While personal losses may not be deductible and income from personal sales may not be reportable in general, I know PayPal will send me a 1099-K for 2019 and dutifully report my transactions to the IRS. I'm certain the IRS would take notice if I failed to account for $20,000+ of incoming funds, which they will be well aware had passed through my PayPal account. The internet is full of stories of eBay sellers who found themselves being audited for failing to report thousands of dollars in eBay sales income that PayPal dutifully reported to the IRS - sellers who liquidated lots of things at once or sold valuable collections, who were not operating businesses or profiting from their sales overall, but nonetheless generated sufficient funds from those sales to exceed the threshold at which the IRS distinguishes personal/hobby from business. I can't just ignore 20K+ and hope no consequences come when the IRS gets wind of it, which they absolutely will. I need to figure out what approach to take in reporting and deducting it, since I will be required to report it and since IRS will be well aware of it and will absolutely catch me if I fail to report it. I need to hopefully demonstrate it wasn't 20K of extra income or profit, and ideally avoid income tax liability for it, if possible. In order to do this, I'm trying to determine if I get a business license and operate as a business for all intents and purposes - could I then, as a business, claim losses and expenses that as an individual, I could not claim? Or is there a way to properly report the funds as an individual filing taxes, and be able to claim/deduct/report that I made no profit on these sales and not pay income taxes on those funds - the way that gambling losses can be claimed against gambling winnings up to the point of reducing/negating the winnings so no taxes are owed? Can I do this some way as an individual or do I have to be a business? Or do I just report it on my taxes, say it wasn't profit or income, wait for the inevitable audit, then produce my meticulous records on every transaction to prove my claims?
