Etsy 1099 Tax Form: Filing Requirements and Steps

The IRS announced a one-year delay of the new $600 Form 1099-K reporting requirement for third-party settlement organizations (such as Etsy) for calendar year 2023.

Additionally, the agency is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).

Consequently, only Etsy sellers who reached more than $20,000 in gross sales and more than 200 transactions in 2023, or met a threshold requirement for their state, will 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 concerned about your Etsy hobby income tax or are a professional Etsy seller with your online marketplace, we can help. Here’s everything you need to know about filing the 1099-K form.

Key Takeaways

• All Etsy sellers who make more than $20,000 in gross sales and have more than 200 transactions per year will receive the 1099-K Form on behalf of the platform.
• This requirement is the main document you’ll be handing to the IRS when paying your taxes.
• Given the different thresholds in specific states, it’s worth checking the details about the 1099-K requirements in your state. 
• Etsy customer service can be of great help by providing additional information. 
• Together with accounting software like FreshBooks, keeping track of your expenses and filling out the 1099-K Form won’t ever be a problem.

Table of Contents

Why Is Etsy 1099-K Important?

Etsy 1099-K Requirements

How to Get 1099-K From Etsy

How to File Etsy 1099-K

Consider FreshBooks to Track Business Expenses

Frequently Asked Questions

Why Is Etsy 1099-K Important?

With a 1099-K form, an Etsy seller reports the total gross sales income they make on the platform throughout the year. Basically, you need this form to report your Etsy sales to the Internal Service Revenue (IRS) when you file your federal and state taxes.

You should receive a 1099-K form from Etsy by January 31 of the following year.

Box 1a of Form 1099-K reports the gross amount of payment card/third-party network transactions. This amount is not adjusted to account for fees, refunds, chargebacks, or other costs included in the unadjusted dollar amount of the payment transactions. If the Form 1099-K reports the total unadjusted dollar amount of the payment transactions and you separately paid selling expenses, you may need to make a separate adjustment to the resulting gain or loss (by reporting your business expenses on Schedule C Form 1040 when you file your federal income tax return). You should maintain and consult your own records to determine these amounts. The rule is the same for all, whether you’re doing hobby sales or running professional Etsy shops.

If you have worked as a salaried or hourly employee in the U.S., you’re most likely familiar with the W-2 form. Well, the 1099-K form is just as important. But unlike the W-2 issued at the start of the year, the 1099-K doesn’t list wages for your salary pay or consistent hourly pay. Instead, it lists your transaction sales that are processed by Etsy.

The 1099-K form may also be needed to pay state income taxes, depending on the location of the freelancer. Different states have their own 1099-K sale thresholds. Also, some states require Etsy to send them the federal 1099-K copy.

Here’s an overview of the threshold amount for states that require one:

• Arkansas – $2500
• Alabama – $1500
• Missouri – $1200
• New Jersey – $1000
• Illinois – $1000 or more than four transactions
• District of Columbia, Maryland, Mississippi, Massachusetts, Virginia, and Vermont – $600

Etsy 1099-K Requirements

For the year 2023, businesses selling goods on Etsy need to receive and report their  1099-K earnings on their federal tax return, when their gross payment amounts are more than $20,000 USD per year and they had more than 200 transactions.

When you consider the 1099-K form eligibility for your shop, it’s important to keep in mind the following as an independent contractor:

• The 1099-K reports are only for sales made in U.S. dollars. Business owners outside of the U.S. who don’t file tax returns won’t receive this form.
• The only Etsy income that counts for the IRS is the Etsy Payments sales. If you receive funds on your PayPal account, for example, that income doesn’t contribute to the 1099-K sales. PayPal will send you a separate 1099-K form if you earn more than $600 on that platform.
• Etsy will calculate the combined shop totals using the Employer Identification Number (EIN). They can also use your Social Security Number if you own multiple shops on the platform.

Business owners getting ready to file the 1099-K form need to fulfill some additional requirements.

Here are the taxpayer ID numbers accepted for the 1099-K form:

• Federal Social Security Number (SSN)
• Federal Employer Identification Number (EIN)
• Individual Taxpayer Identification Number (TIN)

For U.S. businesses who use EIN, it may be necessary to fill in the business name under “Legal Name and Address” on Etsy’s Legal and Tax Information page.

Businesses registered with the IRS that file their taxes as a business should use the EIN and business name they registered with the IRS. Also, they should refer to the IRS letter they received after registration of the EIN. They’ll find the properly matched taxpayer information (name and EIN).

Finally, businesses that file their income tax as individuals may be exempt from the process and be seen as a “disregarded entity.” If a single-member LLC does not elect to be treated as a corporation, the LLC is a “disregarded entity,” and the LLC’s activities should be reflected on its owner’s federal tax return. 

