I started selling items via consignment through therealreal.com. I asked them about any tax paperwork I would need come end of the year and was told they do not provide it ( I am working to confirm if that is true as I have a few emails out). Just to get a head of everything, what would I do if they do not issue the 1099? I do not have an LLC or anything, this is just something I do on the side (reselling). I've made $4,893 in commissions, but my cost of purchasing items to resell is a bit higher. How would I do this in Turbo Tax? Thank you!
It depends. This could be a hobby or business. Please see the following IRS website link regarding hobby or a business.
If it is a hobby, follow this link Solved: How do i declare hobby income - TurboTax
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Ahhh ok. It kind of is a hobby for now. I just looked at the link and it said I shouldn't be operating at a loss. As of right now, I'm about $1,000 in the hole. So would that mean, I wouldn't have to claim anything?
You need to claim the income.
(1) If it is a"hobby", you claim the income minus your "Cost of Goods Sold" (the cost of the items that you actually sold, but not the cost of the items you have not sold yet). That would be reported as "other income", however you are NOT allowed to claim any other deductions for it.
(2) If it is a "business" and you keep track of "inventory" (which is related to "Cost of Goods Sold"), you claim the income as a business. When you enter the information about your Inventory/Cost of Goods Sold, your current deduction will only be for the items you actually sold (not the items you haven't sold yet). You can also claim any other valid deductions (mileage, commissions, etc.). Because you have not yet received a deduction for the unsold items, you will probably have a profit.
(3) If it is a "business" where you do NOT keep track of "inventory" (which is related to "Cost of Goods Sold") *AND* you claim the "De Minimis" election (go into "assets" to make that election), then you claim the income as a business. Generally, you will deduct the cost of all items as "Supplies". You can also claim any other valid deductions (mileage, commissions, etc.). This will create a loss this year, BUT because you are deducting all items this year, you are very likely to have a profit next year.
You are not allowed to claim or deduct expenses for hobby income. If this is a hobby, then every penny you received from the cosigner is reportable, taxable income. Whereas if you are declaring that you do this as a business, (even if a side business) then as far as the IRS is concerned you made that money while self-employed and "in business" for yourself. So it would be reported as such on SCH C as a part of your personal 1040 tax return. Business expenses would be allowed then.
Just understand that you have to prove those expenses if audited. So if you sold that old baby car seat that's been sitting in the attic for 5 years, for $50 and are claiming you paid $100 for it (for a $50 loss) then if audited you'll have to prove it. Otherwise, your cost claim may not be allowed and you have a $50 taxable profit.
You are not allowed to claim or deduct expenses for hobby income. If this is a hobby, then every penny you received from the cosigner is reportable, taxable income.
You can still deduct Cost of Goods Sold for a Hobby. You just can't deduct any other expenses.