I followed the guidance from @TeresaM above, and get the results below, depending on how the 1099-K is categorized. Again, this is for personal property "garage sale" style eBay sales, which should be governed by the "Personal items sold at a loss" instructions here: https://www.irs.gov/businesses/understanding-your-form-1099-k
(Note: I'm using TT Premier Online)
1) If I say the 1099-K is for "Personal Item Sales", then it takes me down the rabbit hole of 1099-B's and treating this as an investment sale, which it's not. This ends up misstating overall income because the adjustment is improper in this case to carry on Schedule 1, as the 1099-B path results in no taxable income. So this seems like the wrong way to go for sure.
2) If I say the 1099-K is for "Hobby Sales," then the 1099-K income appears on Schedule 1, Line 8j "Activity not engaged in for profit income", and the negative adjustment shows up on Schedule 1, Line 8z. (It does *not* show up on Schedule 1, line 24z as would be proper). Because both the income and adjustment amounts are in Part 1 of Schedule 1, it nets out to a 0 being reported on Form 1040 Line 8. This procedure does *not* result in proper listing of an income item on 1040 Line 8 and an offsetting adjustment amount on 1040 Line 10. It is nice that the income and adjustment are explicitly listed on the Schedule 1 this way, albeit in the wrong spots. However, I'm hesitant to have the income appear on 8j and not sure of the implications - and I am also hesitant to characterize the income as hobby sales, which it isn't.
3) If I say the 1099-K is for "Other (can include any taxable income not reported elsewhere on your return)", then I end up with a net 0 reported on Schedule 1, Line 8z with a "See statement" message. Again, this procedure does *not* result in proper listing of an income item on 1040 Line 8 and an offsetting adjustment amount on 1040 Line 10. The statement reads:
Other Income from Form 1099-K: 1,668.
Form 1099-K Personal Item Sold at a Loss: -1,668.
So with all of the above scenarios, we still don't end up with what the IRS recommends doing for this situation.
I'm not sure which of options #2 or #3 above would be the "least worst". Anyone have thoughts?
