Q. Is this an 'other income' issue?
A. Yes. Again, you decide whether it is a hobby or self employment and report it accordingly. If self employment, you deduct all ordinary and necessary expenses. If hobby income, your deduct only COGS.
Q. And is there a place in the 1040 to enter the expenses or do I do these adjustments on a sheet of paper that I hold onto for 'the audit'.
A. There is no IRS form to show COGS, other than Schedule C, for self employment income. So, yes, you do those adjustments on a sheet of paper that you hold onto for 'the audit'.
Q. I assume it's ok to split up the 1099k gross figure into various topics (ie schedule D, other income, not actually income ).
A. Yes.
Q. Do these separate entries have to add up to the 1099 gross ?
A. No. It would be nice if they did, but there's no where to show COGS. So, you will only be reporting net income, and your total entries will not match the 1099-K. If you decide to use the "workaround" described above, that may help stave off an IRS inquiry.
