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.
