Sellers are reporting discrepancies on Form 1099K tax forms received from Etsy, and since Etsy also sends the form to the IRS, sellers are asking whether it could flag an audit since it over-reports their gross sales income.
There are numerous sellers who say the discrepancy is for the month of December 2018. Some wonder if it is related to Etsy’s practice of collecting sales tax on behalf of states with Marketplace Facilitator laws, where it is Etsy rather than the seller that is processing the tax.
On Etsy’s help pages, there’s a FAQ “How Is the Total on My 1099-K Calculated?“
If you are located in the US or paid in USD, Etsy is required to report your total gross sales income from Etsy Payments on the 1099-K form without subtracting expenses, such as (not a complete list):
- Shipping costs
- Sales tax collected by you
The page specifically states, “Taxes collected by Etsy from your buyers are not reported on the 1099-K form we issue.”
We sent an inquiry to Etsy with links to two of the threads where sellers were discussing the 1099K discrepancy.
On this thread started yesterday, a seller who pored over her numbers believes it may have to do with December transactions involving refunds and how Etsy handled the sales tax it had collected for states on those transactions.
On this thread started 2 weeks ago, an Etsy moderator posted the following and closed the thread a week ago:
“If you’re experiencing discrepancies with your 1099, can you reach out to us directly over email and we’d be happy to review this with you right away. In the meantime, since these sorts of issues will need to be handled over email, I’m going to close up this report.”
Some Etsy sellers may remember an unrelated problem involving 1099Ks last year, which we reported in this article from a year ago.
And more information about Form 1099Ks can be found in this recent AuctionBytes Blog post.