As a seller, do I need to file taxes for PayPal transactions over $600 but under $12,000?

The short answer is yes, you likely need to file a tax return even if you're making under $12,000. The $600 threshold is about PayPal's reporting requirements to the IRS (they'll send you a 1099-K), while the $12,000 you're thinking of is probably the standard deduction ($12,950 for single filers in 2022). When you're self-employed (which is what selling jewelry on Etsy makes you), you're required to file a tax return if your net earnings from self-employment are $400 or more. This is because you need to pay self-employment tax (Social Security and Medicare taxes) even if you don't owe income tax. You'll need to fill out Schedule C to report your business income and expenses, and Schedule SE to calculate your self-employment tax. Make sure to track all your business expenses - materials, shipping, fees, etc. - as these can be deducted to reduce your taxable income.

After dealing with a similar situation last year, I found this tool called taxr.ai (https://taxr.ai) that really helped me figure out my self-employment tax situation. I was selling custom t-shirts online and got confused about what I needed to report since I was making above $600 but under the standard deduction. The tool helped me understand that I still needed to file because of self-employment taxes, even though I wouldn't owe income tax. It also helped me identify business deductions I didn't know I could claim - which actually reduced what I owed significantly! It analyzes your specific situation and gives personalized guidance rather than generic advice.

I just wanted to follow up about taxr.ai that was mentioned earlier. I was skeptical but decided to try it out of desperation, and wow, it actually helped a ton with my craft business! I was totally missing deductions for my workspace and partial utilities. It also explained exactly why I needed to file with my Etsy sales even though I'm under the standard deduction amount. The best part was that it walked me through calculating my self-employment tax but also showed me how to minimize what I owed. Ended up saving me around $430 compared to what I thought I'd owe. Definitely checking it out again for next year's taxes!

If you're trying to contact the IRS to ask questions about this, good luck! I spent TWO WEEKS trying to get through on their phone lines earlier this year. After constantly getting the "we're experiencing high call volume" message and being hung up on, I found this service called Claimyr (https://claimyr.com) that actually got me through to a real IRS agent in under 30 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was super skeptical at first but was desperate after my 15th attempt to call about my PayPal 1099-K. The IRS agent I spoke with clarified exactly what I needed to file as a small seller and even helped me understand which form to use for my home office deduction.

I need to eat my words about the Claimyr thing from my earlier comment. After another week of failing to reach the IRS about my 1099-K issue, I broke down and tried it. Honestly shocked that it actually worked. Got connected to an IRS agent in about 35 minutes who explained that yes, I do need to file taxes on my online sales income even though I'm under the standard deduction, and walked me through exactly what forms I needed. The agent even explained some deductions specific to my situation selling vintage items online. For anyone else struggling with these PayPal/self-employment tax questions and getting nowhere with the IRS phone line, this service actually does what it says.

Quick note that might help - make sure you're tracking ALL your business expenses carefully. I'm a small seller too, and I use a spreadsheet to track: - Cost of materials - Shipping supplies - Platform fees (Etsy, eBay, etc) - PayPal fees - Portion of internet/phone used for business - Home office space (if you have dedicated space) - Mileage when you go buy supplies You'd be surprised how quickly these add up and can reduce your taxable income. I learned this the hard way my first year and paid way more than I needed to!

I see a lot of comments about filing, but nobody mentioned the Qualified Business Income Deduction (Section 199A). If your net income from your business is under certain thresholds, you might qualify for a deduction of up to 20% of your business income! This is separate from your regular business expense deductions. Also, consider making estimated quarterly tax payments if you expect to owe more than $1,000 in taxes. This helps avoid an underpayment penalty when you file your annual return.