How To File (and Save Money on) Your Whatnot 1099 Taxes

What taxes do you pay as an Whatnot seller?

Whatnot sellers have to pay self-employment taxes and income taxes on what they earn. Depending on where you — or, more likely, your customers — live, you might have to collect sales taxes from them and pay that out on their behalf.

Most Whatnot shops are “sole proprietorships”. This means one person owns the business, and they can take care of their Whatnot taxes when they file their personal tax return. (That’s true even if Whatnot is your side hustle — something you do alongside a regular day job.)  

Let’s break down the types of taxes you‘ll pay on your Whatnot income.

Self-employment tax

If you’ve worked as a regular employee, you’re used to seeing FICA taxes taken out of your paycheck to cover Medicare and Social Security taxes. Self-employment tax is essentially the same thing, but for business owners.

The key difference is that:

• W-2 employees pay 7.65% of their income in FICA taxes. Their employer matches the other 7.65%, bringing the total contribution to 15.3%
• Self-employed people pay the full 15.3% because they’re responsible for both the employee and employer amounts

Luckily, you can deduct the employer portion from your income taxes. Speaking of which….

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Income tax

In addition to self-employment tax, Whatnot sellers also pay income taxes to the federal government.

Federal income taxes are progressive, which means that the amount you pay depends on your income level. Depending on where you live, you might also have to pay state income taxes. 

Get an idea of what you can expect to owe in self-employment and income taxes with our free income tax calculator. We’ll tell you how much goes to your state, too.

Sales tax

Sales tax works a little differently than the first two: it doesn’t come out of your income. (Hooray!) It’s your customer who pays it — assuming they live in the US.

You’ll facilitate this payment, though, usually by tacking a fixed-percentage sales tax onto the price of your products. Keep reading to learn more about sales tax, or skip ahead to the part on hobby sales.

(Note: Money from sales taxes usually goes to your customers’ state or local jurisdictions, for things like road work or funding for public schools. If you live in one of 12 “origin states” — meaning, the sales tax is collected from the merchant’s state instead of the recipient’s — it’ll go to your state or local government instead!)

Does Whatnot take care of sales tax for you?

In most cases, yes. Whatnot automatically collects and remits sales taxes on physical goods shipped to most states. Specifically, it handles this in the states where it’s legally required to do so, thanks to what’s called “market facilitator laws.” 

Which states don’t require sales tax?

A few states are exempt from sales tax, period. They are:

• Montana
• New Hampshire
• Alaska
• Delaware
• Oregon

In addition, not all states tax digital orders. And some states only collect sales tax for certain types of digital orders. For instance, in Vermont, the sale of a downloadable photo wouldn’t need to be taxed. But other digital orders — like custom ringtones or digital games — are taxed.

All in all, there’s a fairly good chance that Whatnot has your situation covered. That said, it won’t always be the case.

What about out-of-state sales?

If your store is based in, say, California, but you sell to another state where Whatnot doesn’t facilitate sales tax, you’re still likely off the hook.

Here’s why. Every state has two rules for determining who should pay sales tax: 

• Economic nexus: You’ve made enough sales in their state for them to care
• Physical presence: You have employees, an office, warehouse, or shop in their state 

Luckily, most states don’t consider you to have “economic nexus” in their state unless you sell more than $100,000 in goods.

Bottom line: If you make $5,000 in digital order sales in a state where Whatnot doesn’t handle your sales tax, you still don’t need to worry about it. You don’t have economic nexus!

That said, if you have a remote employee — not a contractor —  in that state, you would need to collect sales tax. Because then you’d have a physical presence there. 

Now let’s move on to a common question among Whatnot sellers: How do you handle taxes if you just run your store as a casual hobby?

Do you have to file taxes if Whatnot is your “hobby”?

Yes. "Filing taxes" essentially means reporting your income to the IRS. And if you’re running your shop as a hobby, you’ll still have to report what you earned from Whatnot sales. 

The tax form you'll use is Schedule 1. Your hobby income goes on line 8.

How does hobby income work?

Hobby income isn’t subject to self-employment taxes. But it is subject to income taxes. That means it can push you into a higher marginal tax bracket.

For example, say you’re a single filer who made $200 selling your crochet on Whatnot as a hobby. It’s enough to push your total income from $41,700 to $41,900. That puts some of your income into the next tax bracket up (because the 12% tax bracket ends at $41,775, while the 22% tax bracket starts at $41,776).

That means $124 of your money would get taxed at the higher tax rate of 22% — thanks to your Whatnot hobby. But what if your Whatnot shop counted as a business instead?

Does your Whatnot shop count as a business or a hobby?

The IRS doesn’t shy away from a gray area. And the distinction between hobby and business can be a little fuzzy. The key consideration, though, is your intention as a seller: Are you running an Whatnot shop expected to make a profit? Or is it purely a recreational pastime?

A few other things the IRS wants you to think about when it comes to your store. If the answer to any of these questions is “yes,” it’s less likely to be a hobby:

• Do you devote a significant amount of time to making your Whatnot shop?
• Do you depend on income from Whatnot for your livelihood?
• Do you have prior experience in making a profit with a similar business?

What if my Whatnot shop lost money?

It's common for businesses not to turn a profit in their first few years, but that doesn't mean they're not businesses. It's more about the purpose of the work — i.e. are you putting time into your shop with the expectation of making money in the future? Find out more in our in-depth guide to business vs. hobby.

It’s important to figure out if your Whatnot shop counts as a hobby. Why? Because hobbies aren’t eligible for tax write-offs — even though you still have to report any income to the IRS.

On that note, let’s talk about common write-offs that Whatnot shop owners should track to save money on their taxes.

