How Etsy sellers report 1099-K income on Schedule C in 2026

What Form 1099-K actually reports

According to the IRS page Understanding your Form 1099-K, Form 1099-K reports payments you received for goods or services through payment cards and through payment apps or online marketplaces (third-party settlement organizations, or TPSOs). Etsy Payments is that kind of marketplace settlement for many US sellers.

The IRS also states that you must report income from selling goods or services even if you never receive a 1099-K. The form helps the IRS match payments; it does not define whether income is taxable.

2026 federal reporting threshold (and why you might still get a form)

For TPSOs, the federal reporting threshold described by the IRS is over $20,000 in payments and more than 200 transactions. Important caveats from IRS materials:

• A TPSO may still send a Form 1099-K for amounts below that federal threshold.
• Your state may have a lower reporting threshold.
• Payment-card processors can have different rules than marketplace TPSOs.

Etsy’s own seller handbook similarly describes a US federal threshold of more than $20,000 in gross Etsy Payments sales and more than 200 transactions, and notes that state thresholds can be lower. Always verify against current IRS and Etsy guidance for the year you are filing.

Why the 1099-K number is usually higher than “what you made”

Gross amounts on a 1099-K commonly include pieces that are not net profit, such as:

• Item price paid by the buyer
• Shipping charged to the buyer (which you later spend on postage/labels)
• Sales tax collected (if included in the payment stream your platform reports)

Fees, refunds, and cost of goods sold are generally not subtracted on the face of the 1099-K. You account for those on your books and on Schedule C (Form 1040).

A practical Schedule C workflow for Etsy sellers

1. Export your records. Download Etsy monthly statements / sold orders (and Shopify Payments CSVs if you also sell there). Keep them with your 1099-K.
2. Reconcile Box totals to your shop reports. Explain every gap (refunds, multi-shop EINs, off-platform payments, sales tax, shipping).
3. Enter gross receipts on Schedule C. Start from accurate gross sales for the business — not “1099-K minus a gut feel.”
4. Deduct ordinary and necessary expenses (fees, ads, packaging, supplies, qualified mileage, home office if you qualify, etc.). Keep receipts.
5. If net earnings are $400 or more, you generally also need Schedule SE for self-employment tax (Social Security and Medicare). Confirm against current IRS instructions.

2026 standard mileage rates (if you use the standard rate)

Per IRS standard mileage rate tables for 2026 business use:

• January 1 – June 30, 2026: 72.5 cents per mile
• July 1 – December 31, 2026: 76 cents per mile

Source: IRS Standard mileage rates. Keep a contemporaneous mileage log (date, business purpose, miles).

Common mistakes that create IRS mismatches

• Reporting only “deposits to my bank” instead of gross sales and expenses
• Ignoring income because no 1099-K arrived
• Treating the 1099-K Box 1a figure as taxable profit with no expense deductions
• Mixing personal Venmo/PayPal gifts with business settlement totals

Questions, answered

Educational information based on IRS publications linked above as of October 2026. Not tax, legal, or accounting advice. Rules and forms change; confirm with irs.gov or a qualified tax professional for your situation. Sostren is not affiliated with Etsy, Shopify, or the IRS.