Great information! Thanks!

Thanks for writing about this! I was avoiding reading about this kind of stuff even though I know I shouldn't!

Thank you for the information.

Thanks for the info!

I'm an accountant by trade, and believe it or not I am not looking forward to tax time. Too much work. Thanks for the post (and reminder)!

i wonder if it will calculate all the money spent on shipping each year too. Either way, im so glad I saved receipts :)

anybody get theirs yet?

perfect post for my bookkeeping day

Thanks for finally clearing up the $20,000 in sales -AND- 200 sales debate

Thank you for making it clear about the $20,000 *AND* 200 sales debate

I wish I made $20,000! : )

Thanks for the great information!

Thanks so much for clearing this up for me!

Just got mine in the mail today. I got an email from Paypal a few days ago telling me it was on it's way and that I could view it in my account.

just in time!! i posted some Q's in the etsy success forum about this and its just what i was looking for! thanks for helping us sellers out on this end of things too. (seriously!)

and joining the etsy team! what a great resource! ill be recommending to all my etsy friends...

Great information!

thanks. very helpful

I'm a UK seller, but just wanted to add that it would be really helpful if getting a hard or digital copy of the Etsy Bills we pay, would be really helpful. I find keeping on top of this so difficult because of the exchange rate etc. Can someone look into this?

Thanks! I had no idea about the new form. But, I've always reported everything to the IRS so I'm worried. I keep good records all year and tally my expenses monthly so come this time every year I just have to plug a few numbers in place and I'm good to go. xo, MJ

Thanks for the information. Very helpful.

Glad to have this information. I think this change was making a lot of people nervous, but if I made $20,000 a year on Etsy, I would already have hired an accountant to deal with the taxes! But it is very helpful to be able to access this information for our accounts for whatever reasons we may need it.

Great simple explanation, with all the pertinent info, thanks for providing it to us.

thank you for the information! hmmm....not sure if i am happy or sad about not receiving a form...LOL

We are so glad to hear this is helpful! We definitely appreciate all of the comments back... you made our day. Blooming Thread - Thanks so much for recommending us! Salvage Shop - You should be happy... reaching that level with your shop is definitely an accomplishment. :)

Even though I had nowhere near enough sales for this form to be issued to me, Outright still helped me make sense of all the Etsy and Paypal transactions that had occurred over the year. I actually do love spreadsheets for handling all sorts of information! But Outright made all the difference: and I mailed off my tax return today! Thanks, Etsy, for telling us about Outright!

Thanks for the info!

Working on taxes some each day these days, so good info here!

good to know!

ahhhh! death + taxes...thanks for reminding me, gotta go craft something to forget.

Does this apply to people in Australia? Cant seem to find any info clarifying this??

Keep in mind that the $20,000 minimum is gross, not net - so you may receive a 1099-K even if your profit from Etsy was $10,000 or less. To give a quick example, suppose you buy some yarn (ideally from me!) for $10, knit a scarf, sell it in your Etsy shop for $40 plus $5 shipping, and your customer pays you via PayPal. For the purpose of the 1099-K, PayPal's view of this transaction is that you received $45. But in terms of paying taxes, you don't owe tax on $45. You should subtract the $10 you paid for materials, the $5 you spent on postage, the 20 cents you spent to list the scarf in your shop, the fee that Etsy assessed on your sold scarf, and also PayPal's fee. Now you're already below $30, and there may be additional items you can subtract. Did you drive to the Post Office to ship the parcel? You can deduct mileage (usually about 50 cents per mile, see Schedule C for current rates). Did you buy knitting needles to make the scarf? That counts as tools/equipment, and is also deductible. Did you purchase a cardboard box in which to ship the scarf? Shipping labels, packing tape? All deductible. Your profit will probably end up around $25, which is much more pleasant to pay taxes on than $45. The primary purpose of the 1099-K is to prevent people from concealing income that they've received outside of a traditional hourly or salaried job, in the same manner that a W-2 encourages you to report your income truthfully on your 1040. If your 1099-K says that you received $100,000 through PayPal and you tell the IRS that your self-employed earnings were $5,000, it raises a red flag. While none of us enjoy paying taxes (I find Schedule SE particularly vexing), if you're tempted to underestimate your income to reduce your taxes, keep in mind that this will come back to bite you later - someday you'll retire, and the size of your Social Security payments will be smaller if you've consistently under-reported your income to the IRS.

