1099-k tax question

[parrybrynne]

I show my art and sell a few pieces once a year for a convention as a hobby, I take card payments through square and this year I made enough to qualify for a 1099-k, I paid my sales taxes right after the convention ended but my question is this, When I received my 1099-k form it had my gross income listed (taxes and fees and all) and that seems to be the way square does it after reading through their FAQs, how do I list this as hobby income when I've already paid sales taxes on this amount but the 1099-k is stating the gross amount I made, I don't want to get taxed on a TOTAL AMOUNT twice?

[Bsch4477]

Edited. 
While you don’t have to pay self employment tax on hobby income, you can no longer deduct any expenses. 

[parrybrynne]

I thought for hobby income you couldn't claim deductions or expenses, is that incorrect?

[Bsch4477]

You are correct. I edited my response. 

[parrybrynne]

Got, it so does that include sales tax? I can't subtract sales tax paid either?

[ThomasM125]

The sales tax is not part of your sale, it is money you collect from the customer on behalf of the government so you can remit it to the taxing authority. So, you don't have to include it in your income. If you report the income as hobby income, you can report the full amount listed on your Form 1099-K and then enter an adjustment to "Other Income" to back it out. If you report the income as self-employment income, you can deduct the sales tax as tax expense.

You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the adjustment and the amount as a negative number

[parrybrynne]

I was told by another tax expert on here that when I enter my 1099-k I just hit the “amount in box 1a is too high” button and then enter the sales tax paid in that box. Is that incorrect?

[PatriciaV]

Yes, if you have identified the amount in Box 1a includes sales tax, you can adjust this by checking the box "This amount in box 1a is too high..." Note that by checking this box, you are saying that the 1099-K is incorrect (in your case, because it includes sales tax that is not income to you).

If you have other adjustments related to this hobby income, follow the instructions from ThomasM125 to report the total as negative Other Income.

[parrybrynne]

I’m sorry, I’m confused, so I SHOULD hit the “the amount in box 1a is too high” and subtract the sales tax already paid if my 1099-k includes my sales tax in my gross, correct?  I’ve gotten a couple different answers from tax experts on this page at this point and I think I’m more confused than when I started

[PatriciaV]

Your confusion is understandable. How you report Form 1099-K income is your choice. You can use the "amount too high" box to tell the IRS you don't agree with the income as it was reported to you (and adjust the total for sales tax). Or you can report the total 1099-K income but enter the sales tax as a business expense under business taxes. The result is the same for net business income on your tax return. 

[parrybrynne]

Perfect, thank you!!