@Anonymous wrote:
What would I categorize the desuction as?
The 1099-K is informational only. I don't think you have to enter the 1099-K at all. If you are filing a schedule C, you must report your gross sales. I imagine some of your gross sales come by cash or check, so they wouldn't match the1099-K even if the 1099-K was correct. I would report your gross sales, your expenses, and so on, as they were. If the IRS sends a letter asking why did you get a 1099-K for $1M when you reported gross sales less than that, you will respond with your proofs (copies of credit card statements, PNL, copies of letters to the credit card processor, etc.)
I'm not convinced you are better off by reporting $1M of gross sales and then $500K of phantom expenses.
But, for even $500K of gross sales, I would strongly consider hiring a tax professional instead of doing it yourself on Turbotax.