Northcott - Yes, that's exactly right! The 1099-K only shows your revenue... it's your job to tell the government ALL of your expenses, as you only pay taxes on profit (revenue minus expenses).

Northcott- great clarification, and Outside, great help in general.

outright! oops! first time reader.

Mine came yesterday.

from what I have researched this outright service is only free for 30 days. Am I wrong?

Thanks so much for this info! I was very confused - I didn't make anywhere near $20,000 but I did have over 200 paypal transactions because I use paypal for shop and personal use, so I wasn't sure what the situation was.

How does it work when you receive payments via paypal for other things? I've been doing fundraising for my Mom's cancer expenses as well through another website, but it all goes through my paypal account, which was fine previously....sounds like I may want to change that!

While I'm really glad that my taxes were fairly simple this go-around, I'm also really, really, REALLY jealous of the people who made $20,000!! (Not really. Well, yes I am, but I'm also glad for them.)

Thanks for the clarification and tips!

jmayberry26 - it was suggested in a forum thread to have a separate Paypal account for personal expenses. I haven't done that yet. My Netflix and sometimes groceries come out of my one account. (but those aren't payments received) I need to take care of that soon.

Can you only import from etsy to outright or can you import sales on other sites like ebay?

And I don't see if this is just a trial or is truly free?

Thank you so much for this article! It was very helpful!

So helpful!!! Thank you so much, what a stress reliever!!!!!!

yes thank you for all the information on this 1099-k form...

Telamarie and NW - Yes, you can have a free account forever. We do have a paid version as well that includes more detailed tax reporting, but Etsy sellers are getting all of the regular features plus the detailed tax reports free for this tax year. So, enjoy (as much as you can enjoy taxes)! JMayberry - Yes, you can mark personal PayPal transactions as "personal" in Outright so that it calculates things correctly. So, it would work in your case. NW - Yes, we import from eBay as well.

Thanks, great info!!!

Sure hope I get one at the end of 2012!

its such a great way to keep track - and great customer service too - so glad i started using outright

will this be happening to other countries other then the US?

Thank you so for the information! I would be lost without it. I am going to go checkout Outright next.

i already knew i was getting it, because paypal sent me an email saying so. i am sure anyone else who is will also be getting that email.

Thanks for the article! Ii answered a few of my questions.

Got my form and I'm not happy about it. Ugh, going to owe so much!

Thanks for the info, I'm going to have to check out Outright!

I just got mine and I forgot it was even coming in the mail! I had already done my taxes...I am so bad at these kinds of things!

This is exactly why Outright ROCKS!! It figures it all out for you....thank you Outright!!!

I signed up for Outright and linked my Etsy and Paypal info and it says I have no transactions for 2011 AND for 2012. Yeah right. Now I am sorry I signed up. Worthless.

I've been using outright for a couple years and love it!

Just got mine, and I'm glad to read the simple explanation of what it really is. Not so scary after all!

Good info...that's for sure! I got my form and it scared me!!

Just what I was looking for... I'm so glad I didn't get to miss the online lab! See you next wednesday!

From what I am hearing on some other forums, the problem is arising that paypal is reporting wrong figures. One man said they reported 17,000 more than what he made, and while had tried to contact them to straighten this out, nobody at Paypal seems to be very helpful. I use paypal for my online business, so I had well over that many sales, and I am very stressed over this. For several reasons. One...I do custom orders, so I have always recorded my income down as not when an order is received, but as in when it is shipped. I do quarterly taxes, and have always done them myself. My quarterly taxes are going to look totally different than paypal. Also from what I know, paypal is reporting your gross sales, AND shipping fees as income, not your net. I have always done my year end taxes, and they are hard enough...as I file the long form with all of my deductions. Is there a place to specifically put your income from your 1099 form, or do you just check paypal's figures against your own and put your own income down ? I am just not understanding.

In addition to Etsy, I am also a tax preparer. This is a good article. I had someone call and ask me about 1099-K today. @SmokymistGardens you still must put the amount of gross receipts reported on 1099-K on line 1d (you can't just alter the gross amount and place the figure you come up with on that line). Look at the gross receipts statement closely (it's just like a credit card or bank statement it has to be reconciled) you must make sure that you calculate charge backs, returns and discounts etc that are listed, these items offset your gross receipts total and decrease the amount. This is an item reported in the expense section of Schedule C. As stated 1099K does not report what you actually made speaking from a net income point of view. If you DIY your taxes and bookkeeping the best thing to do is keep complete and accurate listings of your expenses, as well as the charge backs and returns that will decrease your actual gross income. If you cannot afford a bookkeeper, efficient good w/ numbers use Excel, Quickbooks or something to help track your expenses and chargebacks.