People who use the SSN or EIN should enter their legal name for sole proprietorships. This is to say that a sole proprietor uses the name featured on their Social Security Card.

You need to have the same taxpayer information on your digital 1099-K form. If that’s not the case, you can update the taxpayer ID to get a corrected form before March 14, 2023. After that date, Etsy will no longer accept tax information changes for 2022.

You’ll also receive an updated form if you update the taxpayer information between January and March 14, 2023.

How to Get 1099-K From Etsy

Etsy processes all credit card payments via the Etsy Payments sales system. The platform will provide a 1099-K form to any seller who makes more than $20,000 and has more than 200 transactions in 1 calendar year. This includes all gross revenue from Etsy Payments. Examples include transactions made with credit cards, gift cards, bank transfers, and more.

Etsy makes this form available in digital format. You can find yours by following the steps below:

1. Log in to your Etsy account.
2. Go to “Shop Manager.”
3. From there, open “Finances.”
4. Click “Legal and Tax Information.”
5. Hit “Download 1099-K.”

If you prefer snail mail, you can also receive your copy that way. Just follow the steps below:

1. Log in to your Etsy account and go to “Shop Manager.”
2. Go to “Finances,” then press “1099-K Settings.”
3. Next to the statement saying you want to receive the 1099-K in the paperless form, toggle the button to “Off.”

The form will be available on your Etsy account by January 31 for the previous tax year. You’d have to wait a bit longer to receive the file at your mailing address.

Again, note that the 1099-K form is only for sellers who make over $20,000 and have more than 200 transactions on Etsy in one year.

The best way to find out how much you earned is to follow the steps below:

1. Open “Etsy” and head to “Shop Manager.”
2. Go to “Settings,” then “Options,” then “Download Data.”
3. Pick “Etsy Payments Sales” for the CSV type and press “Download.”
4. Go over the downloaded file and add the current year’s total from the “Gross” column.

Once you get this part ready, you can start preparing to file the form for your Etsy shop.

How to File Etsy 1099-K

Everyone who makes money on their Etsy shop, including hobbies with Etsy income, needs to file taxes with a 1099-K form.

If you file your taxes on your own, you should get familiar with the process in detail. You can always use accounting software like FreshBooks, but you should continue learning about the ins and outs of the process.

There are several steps you should follow:

1. Calculate your gross income.
2. Make an “Etsy expenses” list.
3. Get “Schedule C” ready.
4. Investigate quarterly estimated tax payments.

If you receive a 1099-K form from Etsy, you should first check the taxpayer ID. Then, you want to review your total gross sales income for your monthly and annual sales. Again, the Etsy Payments CSV file will be useful for data reconciliation.

Etsy sellers must check the information on the 1099-K form and their business expenses record when they file their taxes.

If you ever need help from Etsy, their customer support can help you with the following:

• Correcting the taxpayer information before the March 14 deadline
• Gross sales income amount on the form
• Technical issues related to downloading the form
• Downloading data about your shop in a CSV file to calculate gross sales
• Finding data like refunds, fees, and more
• Exemption from the 1099-K form if you’re eligible or operate your business outside of the U.S.

As an Etsy seller, you can contact tax professionals at Etsy about:

• Thresholds
• IRS taxpayer info updates
• Filing taxes
• Reporting and tracking expenses.

But do note that the Etsy team can’t give tax or legal advice.

Consider FreshBooks to Track Business Expenses

A great software you can use to help keep track of business expenses is FreshBooks. This accounting software will have you covered for all your expenses on Etsy or any other platform.

The software is relatively simple to use, and you can get a hold of it even if you aren’t a skilled accountant. Your Etsy sales tax will be much easier to follow, and you won’t have to worry about calculating your self-employment taxes.

Software like FreshBooks can help you avoid a hefty tax bill and automate your accounting needs in the long term. Once the tax season arrives, you’ll be ready to make the payments without stressing out.

Frequently Asked Questions

Does Etsy send a 1099-K form?

Etsy will send the 1099-K form to you for your Etsy sales income. Whether you have one or multiple Etsy shops, you’ll receive the form based on the total amount of income for all your Etsy shops.

When does Etsy send a 1099-K form?

Etsy sends the downloadable 1099-K forms to all eligible sellers by the end of January each year for the previous tax year. If you choose to receive your copy by mail, it can take a few weeks longer.

How much do you have to make on Etsy to claim it on your taxes?

Every Etsy seller has to pay taxes if they receive gross payments that surpass $600 per year. The taxable income can differ from state to state, but Etsy must send you a 1099-K form if you earn more than the abovementioned threshold.

If you want to learn more about the 1099 form, follow our guide on How to File a 1099. In it, we explain who should file the form, as well as provide a detailed process for completing it.

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