As a small business owner, one of the most confusing things is how to take care of your taxes, especially when you're selling on platforms like Etsy or Amazon.
Today, I wanted to quickly cover the topic of whether or not Etsy sends 1099s to sellers, when to look for them, and what to look out for when and if you receive one.
What Is a 1099-K Form And Why Would Etsy Send Me One?
Unlike working as an employee where you get the more common W-2 form, when you are making money outside of the traditional employment environment, you will often get what is referred to as a 1099-K.
These forms can be thought of as the business equivalent of a W-2 form, except instead of showing your salary, it shows the dollar amount of sales you made.
Essentially, it's a way to let you and the IRS know the gross sales of your business.
Any platform that processes payments, such as Etsy, stripe, or PayPal, is required to issue 1099-K forms to anyone transacting over a certain amount through the platform.
Does Etsy Send 1099s To Sellers?
Generally speaking, Etsy is required to issue a 1099-K to all US-based sellers who meet certain requirements.
Although there is a bit of variation in these requirements if you have sold more than 20,000 (this will be dropping to $600 in the coming years) in gross sales and had more than 200 transactions (Etsy sales) in the last year, you should expect to receive a 1099-K form from Etsy.
Additionally, you may receive a 1099-K form from Etsy if your state of residents has different income or transaction requirements to trigger the sending of the 1099-k from Etsy (more on this below).
Does Etsy Report Earnings to the IRS?
If you meet the threshold requirements for being sent, a 1099-K form, Etsy would automatically be required to report all earnings to the IRS.
Although they aren't specifically required to report amounts below this threshold, you would still be required to report and pay taxes on all income earned from Etsy regardless of whether they report it to the IRS or not.
How Is the Total on My 1099-K Calculated by Etsy?
Like most things having to do with income taxes, the totals and amounts on your 1099-K form can be a bit confusing.
Typically, the total on your 1099-K from Etsy is going to include all payments processed through Etsy payments.
This gross sales amount is for what all buyers have paid you throughout the year, without taking out any expenses, such as:
- Sales tax collected by you manually
Payments processed outside of Etsy payments, such as in-person sales through Etsy's integration with Square are not included on the form.
Additionally, any sales tax collected and remitted by Etsy on your behalf is not included on your 1099 either.
It's important to note that your 1099-K will not likely match many of the other reports that you see inside Etsy, this is due to the way that it's calculated.
As Etsy sellers, We are used to seeing a variety of financial numbers for Etsy including revenue, deposit, and all of the fees in separate places.
The 1099k is issued based on the gross sales through the platform and does not subtract any expenses or refunds, which are typically included in the monetary reports you see from Etsy.
It's also important to keep in mind, that even though you typically see a higher amount on your 1099k than what you would see in your deposits report, it doesn't mean you're paying taxes on this amount.
Does Etsy 1099 Include PayPal?
The 1099-K issued by Etsy only includes the gross amount of money that was processed by Etsy itself through Etsy payment.
If your shop is set up to take payments through PayPal or any other payment method, such as manual payments, these would not be included in your 1099 from Etsy.
If your shop is using PayPal in place of or in addition to the payments, PayPal would be required to send you a 1099 if you meet the threshold of payments processed through PayPal.
Will I Receive a 1099-K for My State Taxes?
You may receive a 1099 from Etsy if you meet your state's threshold to trigger the sending of the form.
Federally, the threshold for getting a 1099 is $20,000 in sales and over 200 transactions.
However, nine states currently have thresholds lower than the federal threshold and you can check the chart below for your specific state.
|District of Columbia
|$1,000 and 4 transactions
How Can I Download A Copy Of My 1099-K From Etsy?
If Etsy is required to generate and send you a 1099-K, you should be able to find your form inside the finances section of your shop under the legal and tax information subsection.
After you've logged into your shop manager and gone into the finance section, simply click on the legal and tax information section and you should see a button labeled ” download 1099-K”.
This will allow you to download the most recent version of your form.
Does Etsy Send 1099s to Non-Us Sellers?
Since a 1099-K is a US-specific form, non-US sellers would not typically receive a 1099k, regardless of their sales volume.
Although, in the rare case that your legal or tax information page identifies you as a US seller (meaning you're using a US address or you receive payments in US dollars), Etsy is required to issue you a 1099k.
If you fall into this narrow exception, you can easily stop Etsy from sending you this form by filling out what is referred to as the W-8BEN form.
This form allows both Etsy and the IRS to understand what your true status is for all tax reporting purposes.
The easiest way to grab this form is to start by contacting Etsy support and letting them know the situation.
Once let them know you need the form, Etsy support will send you a copy to fill out and return to them.
Do I Get More Than One 1099 If I Have More Than One Etsy Shop?
If you have more than one at a shop with the same taxpayer information (meaning You used the same Social Security Number or EIN), the sales from all shops using that same information are included on a single 1099-K.
Although this may seem a bit odd, it makes sense when you consider the IRS's point of view.
Even if you have several different DBAs or shops on Etsy, at the end of the day, all of that income is coming back to one place (Either you or your business).
On the other hand, if you have multiple shops and aren't using the same taxpayer information, you would receive different 1099s for each shop.
For example, if you opened one shop under your business's EIN and one shop under your SSN, You would receive one 1099k for the business and one for your personal taxes.
Although taxes can be one of the most confusing and frustrating things about starting and running your own business, the introduction of things like the 1099-K form can help make that process a little bit simpler.
If your shop is doing well, you can expect to see one of these forms show up next year at tax time.