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A Guide to Your Etsy 1099 Taxes

etsy-1099

A Guide to Your Etsy 1099 Taxes

With access to digital marketplaces, your homemade crafts and specialty items can be sold to customers around the globe. One of those digital marketplaces is Etsy, which lets local crafters effectively sell their handmade products and craft items with minimum marketing.
At the end of 2022, Etsy had as many as 7.3 million active sellers in its online marketplace and annual sales of $10.1 billion. If you are a seller earning money on Etsy, you’re required to report this income and will most likely have to pay taxes on it as a self-employed seller or entrepreneur.
Key takeaways:
  • Etsy helps individual sellers get their hand-made products to buyers around the US and abroad.
  • Your federal income taxes depend on whether Etsy is your hobby, or you’re a professional Etsy seller.
  • Professional Etsy sellers have to pay taxes as self-employed individuals.

Table of contents

Etsy 1099-K: the IRS form for online sellers ...Read more

How to do my Etsy 1099 taxes ...Read more

Selling as a hobby vs. as a business owner ...Read more

Are you an Etsy business seller?...Read more

Etsy 1099-K: the IRS form for online sellers

If you make $600 or more selling goods on Etsy, you’ll receive a 1099-K form from them. Third-party applications like Etsy use this tax form to report payments made to self-employed individuals to the IRS. Etsy should also send a 1099-K form to you, along with the IRS, usually by the end of January. You can use this form to cross-check the payments you’ve received with your bank statements and be more organized when filing your taxes.

How to do my Etsy 1099 taxes

As a seller on Etsy, you're considered to be a self-employed person by the IRS, so you'll have to pay self-employment taxes as well as income tax. Depending on where you live or where you’re selling goods, you might also have to collect sales tax on each sale you make.

Etsy income tax for self-employed sellers

Self-employment taxes for Etsy sellers

Sales tax for Etsy sellers

Selling as a hobby vs. as a business owner

The IRS will tax you based on how you use Etsy as a seller. Some people only use Etsy for hobby purposes and have regular full-time jobs. Their Etsy income adds to their regular W-2 income and is considered to be their side gig.

Part-time Etsy selling as a hobby

Are you an Etsy business seller?

The IRS needs to be sure whether you operate as a business or a hobby, and they also expect you to prove that. A few questions to ask yourself are:
  • Am I selling for profit, or is it just a hobby?
  • Do I have a business strategy and dedicate time to working on orders and selling and marketing products on Etsy?
  • Do I have previous experience as a seller?
  • Is Etsy my primary source of income?
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