How do I report income from online platforms (Etsy, Amazon, Stripe, PayPal)?

by | May 28, 2025 | Business Taxes, Income & Revenue

Here’s what HIVE AI had to say about “How do I report income from online platforms (Etsy, Amazon, Stripe, PayPal)?”:

Reporting Income from Online Platforms (Etsy, Amazon, Stripe, PayPal)

Income earned through online platforms like Etsy, Amazon, Stripe, and PayPal is generally taxable and must be reported on your tax return. The IRS requires taxpayers to report all income received, regardless of the source, unless specifically excluded by law. This includes income derived from the gig economy and digital assets. Most income is subject to taxation. Failing to accurately report income may result in interest and penalties. Taxable income includes various sources of income such as income derived from the service industry, gig economy and digital assets. For further details, consult Publication 525, Taxable and Nontaxable Income. IRS Newsroom – IR-2025-36 IRS Newsroom – IR-2025-36

Types of Income from Online Platforms

When selling on platforms like Etsy, Amazon, or receiving payments through PayPal or Stripe, you may have several types of income:

  • Sales of products or goods – Income from selling handmade items, digital products, or reselling merchandise
  • Service income – Payments received for services provided through these platforms
  • Affiliate marketing income – Commissions earned from promoting other companies’ products

It’s important to know that if you’re getting payments for doing a side hustle, running a small business, or selling things online, that money should be reported as income. It’s the profit from these activities that’s taxable income. IRS – Publication 5731-B: Are you making money selling things or providing a service?

Reporting Requirements

Form 1099-K Reporting Thresholds

Online payment platforms and marketplaces may be required to issue you a Form 1099-K reporting your transactions. The American Rescue Plan (ARP) required third party settlement organizations (TPSOs), which include popular payment apps and online marketplaces, to report payments of more than $600 for the sale of goods and services on a Form 1099-K. These forms would go to the IRS and to taxpayers and would help taxpayers fill out their tax returns. Before the ARP, the reporting requirement applied only to the sale of goods and services involving more than 200 transactions per year totaling over $20,000. The IRS temporarily delayed the new requirement last year. IRS Newsroom – IR-2023-221 – IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation

For 2023, the reporting threshold remains at the higher level of more than 200 transactions totaling over $20,000. And if you received over $20,000 and had over 200 transactions in 2023 and previous years through payment apps and online marketplaces, you and the IRS could receive a Form 1099-K. IRS – Publication 5731-B: Are you making money selling things or providing a service?

However, it’s crucial to understand that you must report this income regardless of whether it is reported to you on an information return. IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) This means that even if you don’t receive a Form 1099-K because you didn’t meet the threshold, you’re still legally obligated to report all your income from these platforms.

What’s Not Taxable

Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K. IRS Newsroom – IR-2023-221 – IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation

If you and a friend went to a concert, and your friend reimbursed money to you for their concert ticket through an online application, and you get a Form 1099-K for the reimbursement, generally the reimbursement would not be taxable to you because the money is not payment for the sale of goods or the provision of services. IRS – Publication 4491-X: VITA/TCE Training Supplement

How to Report Income from Online Platforms

Schedule C for Business Income

If you’re operating a business through these platforms (including a side hustle), you’ll generally report your income and expenses on Schedule C (Form 1040), Profit or Loss From Business.

If you received payments from platforms like Amazon Payments for items you sold, you have an obligation to report your gross receipts from these activities; third-party reporting does not affect that obligation. The payments received from these platforms are considered unreported income and must be included in your gross income. Dawson U.S. Tax Court Opinions: John Legoski

Cost of Goods Sold (COGS)

When selling products, you can offset your gross receipts with the cost of goods sold to compute your gross income. A taxpayer may offset his gross receipts with COGS to compute his gross income. See Metra Chem. Corp. v. Commissioner, 88 T.C. 654, 661 (1987); secs. 1.61-3(a), 1.162-1(a), Income Tax Regs. Dawson U.S. Tax Court Opinions: John Legoski

Taxable income is equal to gross income minus deductions. Cost of goods sold is subtracted in calculating gross income. It is not a deduction. Cost of goods sold is the cost of buying or manufacturing a product. Dawson U.S. Tax Court Opinions: Octavia Nakia McClain

For example, if you sell handmade jewelry on Etsy, your cost of goods sold would include the cost of materials used to make the jewelry.

Fees and Expenses

You should include all fees (e.g., selling fees, payment processing fees, etc.) associated with the sale of your personal items in your basis when computing your gain or loss on the sale. IRS – Publication 4491-X: VITA/TCE Training Supplement For business sales, these fees would typically be deductible business expenses on Schedule C.

Personal Items Sold at a Loss

The casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales. IRS Newsroom – IR-2023-221 – IRS announces delay in Form 1099-K reporting threshold for third party platform payments in 2023; plans for a threshold of $5,000 for 2024 to phase in implementation

If you bought a refrigerator for $1,000 (the purchase price) and sold it for $600 (the sales price), you have a loss of $400. Enter $600 on the line at the top of Schedule 1 to report the personal item sold at a loss. IRS – Publication 4491-X: VITA/TCE Training Supplement However, losses on personal items are generally not deductible.

