Confusion about 1099-K filing with eBay/at a loss?

[PattiF]

Yes, Massachusetts and a few other states have lowered the threshold for reporting income from PayPal on a 1099-K. The Massachusetts State Tax website says that if the income on the form did not meet the federal threshold of $20,000, then the 1099-K only needs to be reported to Massachusetts and not included with the IRS return. There is a separate link to MassTaxConnect as shown in the link in the paragraph Submission of Forms 1099-K to DOR using combined Federal/State Filing Program. Massachusetts 1099-K Submission

The FAQ section of the same web page has a section "Since I received a Form 1099-K, does that mean I owe tax?" FAQ 1099-k Massachusetts Number 2 addresses selling personal items at a loss while downsizing.

The cost basis of something that was received as a gift would be the cost that the person who gave the gift paid for the item. Determining cost of sold items The original cost of books, toys and comic books could be researched on the internet to come up with a reasonable figure.

[cobra02301]

I received a Form 1099K from Paypal, Inc in relation to sales I made on eBay in 2020.   My sales were only $2,900 and my total transactions were 137.   I live in Massachusetts.   Will this info be reported to the IRS and do I have to report it on my 1040 this year or do I have just have to report it to Massachusetts?   Can I deduct shipping expenses, state tax paid and fees if I do have to report it?   Thanks for your time.  

[KathrynG3]

Yes, this information is reported ot the IRS. Yes, you do have to report it on your 2020 Form 1040 and it would be included in the Massachusetts return, as well. If you want to deduct shipping expenses, state tax paid and fees, then that would need to be reported on Schedule C and subject to self-employment. 

Alternatively, if this was not self-employed income, but more like income from a garage sale, then you could offset your earnings with the costs of the items. The maximum you can deduct from the proceeds is the amount of the proceeds. 

In TurboTax Deluxe or higher: reporting it via Other Miscellaneous Income is acceptable to the IRS.

1. From the left menu, go to Federal and select the first tab, Wages & Income
2. Add more income by scrolling down to the last option, Less Common Income, and Show more
3. Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
4. Choose the last option, Other reportable income and Start and Yes
5. Enter the applicable description and amount and Continue
   • First, enter Form 1099-K as received. It is essential that the full amount be entered.
   • Next, enter an adjustment to reflect the cost of these items as an offsetting, as a negative amount up to the amount of the income. In other words, if the goods cost you $100 and Form 1099-K was for $10 in sales, the maximum cost allowable would be $10.

@cobra02301

[cobra02301]

Thank you for the response.  I understand the federal return now.  Where do I report that income as a garage sale with the offsetting cost of the items on my Massachusetts State Return.   Thanks again.   

[PattiF]

Yes, Massachusetts and a few other states have lowered the threshold for reporting income from PayPal on a 1099-K. The Massachusetts State Tax website says that if the income on the form did not meet the federal threshold of $20,000, then the 1099-K only needs to be reported to Massachusetts and not included with the IRS return. There is a separate link to MassTaxConnect as shown in the link in the paragraph Submission of Forms 1099-K to DOR using combined Federal/State Filing Program. Massachusetts 1099-K Submission

The FAQ section of the same web page has a section "Since I received a Form 1099-K, does that mean I owe tax?" FAQ 1099-k Massachusetts Number 2 addresses selling personal items at a loss while downsizing.

[Chel1769]

I don't understand why so many people are misled by the IRS tax laws but unfortunately, they are. If you earn $400 or more you have to file federal taxes & write the amount as income on your taxes. Each state has its own state law but the IRS clearly states this. If you sell on eBay or other platforms as I am currently doing myself, you need to report it as income. You ARE a business whether you consider yourself one or not, you are a sole-proprietor and you simply use your name as the "business". If it's a "hobby" you still need to report it but then you can't even deduct the shipping costs, or any cost associated with it if you consider it a hobby. I am selling items from my folks' house & my own condo & I purchased items intentionally to see if I could thrift & flip them. I haven't even earned as much as you & I'm on SSDI, getting food stamps, etc, due to my low income & I am going to have to file taxes for 2020 otherwise it'd be considered tax evasion. I will most likely be at a loss due to all the business deductions I'll be able to take but I probably still will have to pay the 15% self-employment tax. You should hire a CPA and get their advice. Thousands of people are committing tax evasion by not reporting their reselling income, its income, period. My folks are your age & I'm trying to move fast to sell as much as I can because they've got serious health issues & my Mom is in the ICU right now with the "virus" and if she passes my Dad & I would be in serious financial troubles. The IRS cares not about any of that. I earned money from selling. If you can prove you sold all of it at a total loss from what you originally paid ( a CPA may be able to finese this) then you may be able to slide through. I'm not chancing it at all. My Dad won $1,000 on a scratch ticket & he gets about 14 K a year for his retirement & the IRS wanted him to pay taxes on it and he doesn't have to file because his social security is so low but the IRS still sent paperwork & stressed my Dad out for a few months! 

[Chel1769]

If it is higher in value than when it was purchased whether it was a gift or not if you sold it, it is now a profit that needs to be reported. I have my childhood toys & my 8th grade Nike sneakers "gifted" to me from my parents. If I sell those & make money off of them now, I have to report it as income & I am a "business". It's quite clear on the IRS website. People are selling their 1990's t-shirts that cost about $20 back then to buy for $250-$1,000K right now on eBay etc., and all of that is considered income. Only if you sell it at a loss can you "get away" with not paying taxes on it. If you paid $10.00 for a doll & sold it for $7.00 then you'd be set. If the doll was $10 in 1975 and now it's selling for $45 you just made a $35 profit. This is why so many people are selling thrifted items & used items online it is a fairly easy way to have a lucrative "side hustle" or full-fledged business. 

[axr1766]

Only tax experts need answer. No one is asking for your opinion.