JBunnyT, I'm glad you're on here...see I just am not understanding. Do we report both this 1099 form AND what we have kept in our own records ?

is there a team for U.K tax and book-keeping help?

A wealth of information. Thank you! (If only I made $20,000 on Etsy!)

I signed up free Outright a week ago, they seem to have problem of uploading data form my paypal account. I have checked my Outright account for 7 days, the data is still incomplete. My hubby laughed at me: "that's free stuff for you! " Is that true? Would it be better If I signed up for a paid version? I contacted their tech support, all they have done is sending me their announcement: Linked accounts importing slowly. So far I still have no idea when will it be complete.

Outright definitely saved me hours of trying to figure out my deductions ...Thanks so much....

Stupid IRS. The internet should be a tax free zone. Let entrepreneurs try to spread their wings instead of thieving 40% of their cash when they aren't even making subsistence income.

only in my dreams do I make enough to get a form like this! lol

I started to use Outright about a month ago and love using it and it is the FREE version. I did have a few days where it would not update, but that was do to a bug, but in the end it was well worth the wait. Everything is right there and you can print things out when you need them. I have it linked to my PayPal account and use just my PayPal account to purchase supplies, postage and what ever else I need to. Then when I look at my expenses it is all right there. I only accept PayPal as a form of payment and the sales from my other sites are listed there too. This software has made my life a lot easier to keep track of things.

Thank you for the info!

Good, thorough post. Thanks for the insight! Wondering if the totals reported by Paypal are aggregate? Rather, do they include totals from all revenue sources or solely from one qualifying entity, i.e. - Etsy. Example: How would it work if you grossed $19K on Etsy and $19K on eBay? Curious to know.

thank you! concise and to the point.

Great info, I needed since I'm a first timer on eCommerce tax stuff. Thanks for sharing and to the point.

ah, thank u for this info. now if only you would also do my taxes!! :)

Lynne - Glad you like Outright! Thanks. Zoe - I'll contact you through PM so that I can help you. Thanks for letting us know! Karl - The 1099-ks are aggregated by the credit card processor. So, Etsy and eBay sales would both flow into PayPal and be aggregated. Amazon, on the other hand, uses Amazon Payments for their processing and, thus, would be separate.

Thank you for making this clearer.

I have prepared an Excel macro-enabled spreadsheet that helps you categorize your sales and expenses to assist with your tax preparation - email me for details or find it on ebay item 170785278836 - Paypal Tax Assistance Software - Excel VBA code - 1099 analysis - ebay business

Someone asked if anyone had received their 1099, I received mine this past week. I already figured my taxes, but I'm going to go to Outright and check it out now. Thank you!

I wish Outright had an easy way to import data from a dedicated business bank account account and credit card, where all of my other COG and business income are tracked. I imported these accounts to Outright thinking they would integrate with the Paypal and Etsy data, but it does not seem to work that way at all.

Nana - We do integrate with thousands of banks and credit cards! Send us a note if you'd like to discuss your specific situation. We are happy to help.

ok so I used my paypal last year and bill me later, it appears that bill me later is showing as income... Why?

I also see items listed as apple itunes that are indeed sales through Etsy as denoted in the detail description... do I have a glitch somewhere?

Don't wish you made more money. we went to do our taxes and were shocked!! to say the least. After you subtract your expenses, Uncle Sam takes 35% of what's left. 15% for Federal, 15% for Social Security and MA takes 5% for State tax It's not worth making things to sell if your time is only worth about $6.00 an hour after the deductions.

hey there did anyone that made under $20,000 and less than 200 transactions receive a 1099? just curious...

The IRS has suspended the 3rd party payee PayPal, as well as credit cards, for 2011 taxation. This was originally passed by Congress, hidden in the 2,700 page Obama Care Health bill. Over 90% of small businesses did not know about this new legislation and were not prepared to deal with it. Be sure to keep track of all records for 2012, in case the bill is re-enacted.

My wife has been selling some of her collections on eBay. What if the amount that Paypal reported was generated from items you already owned and therefore not taxable income?