals reported on the form to ensure their accuracy. You can use your Etsy Payments Payments CSV to reconcile the assorted data .
Please contact Etsy Support if:
- You believe the totals on your 1099-K form are incorrect.
- Your 1099-K form was filed under the wrong taxpayer ID.
- You met both 1099-K reporting thresholds but did not receive a form.
- You misplaced your form and need another copy.
Consult the information provided on your 1099-K shape, along with detail records of your commercial enterprise expenses and other income, when filing your taxes. Please keep in beware that while we love to help, Etsy can ’ t provide you with tax advice. For more information, consider contacting a local tax master .
Regardless of whether you receive a 1099-K, it ’ s your duty to make sure you have accurate records of the following to accurately pay estimated and annual taxes :
- Business expenses: These must be considered “ordinary and necessary” to qualify for business deductions. Travel, office equipment, client gifts, meals, and charitable contributions may fit into this category. Find more information on common Etsy business deductions.
- Annual income: How much you made throughout the year.
- Estimated tax payments: What you’ve already paid throughout the year in estimated taxes will determine how much you owe or are owed when you file annual taxes.
Other tax forms you might need
If you ’ re making a profit from your shop you might need to file the succeed forms throughout the year :
- Form 1040: The Form 1040 is the U.S. Individual Income Tax Return, the standard federal income tax form that reports the gross income of an individual. This form allows taxpayers to claim expenses and deductions to potentially lower their annual payment. 1040s are due on April 15 of each year and must be filed by all individuals who meet gross income requirements based on filing status and age.
- Schedule C and Schedule C-EZ The Schedule C and Schedule C-EZ forms must be filled out when you operate your Etsy shop as a business.The Schedule C and Schedule C-EZ forms are similar, but the Schedule C is longer and the Schedule C-EZ is more simplified. Individuals may fill out a Schedule C-EZ form if there is a profit for the business, expenses are not greater than $5,000, the business is a sole proprietorship with no employees, there is no inventory, and the business owner is not using depreciation or deducting the cost of their home. You can find more information on the Schedule C here and more on the Schedule C-EZ here.
- Schedule SE, Self-Employment Tax: If your total net income from your Etsy shop is $400 or more, you must file a Schedule SE form for self-employment tax that includes coverage for Medicare and Social Security taxes. As a new business owner, to calculate self-employment taxes, you’ll figure taxable income by subtracting deductions and credits from your expected adjustable gross income. Find more information on the Schedule SE here.
If you expect to pay more than $ 1,000 on annual taxes, you must pay quarterly estimated taxes using Form 1040-ES, Estimated Tax for Individuals. You can find more information on the 1040-ES here. What you pay on your estimated taxes may make you eligible for a refund when you pay your annual taxes, or you may owe more if your actual taxable earnings were more than you estimated. In future years, you ‘ll be able to use what you owed the previous year to guide your calculate tax payments .
Do n’t let your occupation taxes put a damper on all the creative aspects of being an Etsy commercial enterprise owner. QuickBooks and Turbotax products can help you get organized sol filling out your tax forms is a breeze. Get started today.
Please note that tax laws change frequently, and this data is not tax advice or legal advice. You ’ rhenium creditworthy for any use of this information. Please consult an lawyer or tax adept if you have any questions .
Continue reading > Chapter 3: Tracking Your Business Expenses and Claiming Deductions
Go back > The Ultimate Guide to Taxes for Etsy Shop Owners