How to lower your Whatnot taxes with write-offs

Most new business owners are shocked when they see their tax bill for the first time. The good news is that, if you track your business expenses, you can significantly lower that number.

That’s because you’re not taxed on your gross income but your net income. So if your Form 1099-K shows $30,000 in gross annual sales, but you spent $5,000 on business expenses, your taxable income would be $25,000.

The even better news: there are tools out there to do the job of logging write-offs for you. Such as Keeper, an app that connects to your bank account and automatically tracks each business expense — leaving you free to focus on Whatnot matters. The Keeper app gives you a neat list of your expenses at the end of the year with digital receipts attached, so you don’t have to go through the hassle of storing paper receipts.

What kinds of expenses might an Whatnot seller use Keeper to track?

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Common tax write-offs for Whatnot sellers

For an expense to qualify as a write-off, the IRS says that it needs to be both “ordinary” and “necessary” — meaning:

• Common for people in your field
• Useful for doing your job

(According to the IRS, “necessary,” in this context doesn’t have to mean indispensable — just helpful and appropriate.)

For an Whatnot seller, these types of expenses depend a lot on what you’re selling. An ordinary and necessary expense for a jewelry seller could be earring hooks or polymer clay. A cold press juicer, on the other hand, wouldn’t count.

That said, here are some expenses that many Whatnot shop owners can write off.

Office-related expenses:

• 🏠 The home office deduction if you create your products or store supplies at home
• 📞 A portion of your phone bill
• 💻 Your computer
• ⚡ A portion of your Wi-Fi bill

Marketing and promotion expenses:

• 📻 Marketing fees
• 🌐 Logo design
• 🪧 Google and Facebook ads pointing to your Whatnot shop
• 🖌️ Freelance copywriters or marketers

Inventory expenses:

• 📮 Shipping and handling costs
• 🛍️ The cost of the goods you sell
• 🔧 Inventory repair costs
• 🪣 Storage bins or other organizational goods
• 🗃️ Inventory management systems

Other expenses common for small business owners:

• 🚗 Vehicle expenses, if you drive for work — like to the craft store to pick up supplies, to Fedex to mail off your orders, or to classes you attend to hone your craft
• 🛍️ Merchant seller fees
• 🏦 Business loan interest
• 👩‍⚖️ Professional services like legal advice and consulting
• 🏫 Education expenses like courses, conferences, and webinars
• ✈️ Business-related travel
• 🍔 Business-related meals, like with suppliers
• 💵 Payment processor fees — including Whatnot third-party settlement processing fees

Check out our full list of common online seller expenses to ensure you don’t miss a potential write-off!

Before you can start writing off your expenses, you’ll need to determine your gross income. And that means you’ll need an Whatnot 1099-K document.

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What is a 1099-K?

A 1099-K is a document that summarizes the gross sales income of anyone who:

• Got paid through a third-party payment processor, like a credit card, gift card, PayPal,
• Earned at least $20,000 from business transactions
• Had at least 200 business transactions on their account

The threshold to get a 1099-K was supposed to drop to $600 starting in 2022. However, the IRS chose to delay this change — two years in a row. This means that for the 2024 tax year, the bar for getting a 1099-K for transactions through Whatnot will stay at $20,000.

Third-party settle organizations that are partnered with Whatnot will issue 1099-Ks. Read more about it here.

Note: Your gross sales income is the total amount of money you earn from sales. It doesn’t include the write-offs you subtract to find your taxable income.

What to do if you don’t get an Whatnot 1099-K

If you didn’t earn at least $20,000 and settled at least 200 transactions, you won’t receive a 1099-K from a third-party settlement organization.

Whatnot Sellers can see their transaction history on the Whatnot platform in their Seller Hub. See here for more details on where to find data for tax purposes.

How to file your Whatnot self-employment taxes

If you’re filing your taxes by yourself, you’ll need to know the nuts and bolts of the process. Even with a tax filing app like Keeper — or an accountant — you’ll want to have an understanding of what’s involved.

Here are the basics of filing your self-employment taxes, including the Whatnot tax documents you’ll need.

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Step #1: Determine your gross income

Congrats! By getting a hold of your 1099-K or figuring out your gross sales on your own, you’ve already ticked off the first step of filing your taxes.

Step #2: Make a list of your Whatnot expenses

As you know, it’s important to track your business expenses throughout the year because it can save you money come tax time. For instance, if you sell posters on Whatnot, you can remove your printing costs from your gross income. 

Step #3: Fill out your Schedule C

Your Schedule C is the form you’ll use to calculate your taxable income or net profit. That’s your gross income, minus your business expenses. You’ll also claim your write-offs on this form.

Step #4: Figure out whether your need to pay quarterly taxes

If you expect to owe the IRS at least $1,000, you’ll need to pay your taxes quarterly. To figure out if that applies to you, use our quarterly tax calculator.

The deadline for each quarterly payment typically falls on:

• April 15th
• June 15th
• September 15th
• January 15th

The deadline for filing your taxes, however, doesn’t change. That still falls on April 15th. (So long as that doesn’t fall on a weekend or holiday, in which case the deadline is moved to the next business day.)

Think you’ll need a bit of extra time to file your taxes? Learn how to file for a tax extension.

How do you know if you need to pay quarterly taxes?

If you’re not sure whether you’ll be responsible for quarterly payments, you can use our free quarterly tax calculator. This will tell you whether you’ll hit the “$1,000 or more” rule of thumb for filing quarterly. And if you do, it can help you figure out how much you should pay each quarter.

By now you should have an idea of what taxes you’re responsible for as an Whatnot seller, how to file and pay your taxes, and the types of business expenses you should be tracking. Now, why not try the tax app that can make running your own business a little easier?

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