Ebay 1099-K - Inventory vs Supplies

[goro10]

I am an individual, not business ebay seller - I sell mostly used stuff of whatever I can find which includes mix of personal items and stuff that I buy from classified ads, garage sales, etc...cash transactions. My gross income is less than $22K. I'm confused on how to properly report cost of goods sold. With Inventory option, it is very complicated since I can only guess cost of my inventory at the beginning or the end of the year. And what about inventory within that year since a few items I buy and resell right away? Can I just use Supplies category for cost of goods sold, or Inventory is a must?

[RobertB4444]

You can use the actual cost per item sold.  Each item that you sell you enter just the cost of that item and you do that for everything, in which case you show yourself as carrying no inventory.  But that means you can't take any deductions for anything that you have bought that is sitting on the shelf until you sell it.  Which is fine as a way to track expenses per sale.  

@goro10 

[goro10]

Are you suggesting that if I sold let's say 500 items, to have 500 lines under supplies category with the amount I paid for each item?

[KrisD15]

Let's first address your comment:

"I am an individual, not business ebay seller"

Selling items online can be treated as a business if it's done with the intent to earn a profit, or as an individual selling items much like having a garage sale, selling old personal items, usually for less than the original cost. 

You also talk about "Inventory" so my first question is "Are you reporting this on Schedule C (business income) or Schedule D (Capital Gains)?

It sounds to me as if you are a business if you purchase things not for yourself, and sell them later, but only for the purpose of selling them. 

If you are a business, you can use accounting software, like QuickBooks to record your purchases and sales. You can deduct expenses like vehicle expenses. You can apply losses against gains. 

If you are an individual selling personal items, you only report the sale of items that you earned a profit/gain on and losses CANNOT offset any gain.

To provide further assistance, can you clarify if you are filing Schedule C as a business seller?

[goro10]

I have no idea what schedule C or D mean. I am checking as Self Employed and use 1099-K on Turbotax. I don't recall Turbotax asking me about any Schedules. But to clarify your assumption, like the original post says there is a MIX of personal items and various items that I buy to resell. I am given two options at Turbotax to calculate cost of goods sold - Inventory or Supplies. I don't really have active inventory, I just sell randomly whatever I have at the moment. I may have 10 items for sale one week, and 100 next week, so it varies, and items I sell vary as well, there is no constant inventory.

[PatriciaV · Accepted solution]

Schedule C reports activity from Self-Employment. As you enter information under the self-employment topic in TurboTax, the program prepares Schedule C as part of your tax return.

You are not required to report inventory (or cost of goods sold) if your gross receipts (income) are less than $1 million. In this case, simply report the purchase of sales items as Materials or Supplies (your choice).

You can either report all your purchases as "merchandise for sale" in one lump sum or you can separate the items by category under Supplies. For example: Personal vs Resale, or Furniture vs Kitchen Appliances, Clothing vs Books. Again, this is for your information only. How you report your general expenses is not important. Just be sure you report an expense only once.