Seller Handbook

Advice and inspiration for successfully running your Etsy shop

Seller Handbook

Making Sense of Your Tax Forms

As a business owner, you're introduced to lots of new tax forms. Get an overview of the basics including: 1099-K, Schedule C, and Schedule SE.

By QuickBooks Self-Employed Feb 21, 2018

What’s so easy about the Schedule C-EZ? What’s this 1099-K I received in the mail? As a small-business owner, you’re introduced to an entire alphabet of new tax forms. Keep reading to learn more about the Form 1099-K, 1040, Schedule C, Schedule SE and Schedule C-EZ forms.

The 1099-K form: Everything you should know

Selling on Etsy means you’re responsible for taking care of your taxes. As an independent business 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), we’ll mail it to you 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 party to the United States Internal Revenue Service. Since Etsy processes credit card payments for sellers through Etsy Payments, we’re required to provide a 1099-K form to sellers who process $20,000 USD in payments or more and 200 transactions or more through Etsy Payments in a calendar year. We’re also required to file a corresponding form with the IRS.

The dollar amount shown on your 1099-K form will reflect your gross revenue from sales made through Etsy Payments. Etsy Payments sales include any transactions made using credit card, debit card, or Etsy Gift Card, as well as local bank transfer payment methods in certain European countries.

To receive a 1099-K from Etsy, you must reach both of these annual reporting thresholds. For example, if you process $25,000 USD but only 100 transactions through Etsy Payments in a given year, you would not receive a 1099-K from Etsy.

Exception for sellers in certain states

There is an exception to this 1099-K eligibility threshold. Sellers in Massachusetts and Vermont will receive a 1099-K form if they have $600 or more in sales through Etsy Payments in a calendar year. If these sellers also meet the $20,000 in sale and 200 payments thresholds, that information will also be reported to the IRS and Massachusetts and Vermont state tax authorities.

When considering your shop’s 1099-K eligibility, there are a few things to keep in mind:

  • 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. 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. Given the $20,000 and 200 payments thresholds, if you had two shops that each received $10,000 USD and 100 sales through Etsy Payments in a given year, you would receive a separate 1099-K for each shop. 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 easy ways to measure your shop’s annual Etsy Payments sales totals. First, you can visit Shop Manager>Finances> Taxpayer ID. This tab will display the number of sales and the gross sales volume 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 shop, you'll need to add up the totals from the Taxpayer ID tab in each shop account to find out if you qualify to receive a 1099-K.

In the Taxpayer ID tab, you can also review or edit the mailing address where we would send your 1099-K. Please ensure that this address is accurate for all of your shops.

For a more detailed look 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, click Settings then Options and select the Download Data tab. Select Etsy Payments Payments as your CSV type and your desired date range. If you'd like to include all of your Etsy Payments activity for the year, simply 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

If you processed $20,000 USD and 200 transactions through Etsy Payments in a given year, you should receive a 1099-K from Etsy for each shop by mid-February. If you’re in Massachusetts, you’ll receive a 1099-K form if you processed more than $600 in sales though Etsy Payments. When you receive the form, first check to make sure that we’ve filed it under the correct 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 various 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 form, along with detailed records of your business expenses and other income, when filing your taxes. Please keep in mind that while we love to help, Etsy can’t provide you with tax advice. For more information, consider contacting a local tax professional.

Regardless of whether you receive a 1099-K, it’s your responsibility 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 following 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 estimated tax payments.

Don't let your business taxes put a damper on all the creative aspects of being an Etsy business owner. QuickBooks Self-Employed can help you get organized so filling out your tax forms is a breeze. Get started today.

Please note that tax laws change frequently, and this information is not tax advice or legal advice. You’re responsible for any use of this information. Please consult an attorney or tax expert 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

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QuickBooks Self-Employed

QuickBooks Self-Employed helps creative business owners keep their finances and expenses organized. Easily import sales, expense data and categorize fees, profits, and business expenses all in one central hub.

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