Comprehensive Guide on Etsy Taxes for 2024 (2024)

When setting up an Etsy shop, sellers have the entrepreneurial freedom to participate in the growth of eCommerce and make a profit. However, this also means dealing with taxable income, business expenses, and Etsy fees, impacting the net profit of your Etsy business.

To help you navigate through the legal scrutiny of the IRS, this article will list all appreciable Etsy taxes and ways to retain and save money from expenses. Learn all the fundamentals and free up time to optimize your storefront and connect with customers.

Once you start making a profit on Etsy – your income exceeds store expenses – your store qualifies as a business and has to comply with national tax laws and regulations.

If you don’t intend to profit, your Etsy store might qualify as hobby income and is not taxable.

Every Etsy seller working as a business is subject to the following taxes:

Etsy businesses that expect over $1,000 in gross sales income must pay quarterly taxes. You can either use the taxable income you made in the previous year or determine estimated tax payments by deducting business expenses from the expected annual gross income.

Submit a quarterly payment through the IRS website using form 1040-ES. The tax season for quarterly taxes is paid in four annual cycles and is due on the following dates:

• January 1 – March 31. The due date is April 15.
• April 1 – May 31. The due date is June 15.
• June 1 – August 31. The due date is September 15.
• September 1 – December 31. The due date is January 15.

Having an accurate view of all your business expenses will help you budget essential business costs and lower the total sum needed to pay income taxes. However, the IRS requires that business deductions are proven as ordinary and necessary:

Ordinary – expenses that are common and accepted in the specific business industry.

Necessary – expenses that are used for your business to succeed and function properly.

Many of your expenses can qualify as tax deductions, but you’ll need to keep documents that claim them as legitimate, protecting you from audits and tax consequences. Often, an independent business owner uses a business account to track their costs separately.

The IRS considers the following as appropriate proof of a deductible business expense:

• Credit card payments, receipts, and statements
• Account statements and invoices
• Cash register tapes
• Cash slips for cash payments
• Receipts for entertainment, travel, transportation, and gift expenses
• Canceled checks

The costs of running an Etsy business might include the following expenses:

• Home office or studio space
• Inventory expenses
• PayPal and other bank fees
• Listing and advertising fees
• Education and business tools
• Insurance and retirement plans
• Postage and shipping supply costs

Keep records of all business expenses to make filing your taxes easier. Use your deductible estimates to assess and pay taxes for eligible income and self-employment tax forms.

Start your Etsy print on demand business today!

Etsy is an excellent online marketplace for self-employed people. Etsy Payments sales take transaction fees and sales taxes into account, and the platform provides adequate information and resources for shop managers to pay self-employment tax and file forms in due time.

Make sure to claim expenses to limit overtaxing and follow up on any new net income threshold requirements as your business scales and grows in profit. Pay as you go and research any additional tax advice on official IRS government websites or from a tax expert.