Got a 1099-K from Venmo or Etsy? The Ultimate Guide for New Haven Side Hustlers to Succeed in 2026

NEW HAVEN, CT – Jose's Tax Service – February 24, 2026

If you have been checking your mail or your email inbox lately, you might have noticed a specific document from Venmo, PayPal, Etsy, or even Facebook Marketplace. It is called Form 1099-K, and for many of our neighbors here in New Haven, it is causing a bit of a headache.

I’m Jose Morales, and at Jose's Tax Service, we see this all the time. You started a side hustle selling vintage clothes on Etsy, or maybe you’re a local contractor taking payments via Venmo, and suddenly the IRS is looking at those transactions. Don't panic. Whether you’re running a small business out of your garage in Fair Haven or selling crafts at the New Haven Night Market, this guide will break down exactly what you need to do with that form before the April 15th deadline.

Categorized under: News, Tax Planning

Understanding the 1099-K: What Is This Form?!

Form 1099-K, "Payment Card and Third Party Network Transactions," is an information return used to report the gross amount of all reportable payment transactions. Essentially, if you use a third-party processor to collect money for goods or services, they are required to report that total to the IRS and send a copy to you.

For the 2025 tax year (the taxes you are filing right now in early 2026), the IRS has maintained specific thresholds. You will receive a 1099-K if you met both of the following requirements during the 2025 calendar year:

1. You received $20,000 or more in gross sales.
2. You had 200 or more completed transactions.

If you hit these numbers, the platform is legally obligated to file this form. However, even if you did not hit these thresholds, you are still legally required to report all taxable income on your tax return. The IRS knows that the "gig economy" is huge in the Elm City, and they are looking closer than ever at digital payments.

The Big Mistake: Gross vs. Net Income!

The most common reason for panic when a 1099-K arrives is the number at the bottom of the form. This number represents your gross payments. This is the total amount of money that flowed through the app or platform before anything was taken out.

Crucial Point: You do not necessarily owe taxes on the total amount shown on the 1099-K. You only owe taxes on your profit.

The profit is your gross sales minus your business expenses and deductions. For example, if your 1099-K from Etsy says $25,000, but you spent $10,000 on materials, $2,000 on shipping, and $3,000 on platform fees, your taxable income is much lower.

Common Deductions for New Haven Side Hustlers!

If you want to keep more of your hard-earned money, you need to be aggressive (but honest) about your deductions. Here is what you can typically subtract from that scary 1099-K total:

1. Platform and Transaction Fees: Every time Venmo or Etsy takes a cut, that is a deductible expense.
2. Shipping and Packaging: Boxes, tape, labels, and postage paid at the post office on Church Street: all of it counts.
3. Materials and Supplies: If you make jewelry, the beads and wire are deductible. If you fix computers, the components you buy are deductible.
4. Returns and Refunds: If a customer sent an item back and you refunded their money, ensure you subtract that from the gross total.
5. Home Office Deduction: If you have a dedicated space in your New Haven home used exclusively for your side hustle, you may be able to deduct a portion of your rent or mortgage, utilities, and insurance.
6. Marketing and Advertising: Did you pay for Instagram ads or business cards to hand out at the Wooster Square Farmer's Market? Deduct them.

What if the 1099-K Includes Personal Payments?

This is a major issue for many taxpayers. Sometimes, people use their business Venmo for personal things: like a friend paying you back for pizza or your roommate sending their half of the rent.

If your 1099-K includes personal payments that are not actually business income, you must address this correctly on your return to avoid an IRS audit. Do not just ignore the form. The IRS receives a copy of your 1099-K, and if your tax return doesn't account for that number, their system will automatically flag it.

At Jose's Tax Service, we help you reconcile these numbers. We ensure that your personal "reimbursements" aren't taxed as business profit.

Essential Record-Keeping Steps for 2026!

The best way to handle a 1099-K is to be prepared before it even arrives. If you are struggling this year, make a commitment to follow these steps for the rest of 2026:

• Separate Your Accounts: Open a separate bank account and a separate PayPal/Venmo account strictly for business. Do not mix your grocery money with your business revenue.
• Track Every Receipt: Use an app or a simple folder system. If you bought it for the business, save the proof.
• Log Your Mileage: If you are driving around Connecticut for your side hustle, keep a mileage log. Those miles add up to significant deductions.
• Update Your Taxpayer Info: Ensure your SSN or EIN is correct on all platforms like Etsy or PayPal. As noted in recent IRS updates, incorrect information cannot be easily corrected after the forms are issued.

Why New Haven Entrepreneurs Choose Jose's Tax Service

Filing as a side hustler or small business owner is significantly more complex than filing a standard 1040 with a single W-2. Using "free" software often leads to missed deductions or, worse, errors that trigger an IRS letter.

At Jose's Tax Service, we offer:

• Personalized Service: We take the time to sit down with you and understand your specific side hustle.
• Expert Knowledge: We stay up-to-date on the latest IRS thresholds and Connecticut state tax laws.
• Competitive Rates: We believe professional tax help should be affordable for the working people of New Haven.
• Year-Round Support: We don't just disappear after April 15th. We are here whenever you have a financial question.

If you are feeling overwhelmed by your 1099-K, visit our Small Business Learning Center for more resources, or better yet, come see us in person.

Important Compliance Warning!

Failure to report income reported on a 1099-K can lead to significant penalties and interest. Furthermore, if you exceed $500 in sales in a calendar year without providing valid taxpayer details (SSN or EIN) to your payment platform, your account may be suspended.

Instructional Step: Locate your 1099-K forms now. Compare the gross amount to your own records. If there is a discrepancy, contact the payment processor immediately to request a correction. If the form is correct, begin totaling your expenses to offset that income.

Final Thoughts for the Tax Season

The "gig economy" is a vital part of what makes New Haven great. From the artists in Westville to the consultants downtown, you are building something for yourself. Don't let a 1099-K document take the wind out of your sails.

If you're ready to get your taxes done right the first time, visit us at josestaxservice.com. You can also check out our sitemap for a full list of our services and articles.

Remember: The deadline to file your 2025 federal and Connecticut state taxes is Tuesday, April 15, 2026. Do not wait until the last minute to figure out your 1099-K situation.

Jose's Tax Service
Professional Service. Casual Vibe. Local Expertise.

For more information on tax categories and local updates, visit our category map or stay updated with our latest posts.