@premmer wrote:
I though the eBay gross sales amount noted on their 1099-K had to be entered as “hobby income” amount. My profit is 64% of 1099-K amount which is subject to taxes. I’m confused, I just can’t enter my profit amount, 64% of 1099-K, as hobby income without account for the remaining 36% can I?
As I said, your income is determined by the selling price and purchase price of the individual items.
If you have received a 1099-K for 2021, there are two ways to report the correct income. I will give the details below.
If you are worried about 2022, we will have to wait and see if the IRS changes the procedure.
For 2021, you have two ways to report the correct income.
A. Leave the 1099-K off your return. Enter your correct income as hobby income. (You could also enter it as short term capital gains on schedule D.) Print your return and file by mail, instead of e-filing. Attach a copy of the 1099-K and a written statement explaining the situation, how you calculated the taxable amount, and showing that you reported your taxable gains in the correct place.
B. Enter the 1099-K as-is. Then, go back into the hobby income section and enter a new item of income with a descriptive label (maybe "Ebay items sold at a loss") and enter a negative number that will offset the gross sales. For example, if your gross sales were $1000 and your actual profit was $600, you would enter the $1000 1099-K and then enter -$400 (negative $400) as an offsetting adjustment. That way your taxable income nets out to $600 that you determined is taxable. This procedure will allow you to e-file. The IRS may send a letter asking for a more detailed explanation, so keep records of your sales and how you calculated your taxable income for at least 3 years after filing.
