So we are kind of panicking here. My wife got a 1099-k from PayPal and Venmo. The Paypal was for 55,075 and Venmo was 6,834. We were completely in shock!! Because we certainly don't have 61,000 in the bank! lol So what happened here is my wife's hobby and obsession is horses and horse tack (saddles, bits, bridles, saddle bags, horse blankets, saddle pads, etc). And saddles can sometimes cost 2,000 to 4,000. So those were the big ticket items. She would buy one and try it out for a few weeks and then sell it at a small loss or break even but sometimes made a small profit. But most times she broke even or sold at a loss. Same with the saddle bags, saddle pads, etc. She probably went through 20 or 25 saddles like this over the entire year. So it wouldn't take long to LOOK like she sold 55 or 60k when the saddles are between 2,000 to 4,000 a piece. She even sometimes "traded" with people. For example, she sold a saddle to someone on facebook for 3,000 and turns right around buys theirs for 3,000. This way both of them were protected as buyers/sellers through PayPal. She did this quite a few times. It looks like money coming in but really it's not because it's going right back out. Basically she was just recycling the same money over and over. And there's hundreds of small transactions involving the small items like bridles, blankets, bags, etc. Most all sold at a loss or broke even.
She really enjoyed this and it wasn't really costing us much for her to have fun with her hobby. But we were blindsided by this 1099-k situation! We certainly don't have 61,000 in the bank from all of this! Out of the 61,000 she MAYBE profited 5,000 or 6,000 over the whole year but probably not even that. We don't want to report this as a business because it's NOT. And after this, she will no longer be buying, selling, trading anything! And even if we wanted report it as a business, we really don't have records to document what was sold, what the losses were, or what the exact profits really were.
I found a thread from another guy and he had almost the exact same situation with his wife but she was buying and selling purses. And the response below is what he was told to do. So is this correct? Is this how we should handle this too? I am not looking to cancel it all out. We are willing to put a profit around 10,000 (even though it wasn't anywhere near that much) if will help not raise any red flags.
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To report your wife's 1099-K from eBay and her cost of goods sold (COGS) in TurboTax follow these steps:
- Log in to your TurboTax account if it is not open.
- Select the Wages & Income tab.
- Scroll down to Less common income click Show more.
- On the page Let's Work on Any Miscellaneous Income click on Other reportable income.
- On the page Any Other Taxable Income? select yes.
- On the page, Other Taxable Income enter eBay 1099-K for the description and the amount.
- Select continue and answer No on the next page.
Next, you will have to report your COGS. Follow these steps to report your COGS:
- Log in to your TurboTax account if it is not open.
- Select the Wages & Income tab.
- Scroll down to Less common income click Show more.
- On the page Let's Work on Any Miscellaneous Income click on Other reportable income.
- On the page Any Other Taxable Income? select yes.
- On the page, Other Taxable Income enter eBay 1099-K COGS for the description and the cost of the items sold as a - amount for example -1,200.
- Select continue and answer No on the next page.
This process will report your gross income reported to you on the 1099-K in the first entry and then "back-out" your COGS in the second entry. As you are aware this is the first year of the new filing requirements for Form 1099-K and there is no one single step to report the sale and COGS if you are not a business.
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I did put ours in like shown above but haven't sent it in yet. See the pic. So is this entered correctly? Is this even ok?? Any help is appreciated!!
