leland-king,
There are two reasons to file a tax return: 1) report your income, 2) pay your taxes.
If you take a bunch of personal property that you purchased more than a year ago and sell it on eBay, then you will have received "payments for personal property sold at a loss." So, the first step is to report the 1099-K income on YOUR tax return. It needs to show up somewhere on Schedule 1, the IRS suggests line 8J. Next you need to offset that income, as you simply converted capital assets into cash at a loss, so you don't have to pay taxes on it. Again, the IRS suggests that you do that by entering the amount of income from "payments for personal property sold at a loss" in Schedule 1, Line 24J. Sounds simple and it would meet both requirements stated above.
Here is the problem, regardless of how you classify the income on the TurboTax 1099-K, it will never enter the offset on Schedule 1, line 24J. Worse yet, if you check box 2b (payments for personal property sold at a loss) on the TT 1099-K form, "1099-K Reconciliation" section, your entry on line 8J, or 8Z DISAPPEAR!!!! Now you haven't met the first requirement stated in line 1, "report your income".
You can play games all day long with different revenue classifications on the 1099-K and the corresponding destinations (e.g., Sch D long term capital gain) but none of them will properly capture the reported income and offset it so you don't incur additional taxes.
THIS IS A TURBO TAX LIMITATION AND PROBLEM THAT HAS BEEN IN THE PROGRAM SINCE AT LEAST 2022!
The best solution I could find to satisfy both requirements at the top of this post was to:
1) Classify the 1099-K income as "Hobby Income". That enters it on Schedule 1, Line 8J meeting requirement 1.
2) On Schedule 1 click on the line 8Z field, which opens the 1040/1040SR Wks, then click on line 8Z again, which takes you to the "Other Income" worksheet. There you can enter a note (i.e., 1099-K Sales of personal items at a loss" and then enter a negative number equal to your 1099-K income. This way there is a clear audit trail to show that you did report the income and that it is not taxable!
It would be so much simpler if Intuit/Turbo Tax would do this automatically using line 24Z but that option isn't available, hence the plethora of workarounds that have been debated and posted over the last two years since eBay income thresholds have come down to where virtually every personal selling personal property gets a 1099-K.
I should also mention that the last time I was on the phone with TT support trying to get them to explain how to get Schedule 1, line 24Z to populate properly, the support person tried to convince me to pay $60 for Live Tax Advice. I assured them that I didn't need Live Tax Advice, I needed TurboTax to properly report and record 1099-K income.
