Even if you sell other places than Etsy, if you sell more than $600 in a year, you could receive a tax form called 1099-MISC. What now!
I’ve worked for both HR Block and Jackson-Hewitt, so when I got the email from Etsy today, I researched what that meant for me. Tax laws change every year, and can be super confusing. Don’t feel like a failure if you “can’t” do your own taxes – the Tax Code, with commentary from challenges and such, runs to over 1000 pages … and last time I looked was in 2008.
In the past, if you received a 1099-MISC, you were REQUIRED to fill out a Schedule C – Self-Employment form. This became a huge problem when one year PayPal sent out 1099’s with no warning. I guess “hobby income” was a new concept for them? It’s certainly not a new concept in general. Last tax year when I looked it up, I found that it is no longer a requirement.
Before 2008, the next year’s tax laws were finalized in the previous fall, so that tax preparers can study all the new info. That’s no longer the case, but we know what the PROPOSED changes are, so we cross our fingers.
The information is always available on IRS.gov, but not everyone speaks “tax code”. Also, it’s not always easy to find exactly what you’re looking for, even if you’ve been using the website for a decade. Here’s the pertinent info from the HR Block website.
Question
I have a question about 1099-MISC Box 3 — How do I report a Form 1099-MISC with an amount in Box 3?
Answer
The amount shown on Form 1099-MISC Box 3 is usually from one of these:
Prizes
Awards
Taxable damages
Certain benefits of a deceased employee
Medical research participation payments
Legal damages
Indian gaming profits
Other taxable income
You’ll usually report this income on Form 1040, Line 21, as Other income. This is taxable income not subject to self-employment tax. When the income reported on Form 1099-MISC Box 3 is from your trade or business, report it with your business income.
If you keep track of expenses and want to take them off of your taxes, you’ll want to file it as business income (Schedule C). If you haven’t already, research what you can include, such as mileage to the Post Office/ other shipping service.
If you also do “gig work” like I do, here’s a very handy IRS article.
You can see the form and instructions on that site also, buy doing a search for “Schedule C”.
Hope this helps someone!