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Thank you for the clarification. While your proposed solution will net correctly, the IRS will want to see an extra step.
Personal expenses are not allowed as a deductible business expense. If you listed Form 1099-K Cost of Personal Property as an expense, that would not be deductible. But, the income should not count against you.
Therefore, move the entire personal portion out of the self-employed section and offset it separately.
To move the personal items sold, follow these steps:
- Enter the amount as Form 1099-K Personal Property Sales reported as Other Income in the Rebates and refunds, includes any income returned to customers section.
- Follow the steps for reporting Other Income as a positive and negative:
- From the left menu, go to Federal and select the first tab, Wages & Income.
- Add more income by scrolling down to the last option, Less Common Income, and Show more.
- Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start.
- Choose the last option, Other reportable income and Start and Yes.
- Enter the applicable description and amount and Continue
- First, enter Form 1099-K as received. It is essential that the full amount be entered.
- For a description, include Form 1099-K and Personal Property Sales if this is coming from personal items sold similar to selling items at a garage sale.
- Next, enter an adjustment to reflect the cost of these items as an offsetting, negative amount up to the amount of the income.
- For the cost description, include Form 1099-K and Cost of Personal Property
- In other words, if the goods cost you $100, but Form 1099-K was for $10 in sales, the maximum cost allowable would be $10.
- First, enter Form 1099-K as received. It is essential that the full amount be entered.
Then, only list the business expense for the business portion of Form 1099-K in the Other miscellaneous expenses section with the description Form 1099-K cost of goods sold or something similar. This expense category is just below Legal and professional fees when adding expenses.
See screen shots below for added guidance:
