Since your sales were reported on a 1099-K and the IRS receives a copy, you will need to report the sale of your used clothing on Ebay.  However, you can "zero out" the income since you sold the clothing for less than you originally paid, so it won't affect your taxes. 

Enter it under Wages & Income tab at the top: 

1. Scroll down and click Start next to Miscellaneous Income
2. Choose Other reportable income
3. Answer Yes to "Any Other Taxable Income?" 
4. Under Description put "1099-K Personal Property Sales "
5. Enter the amount from the 1099-K in the next box and click continue
6. Click on "add another income item", 
7. Under Description this time put "1099-K Cost of Personal Property"
8. Enter the same amount but as a NEGATIVE number.
9. On the Other Miscellaneous Income Summary make sure you see the 2 items, one positive and one negative and Total is $0.

Note: The IRS will not allow you to deduct a loss on personal items that you sell.

So makes selling on eBay completely complicated and worthless! 

So the IRS is treating us selling our clothes on Ebay as a business where we have to pay income tax on any gain...  But we don't get the usual benefits of running a business, like claiming losses?

Q. So the IRS is treating us selling our clothes on Ebay as a business where we have to pay income tax on any gain?

A. No. It's always been the case that you pay income tax on your personal property sold for a gain.  What's new is that the IRS now knows you got money from Ebay (from the 1099-k) and you have to report it. 

Q.  But we don't get the usual benefits of running a business, like claiming losses?

A. If it's not a business, any gain is taxed at long term capital gains rates, not ordinary income (like business profit).  And that too has always been the way. You also don't pay self employment (FICA) tax on the profit/gain, since you are not a business.