Selling Homemade Goods on Etsy? Use this Tax Preparation Checklist (2024)

As an Etsy seller and self-employed businessperson, you have to report your net business income on your tax return. To organize your business income and expenses, you can use the Etsy tax preparation checklist below. Some of the items may not apply to you, but the list will give you an overview of the kinds of things you need to report as income and what you might be able to claim as deductions.

Key Takeaways

If more than $20,000 is processed with more than 200 transactions, and paid to you through Etsy as a third-party payment processor, the amount should be reported to you on Form 1099-K.
If you do not receive a tax form, you can look up your annual sales by signing into your Etsy.com account and downloading it.
You are required to report all Etsy sales income on your tax return, whether you receive a tax form or not.
Once you have accounted for all of your sales, you can deduct your eligible business expense to determine your net income from your Etsy sales.

Before you start:

Follow this link and print the checklist.
Attach the checklist to the outside of a file folder or place it inside.
Cross out anything on the list that doesn’t apply to your Etsy business.
Place business-related receipts and other tax documents in the folder and check them off the list.

Write down other information that you will need to complete your taxes, including:

Your principal business code
Your employer identification number
Social Security numbers for your dependents
Dates of birth for your dependents
Bank routing number for direct deposit of your refund or payment of any taxes that are due.

Etsy tax preparation checklist

Running your Etsy business can create a lot of paperwork that you might need to complete your taxes. Documents you may need to complete your taxes include:

sales records
receipts for the cost of materials and equipment
business-related fees and expenses

The checklist below (or this PDF version) can help you organize your paperwork into the appropriate tax categories, ensure you don’t miss out on any money-saving tax deductions and save time when you prepare your tax return using TurboTax.

Your Income

__1099-NEC (1099-MISC in prior years)

__1099-K

__Etsy annual sales

__Any other income records you may have (e.g. cash records, W2 income, spouse/partner income, investments)

Insurance and Retirement

__Heath care

__Long-term care

__Contributions to an IRA

__Contributions to an individual 401(k) plan

Equipment

__Phone purchase

__Phone service

__Phone repairs

__Phone accessories

__Computer/laptop purchase

__Computer accessories

__Internet service

Commission and Fees

__Etsy fees

Legal and Professional Fees

Common tax forms for Etsy sellers

You will likely receive a tax form from Etsy stating the amount of income you earned for the tax year. The form you receive will depend on the number of transactions you had and the income your business generated.

You will likely receive a Form 1099-K if you had more than $20,000 and more than 200 third-party payment transactions.
There is no threshold for payment card transactions such as credit card swipes.

The IRS planned to implement changes to the 1099-K reporting requirement for the 2023 tax year. However, the IRS recently delayed the implementation of the new $600 reporting threshold for goods and service transactions from third party processors like Venmo and Paypal,reverting tax year 2023 back to the previouslyhigher 1099-K reporting threshold (over $20,000 in payments and more than 200 transactions). If you don’t receive a 1099-K, the IRS still expects you will report all your income, regardless of the amount.

If you do not receive a tax form, you can look up your annual sales by signing into your account atEtsy.com and downloading it. This tab will display the number of sales you had and the gross sales volume you received through Etsy Payments for the tax year. Remember, you have to report all Etsy sales income on your tax return, whether you receive a tax form or not.

Once you have accounted for all of your sales, you can deduct your eligible business expense to determine your net income from your Etsy sales.

Supplies and equipment

Any supplies you use to make the products you sell on Etsy and any equipment you use to make your items may be deductible business expenses.

For example, if you make jewelry, business-related tax deductions may include:

The metal and stones you use in the product.
The cost of pliers, drills, or any other equipment you use to make the jewelry, if you purchased them during the tax year.
Surveillance cameras or security alarms specifically for your studio, workshop, or office.

Retirement contributions

As a self-employed Etsy seller, you may be able to reduce your taxable income by the eligible retirement contributions your make to a traditional IRA or other retirement plan. Contributions that you and your spouse make to other retirement plans such as through another job, can affect the contributions that you can make based on your Etsy income.

You may also be eligible to set up an individual retirement plan such as a SEP or SIMPLE IRA or individual 401(k) plan. These plans typically allow you to contribute money to the plans each year that you have earned income and lower your taxable income for that year. Individual 401k plans work similar to corporate 401(k) plans. As with a employer-based 401(k) plan, the contributions you make toward your retirement may be deductible from your taxable income, however, your distributions of both your contributions and any earnings from these accounts are typically includable in your taxable income.

Other options for retirement accounts when you have earned income include Roth Solo 401ks and Roth IRAs. Unlike the retirement plans above, the Roth versions don't allow you to take a deduction for your contributions in the year that you make them. However, the earnings and the contributions to these accounts are typically tax free when you take them out during retirement.

Car expenses

One of the best things about selling on Etsy is that you’re able to work at home and eliminate the time and hassle of commuting to your job. However, you may be using your car for business tasks, such as,

picking up, dropping off, or mailing packages,
driving to purchase supplies, or
shopping for vintage or specialty items to sell.

If so, you may be able to deduct some of your vehicle expenses. You have two options for calculating your business automobile deduction:

The standard mileage rate deduction method
The actual expenses method

To use either method you will need to keep a records of the business and total miles that you drove during the year. The standard mileage method provides a set rate per business mile. For 2023, the standard mileage rate is 65.5 cents per mile. This amount increases to 67 cents per mile for 2024.

To use the actual expenses method, you’ll also need to keep track of all of your vehicle expenses, including gasoline, maintenance, repairs, and tolls. You then multiply the total amount of expenses by the percentage of business miles relative to total miles.

For example, if you had $5,000 in vehicle expenses and 10% of your miles for the year were used for business, your deduction would be $500 ($5,000 x .10 = $500).

To decide which method is best for you, read Maximizing Tax Deductions for the Business Use of Your Car.

Cell phone and internet expenses

Managing your Etsy store and providing customer service, both online and with your phone, can be important parts of your business, and the costs associated with these activities can be deductible. Tax deductible costs can include amounts spent on:

Phone or computer equipment
Phone and internet usage bills
Phone and computer repairs
Necessary accessories

The amount you can deduct depends on the percentage of time you are using your phone, computer, and internet solely for your business. Keeping accurate records of the time you’re using these devices will help you calculate the percentage of their costs that you can deduct.

For example, if you use your phone 25% of the time working for Etsy, then you may be able to deduct 25% of the phone costs.
If your cell phone, computer, and internet costs total $2,000, then you can deduct $500 as a business expense ($2,000 x .25 =$500).

If you use a phone and/or computer only for business, you can typically deduct 100% of the expenses associated with that device.

Various expenses

Did you purchase online ads for your Etsy products or pay for a business license? These costs are probably tax deductible.

As an Etsy seller, you are a small business owner. That means you may take advantage of deductions for any qualifying business expenses you incurred, such as bank and PayPal fees and packaging for the items you ship.

For more ideas about what you can deduct, read Selling on Etsy and Your Taxes andTop Tax Deductions for Etsy Sellers.

Let a local tax expert matched to your unique situation get your taxes done 100% right with TurboTax Live Full Service. Your expert will uncover industry-specific deductions for more tax breaks and file your taxes for you. Backed by our Full Service Guarantee.

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