"I'm confused, I thought that a 1099K for personal items sold at a loss was not reportable or deductible."
You are absolutely correct. It's perfectly OK to not report Form 1099-K on your federal income tax return when the dollars reported on the 1099-K pertain to you ad hoc sale of personal property at a loss. It's exactly the same situation as when you hold a garage sale to get rid of the junk you've accumulated and all the proceeds are in cash.
Well, it's exactly the same except that the IRS gets that Form 1099-K with some dollar amount on it , while they never know and have no way of knowing about the cash from the garage sale. So there is a chance - a very, very, very small chance in my opinion - that the IRS might send you a communication of some sort asking "where's that Form 1099-K on your income tax return?" In this situation you'd think a polite letter back to the IRS explaining the situation - sale of personal property at a loss - would put the issue to bed. But, with the IRS, you never know.
Because so many people live in terror of the IRS even looking their way, all kinds of "workarounds" have been devised to "report" the 1099-K proceeds with some sort of offsetting costs such that there's no affect on taxable income. The hope is that the IRS computers make some sort of "match" on your income tax return to that Form 1099-K, and leave you alone. But, with the IRS, you never know.