Digital Assets and Cryptocurrency

If you receive payments in cryptocurrency or other digital assets through these platforms, additional reporting requirements apply:

Digital assets (Virtual currency) may be used to pay for rent, royalties, or any type of goods or services and is to be treated as ordinary income by the recipient if received as part of operating a trade or business. An employer may use it as payment for wages, salaries and compensation. If the taxpayer engaged in certain transactions involving digital assets (virtual currency), the virtual currency box at the top of Form 1040/Form 1040-SR (TY 2021), or the digital assets check box at the top of Form 1040/1040-SR (TY 2022 and subsequent) will be checked “Yes”. Follow appropriate analysis procedures, based on the document type the payer used to report the income. IRS IRM 4.19.3 IMF Automated Underreporter Program

A taxpayer who performs a task through a crowdsourcing platform, including a microtask, has performed a service for the party that requested the task with the expectation that he or she will receive compensation. If the taxpayer receives convertible virtual currency for performing the task, regardless of the value and the manner in which it is received, then the taxpayer has been compensated with property. See Notice 2014-21. The convertible virtual currency received must be reported on the taxpayer’s income tax return as ordinary income and may be subject to self-employment tax. See §§ 61, 83, and 1401. IRS Determination-202035011

Record-Keeping Requirements

Maintaining detailed records is crucial for accurately reporting income from online platforms:

  • Sales records – Keep track of all sales transactions, including dates, amounts, and descriptions
  • Expense records – Document all business expenses, including platform fees, shipping costs, and materials
  • Payment processor statements – Save monthly statements from PayPal, Stripe, and other payment processors
  • 1099-K forms – Retain any 1099-K forms you receive from platforms

The Form 1099-K has the gross, or total, amount of payments you got. You can use it and other records to figure out the actual taxes you owe on any profits. IRS – Publication 5731-B: Are you making money selling things or providing a service?

Self-Employment Tax Considerations

Income earned through online platforms as part of a business is generally subject to self-employment tax in addition to income tax. In the case of any such trade or business in which the income is computed under a cash receipts and disbursements method, the gross receipts from such trade or business reduced by the cost or other basis of property which was purchased and sold in carrying on such trade or business, adjusted (after such reduction) in accordance with the provisions of paragraphs (1) through (7) and paragraph (9) of this subsection; and in the case of any such trade or business in which the income is computed under an accrual method, the gross income from such trade or business, adjusted in accordance with the provisions of paragraphs (1) through (7) and paragraph (9) of this subsection. IRC § 1402(a)

Practical Steps for Reporting Online Platform Income

  • Gather all income information:
    • Review all platform dashboards for sales data
    • Collect any 1099-K forms received
    • Download payment processor statements
  • Calculate your gross income:
  • Determine your cost of goods sold (if applicable):
    • Calculate the cost of products sold
    • Include materials, direct labor, and other direct costs
  • Calculate business expenses:
    • Platform fees
    • Payment processing fees
    • Shipping and packaging
    • Marketing and advertising
    • Home office expenses (if eligible)
  • Complete the appropriate tax forms:
    • Schedule C for business income
    • Schedule SE for self-employment tax
    • Form 8949 and Schedule D for capital gains (if applicable)

Special Considerations for Different Platforms

Etsy

  • Report gross sales as business income on Schedule C
  • Deduct Etsy fees, shipping costs, and materials as business expenses
  • Keep detailed records of all transactions and expenses

Amazon

  • For Amazon Marketplace sellers, report gross sales on Schedule C
  • For Amazon Associates (affiliate program), report commission income on Schedule C
  • If your primary business activity is affiliated online marketing, you should report significant gross receipts and expenses from affiliated online marketing. Under the cash receipts and disbursements method, income is recorded in the year received and expenses are deducted in the year paid. You may not receive income from your affiliated online marketing business until 90–180 days after earning your right to payment. However, the use of the cash receipts and disbursements method of accounting resolves this concern, since it measures actual receipt of the income. When a taxpayer keeps no books or records, has large bank deposits, and offers no plausible explanation of such deposits, the Commissioner is not arbitrary or capricious in resorting to the bank deposit method for computing income. Dawson U.S. Tax Court Opinions: Palmarini Inc. Dawson U.S. Tax Court Opinions: Palmarini Inc.

PayPal and Stripe

  • These are payment processors, not sources of income themselves
  • Report the underlying business activity (sales, services) on the appropriate schedule
  • Use PayPal and Stripe statements to verify your income reporting

Conclusion

Income earned through online platforms like Etsy, Amazon, Stripe, and PayPal is taxable and must be reported on your tax return, regardless of whether you receive a Form 1099-K. By maintaining detailed records, properly categorizing your income and expenses, and filing the appropriate tax forms, you can ensure compliance with tax laws while maximizing your eligible deductions.

Remember that all income, no matter the amount, is taxable unless the tax law says it isn’t – even if you don’t get a Form 1099-K. IRS – Publication 5731-B: Are you making money selling things or providing a service? When in doubt, consult with a tax professional to ensure you’re properly reporting all your online platform income.

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