Somewhere between your first sale and tax season, every Etsy seller asks the same nervous question: "Does Etsy tell the IRS what I made?" With the 1099-K threshold changing three times in three years, the confusion is understandable. Here's the honest, up-to-date answer for 2026 — and the part that trips people up far more than the form itself.
The short answer: yes, but a form doesn't decide what you owe
Etsy, through Etsy Payments, reports your gross sales to the IRS on a Form 1099-K once you cross the reporting threshold, and sends you a copy. But here's the thing most sellers get backwards: the form doesn't create your tax obligation. All income from selling on Etsy is taxable whether or not you receive a 1099-K. If you're under the threshold, you still owe tax on your profit — you just report it yourself. The form is a paperwork trigger, not the line between "taxable" and "not." For the bigger picture on what you actually owe, see do you have to pay taxes on Etsy income.
The 2026 threshold, honestly (it changed — again)
This is where the noise comes from. For a while, the federal threshold was scheduled to drop all the way to $600, which would have pulled in almost every seller. Then the tax law passed in mid-2025 reversed that and restored the old rule. So for the 2026 tax year, the federal 1099-K threshold is back to more than $20,000 in gross sales AND more than 200 transactions — you generally have to cross both before Etsy is required to send a federal 1099-K.
Two important caveats, because "I didn't get a form" is a trap:
- Some states set their own, much lower thresholds. States like Massachusetts, Maryland, Vermont, Virginia and Washington, D.C. require a 1099-K at $600 regardless of the federal rule. Where you live can mean you get a form long before $20,000.
- No form still means taxable income. Under the threshold, nothing changes about what you owe — only whether Etsy files the paperwork. And rules like this can shift again, so treat every year's number as something to re-check, not memorize.
The part that actually matters: a 1099-K reports GROSS, not profit
Here's the trap that costs sellers real money — and it has nothing to do with the threshold. The number on your 1099-K is your gross sales: the total buyers paid, before a single deduction. That figure is almost always much bigger than what you actually earned, because it includes things that were never really your income.
What's baked into that gross number:
- The sales tax Etsy collected and sent to the state on your behalf — money that passed through you and went straight to the government. (More on that in does Etsy collect sales tax for sellers.)
- The shipping buyers paid, even though you handed most of it to the carrier.
- Every Etsy fee — the $0.20 listing fee, 6.5% transaction fee, payment processing (3% + $0.25 in the US), and any Offsite Ads — none of which are subtracted from the reported gross.
- And of course, your own cost of goods — materials, packaging, the labels you paid for.
A quick example of the gap
Say your 1099-K shows $24,000 in gross sales. It's easy to panic and think you "made" $24,000. But work it down: maybe $1,500 of that was sales tax Etsy remitted, $2,500 was shipping you paid out, roughly $2,600 went to Etsy fees, and $9,000 was your cost of goods. Your actual taxable profit is closer to $8,400 — about a third of the scary number on the form. If you report the gross as income and forget to deduct the rest, you hand the IRS tax on money you never kept. Report it correctly and you pay tax on real profit. That reconciliation — gross on the form down to net in your pocket — is the whole game.
Know your real number before tax season
This is exactly the gap Etsy's dashboard leaves open: it shows sales and a payout, but never lines up your gross against every fee, refund and cost to show the profit you'll actually be taxed on. You can check the fee on any single order with our free Etsy fee calculator, and see how to budget for the bill in how much to set aside for Etsy fees and taxes. But at tax time you need the whole year reconciled. Seller Profit Lens connects to your shop read-only, reads the exact fee Etsy charged on every order to the cent, separates out pass-through items like sales tax and shipping, subtracts your costs, and shows your true net profit — so the 1099-K number never catches you off guard. It's in free beta now. Join the waitlist →
This is general information, not tax advice. Tax rules change and vary by state and situation — check with a qualified accountant about your own shop.