That is the current issue ... the IRS has conflicting regulations on this matter that need to be resolved for the non business sellers of personal use property at a loss. The lowering of the bar for the issuance of the 1099-K has an unintended consequence that needs to have allowances made for it.
The current rule that all 1099-K income of $600 or more should be reported on the Sch C or Sch D is in direct conflict with the rule that the sales of personal use items sold at a loss are not reported on a tax return ... they are not income and the loss is not deductible. There have been "workarounds" used in the past but it would be nice to get proper guidance from the IRS ... hopefully they will address this by the time the 2022 returns are filed next year.
If you are in an ongoing trade or business, you report your business income and expenses on schedule C. Being in an ongoing trade or business means you actively and regularly participate, you operate in a businesslike manner, you seek new business opportunities, and you have a profit motive.
If you are a "Casual seller" then you probably aren't involved in "ongoing trade or business" so any net income is hobby income, and you currently can't deduct expenses. But remember, you only have income if you sell items for more than your basis.
What you should always be doing, regardless of tax paperwork, is keeping accurate records. You want to keep a list of the items you sell that includes a description, how you acquired the item and when, your cost, the selling date, selling price, and selling expenses.
We don't know how the IRS will want taxpayers to account for the new 1099-K forms on their 2022 tax returns. If you keep proper records, and understand what is taxable and what is not, and whether you are a schedule C self-employed business or a hobby, then you will be prepared for whatever the IRS does.
