Bookkeeping guide
Maker / crafter tax bookkeeping: categories to review
Handmade goods, Etsy shops, print-on-demand. If you got a 1099 for this work, here are common categories and review questions; your facts and records determine what qualifies.
Worth knowing
These are common expenses people in this line of work may need to review. Anything marked in orange is an edge case worth raising with a preparer rather than assuming.
Etsy deposits may be net of fees
Etsy and similar marketplaces may deposit only what is left after transaction, processing, listing, ad, and shipping-label charges. Use the marketplace's statement or sales report to record gross sales and each actual fee separately instead of booking only the net deposit. A Form 1099-K may not include all of your receipts and may include items that aren't receipts, such as sales tax. Report all business income from all sources, whether or not a form arrives.
actual fees from statement
Materials, print-on-demand & inventory
Raw materials that go into the pieces you sell, containers that are an integral part of the product (a candle's jar, for example), and what a print-on-demand service charges for goods it makes for your orders generally belong in cost of goods sold (Schedule C Part III), not supplies. Leave out the cost of anything you take for personal use. Inventory rules can apply to materials and stock on hand, though small business taxpayers may be able to use a simpler method. PrivateBooks calculates Line 4 only when you confirm you started and ended the year with no inventory and took nothing out for personal use; otherwise your preparer works out Part III.
at tax time if stock on hand
Sales tax you collect
Marketplaces such as Etsy may collect and remit sales tax on orders placed through them, depending on the state, while craft-fair and own-website sales may need your own seller's permit; check with your state and local governments. Sales tax imposed on the buyer that you are required to collect and pay over is not part of gross receipts and is not a deductible expense, but any part the state lets you keep is income. If the tax is imposed on you as the seller, include what you collected in sales and deduct the tax on the taxes line. Confirm your state's rule with your preparer.
by state confirm rules
Hobby or business?
An activity generally counts as a business when your primary purpose is income or profit and you work at it with continuity and regularity; a sporadic activity or a hobby doesn't qualify, and its income is reported through Schedule 1 instead of Schedule C. If you don't carry on the activity to make a profit, deductions are limited and you generally can't use a loss to offset other income. Keep complete records and a separate business bank account, and have a preparer review repeated losses.
profit motive matters
Kilns, cutting machines & big equipment
Supplies you use up, and tools or equipment you normally use within a year, may generally be current expenses. A kiln, laser cutter, sewing machine, or cutting machine whose usefulness extends substantially beyond a year must generally be depreciated on Form 4562, or may qualify for an election such as the de minimis safe harbor or Section 179. If an item is also used personally, only the business part is generally deductible. Keep the receipt and confirm the treatment with your preparer.
at tax time big items
Home studio space
A studio area used regularly and exclusively for the business may qualify for the home-office deduction if it is your principal place of business or a separate structure, such as a detached workshop. If you sell products at retail or wholesale and your home is the only fixed location, space used regularly to store inventory may qualify without exclusive use. PrivateBooks' simplified-method helper uses $5 per square foot, capped at 300 square feet. That method replaces actual home expenses, so don't also book the same space's rent and utilities as Schedule C expenses.
$5 / sq ft simplified
Common categories PrivateBooks suggests
Pick Maker / crafter during guided setup and PrivateBooks shows these categories mapped to Schedule C lines for review — no chart of accounts to invent. The mapping does not establish eligibility, business-use share, or substantiation:
| Category | Schedule C line |
|---|---|
| Raw materials (yarn, clay, wax, fabric) | Line 38 — Materials and supplies |
| Print-on-demand orders (Printful, Printify) | Line 36 — Purchases |
| Small tools, mailers & studio supplies | Line 22 — Supplies |
| Shipping labels & postage | Line 27b — Other (postage & shipping) |
| Etsy & marketplace fees | Line 10 — Commissions and fees |
| Card reader & payment processing fees | Line 27b — Other (bank & merchant fees) |
| Craft fair booth fees & studio rent | Line 20b — Rent/lease (other property) |
| Etsy Ads, business cards & promotion | Line 8 — Advertising |
| Design software & shop apps | Line 27b — Other (software & subscriptions) |
| Product & craft-fair liability insurance | Line 15 — Insurance (other than health) |
| Business licenses & sales tax permits | Line 23 — Taxes and licenses |
| Mileage to markets & supply runs | Line 9 — Car and truck expenses |
| Market parking & tolls | Line 9 — Car and truck expenses (business parking and tolls) |
Merchants it recognises automatically
On top of the 584 built-in sorting rules, this pack adds rules for Blick Art Mat, Candlescience, Ecoenclose, Fire Mountain Gems, Hobby Lobby, Hobby-Lobby, Printful, Printify, Rockler, Spoonflower, Vistaprint. A matching description gets a suggested bookkeeping category; anything uncertain goes to Review instead of being guessed at. Spot-check every suggestion: a merchant match is not proof of business use, eligibility, allocation, or substantiation.
Do you even have to file?
Net earnings from self-employment of $400 or more generally require Schedule SE, but other filing rules can apply below $400. Whether you received a 1099, also have W-2 wages, had withholding, or need estimated payments depends on the full return. Review the official Schedule SE instructions or ask a qualified preparer instead of treating this bookkeeping guide as a filing decision.
See an optional cash-reserve illustration →
Educational pointers, not tax advice. Tax rules change and your situation is specific — worth asking about at tax time. The free IRS-sponsored VITA program helps people under its income threshold at no cost.