Yes, to offset income with expenses, it is necessary to use the self-employment section if this is a trade or business for you and not just a sale similar to a garage sale.
Yes, as long as your ordinary and necessary expenses are documented, you can deduct them. Yes, you can take eBay and PayPal fees.
However, if this is not a business for you and you are selling personal items privately, then there is an alternative way of reporting Form 1099-K.
The IRS will expect Form 1099-K to be reported in full. While they allow you to offset the income with related expenses, it is limited to the income received. This will not specifically identify the sales tax collected and remitted by PayPal because your original cost was probably more than the eBay price.
Keep in mind income received on Form 1099-K has been reported to the IRS at the same time you received your Form 1099-K. Therefore, it is a best practice to report the full amount from Form 1099-K, whether it is as a business, or it is for personal transactions.
If Form 1099-K is for personal items sold, but not as a business, report the income as an investment, not as self-employed income.
To do this in TurboTax,
- Go to the search box and enter Investment Sales
- Select Jump to Investment Sales
- Select Other at the next screen, OK, what type of investments did you sell? and click Continue
- At Tell us more about this sale, enter in the name, such as Form 1099-K eBay and the Payer's EIN and click Continue
- At Now we'll walk you through entering your sale details, under the first dropdown menu, What type of investment did you sell? Select Personal Items
- Answer How did you receive this investment with an option from the dropdown menu.
- Enter the Description. If you are uncertain what date you purchased the goods, select Something other than a date so that TurboTax will enter Various
- Next, enter your Sale Proceeds and an equal amount for the Total Amount Paid and click Continue
- Select None of these apply at Let us know if any of these situations apply to this sale and Continue
- Continue through the rest of the prompts
- Select Add another sale to add the next Form received
Please see this help article for more information: What is Form 1099-K?
