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Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

Basically I live in MA and I made over the $600 last year. I received a 1099-K year 2020 from Paypal and I don't know what to do. I spoke to someone who mentioned schedule C but I was panicking and can't remember. I just was selling Pokemon Cards to earn some money as on the side, not for a business. I can't figure out how to do this and I'm worried I'll go to jail because I can't figure out what to do even after I've spent hours reading about it. I just don't get it 😕
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6 Replies

Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

Anything you do to make money as an "ongoing trade or business" is self-employment income.  If you did this regularly, with an intent to earn a profit, you are self-employed and are running a business.

 

You need to use Turbotax Self-Employed version if using Turbotax online. You are expected to have kept accurate records of your income and expenses, and report all these even if you don't get tax paperwork.  It gets reported on Schedule C which is attached to your regular tax return.  Your gross sales are your gross income.  Your expenses include inventory (what you paid for the cards), your listing fees, credit card processing fees, and shipping costs.  If you have a net profit, that income flows to your regular return and is subject to income tax and 15% self-employment tax.

 

If you are buying and reselling inventory, this is fairly straightforward.  If you are selling old items that you bought a long time ago, you will have to estimate your original cost.  If you sell for less than your original cost, then the proceeds are not taxable, but if audited, you will have to be able to prove your cost.  If you sell for more than your original cost, only the increased value is taxable income, but again you have to prove your cost.  If audited, and you can't prove the cost, the IRS can set the cost to zero and make all the proceeds taxable.

 

The other way to handle this is as a hobby.  If a hobby, your taxable income is the difference between your selling price and your cost, and you pay income tax but don't pay self-employment tax, but you can't deduct other expenses like credit card fees or shipping. 

 

The difference between self-employment and a hobby is mainly regularity and intent to earn a profit.

Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

See I don’t know how to do that. I only sold some Pokémon cards and I was never informed of this stuff. I’m absolutely terrified of going to jail because I literally have no clue how to do any of this.

 I just paid to upgrade TurboTax so I’ll have to do it again? I only sold cards three times (two on eBay) and one over the net in general. I just don’t want to go to jail 

Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

If it's casual activity, it's hobby income, although you must have sold large lots to reach the $600 threshold. 

 

You can report hobby income under "other income", report the difference between your selling price and your purchase price.  If you sold at a loss, don't report it as Income.  The IRS may send a letter asking for an explanation, you would reply with details and proof (that you sold items for less than your cost, etc.)

 

Or report the business activity as a Schedule C business.  Just follow the steps in Turbotax online and answer the questions in order.  If you want someone to hold your hands as you go through it, you can upgrade to the Live online version which gives you a CPA agent via chat to help you walk through your situation.

 

There's no jail here, at worst the IRS will tax the entire amount of your sales if you can't prove that you had deductible costs that reduced your profit.

 

@VolvoGirl ???

Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

Alright. Honestly I just looked up how much the cards were worth and went from there. Two were standalone, and one was larger, about 11 cards.

 

 But thanks. I wish I knew about all of this before hand because otherwise I wouldn’t have done any of this. The problem is I’ve had these cards since a kid so I have no way of proving how much I paid for them. Thank you though.

Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

Schedule "C" is not that bad. It is just taxes, no jail.

From your description selling your old cards does not sound like a business or Schedule "C"activity. Buying more and selling  would clearly not be a hobby, but a business activity.

 

Proper treatment would be as a Capital Gain, if you want to go that route.

Received a 1099-k because I made over $600. I sell stuff on ebay but not as a business. How do I file this? I can't figure it out and I'm worried.

Exactly! I only sold two cards (literally) on eBay- they just happened to be super old and rare. Then one lot through PayPal alone and only in December. I don’t buy cards to resell, I was just trying to earn extra money. I’ll check out a Capital Gain, thank you.

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