You do not have taxable (or reportable) income. As you said, the income is taxable if and only if you received more than you paid, for any item sold. And then, only the profit, on that item is reportable.
But, you have an IRS form (1099-Misc) to deal with.
If you received an erroneous 1099-Misc, you have several choices:
- Ideally, you get a corrected 1099-misc from the payer (probably not gonna happen)
- Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
- Report the income as misc line 8z, Schedule 1 income (enter in TurboTax at the 1099-MISC screen and identify it as sporadic income). Then enter a line 8z deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front. Briefly explain at description. Call it something "cost basis of personal items sold on 1099-Misc"
- Do nothing and hope you can explain it away when & if the IRS contacts you
Most people, in this forum, use #3.
