Paypal doesn't decide what a business is or isn't, nor does receiving a 1099-K determine how to include it. The IRS looks at a profit motive. There are several criteria to consider.
If you are selling your old used clothes, you do not need to include the form, but you do want to keep records in case you are questioned by the IRS.
If the electronics are in the same category as your clothes, the same applies. If, however, you are buying electronics and reselling them, it is a business, profit or loss notwithstanding. A hobby is collecting stamps or making quilts. You may happen to sell something, but you are doing it for fun.
Your digital project may be a hobby or a business. Again, a profit motive is the determining factor, not gain or loss. There are no longer hobby expenses. If this was a one-time thing, you will have to include your profit. If it is a business that will be ongoing, file a Schedule C.
To set up your business:
- Open or continue your return.
- Search for schedule c and click the Jump to link in the search results.
- Answer Yes to Did you have any self-employment income or expenses?
- If you've already entered self-employment work and need to enter more, select Add another line of work.
- Follow the onscreen instructions
