1099k question - EBay

[jjzonka]

This is my second year with a 1099k from eBay sales. I sell personal items, collectibles, and some finds from garage sales. Making a profit on some of the vintage stuff and loss on personal items. Last year my 1099k was from PayPal and this year from eBay after they took over managed payments as my state of Illinois requires reporting over 1000.00. eBay only accounted for my sales on my 1099k that they took over payment processing for and the earlier year sales of about 721.00 through PayPal I never received a form. So do I enter this on a second line under my 1099k as other sales? 
I also deducted a home office last year using the simplified method but no longer have it this year so I’m assuming I leave this blank? I also took full depreciation of a computer in the amount of 686.00 that we purchased in November and put in use in December. Well this year I’m not using that computer since about February as I got a tablet from work and gave this to my son I noted this on my turbo tax return will turbo tax automatically complete the recapture and deduct what I need to repay to the irs? Also,I have no inventory and left my cogs blank last year and counted everything as full profit, can I do the same this year as I have no receipts and don’t want to make up costs or will this cause red flags with the irs? I’d rather underclaim then over with regards to this, I did deduct my eBay selling fees, office supplies, shipping costs, and PayPal fees. I did put my shipping costs under office supplies but I think I should have listed these in miscellaneous, any help would be greatly appreciated.

[ColeenD3]

Let's take the questions one by one.

1) If I understood you correctly you only have a portion of your sales reported on 1099-K and no other reporting form. If this is true, you can list the balance of the income as cash.

2) Yes, omit the home office.

3) Yes, TurboTax will recapture the depreciation. Note that you gave it away as opposed to selling it.

4) According to tax law, you must take all your expenses that you are entitled to. This is because EIC is based on income. Do the best you can to reconstruct your costs.

5) Yes, shipping should be miscellaneous.

[jjzonka]

Thank you so much, I did not claim my cogs last year and left blank, will this be a red flag? Also, I do not receive the EIC due to my w2 wages and never had. I am selling stuff that I had for years and some I may have received as gifts, I have no idea what the value is, I can’t leave my cogs blank and just claim the profit as I did last year? If not, will this be a red flag from last year as now comparison of my returns will be different ? I did deduct my fees etc, and paid the self employment tax. 

[ColeenD3]

Again, I can only speak to best practices. Even if you don't get EIC, this is still an IRS rule. If you choose not to report the costs, yes, it could be a red flag. The IRS expects you to keep accurate records for your business.

[jjzonka]

Thank you, what should I do with regards to last year since I did not report cost of goods for my personal items? I assumed zero is always an acceptable IRS number especially when some of the items were free. Where can I look up costs to try to calculate for these items? 

[JamesG1]

Any documentation that you can assemble including pictures downloaded pages of similar items on Ebay and Amazon would allow you to defend your deduction.

Report self-employment income and deduct personal expenses as a self-employment expense.

As an example, suppose your 1099-K reported sales of $1,000.  The items sold were these:

• $900 for items purchased for resale (for which you have cost figures), and 
• $100 for personal items for which you have no cost figures but expect there to be no gain on sale (for personal items, no loss on the sale is allowed).

Since you are not reporting an inventory in your Schedule C, you may report two cost entries:

• Items purchased for resale reported under Here's your info / Inventory at the screen Let's get the costs of your goods,  You have the individual costs for these items.
• The cost of personal transactions are reported as Personal Sales - no profits under Here's your info / Other miscellaneous expenses.  Those costs are reported as no more than $100 since no loss on sale is allowed.

[Edited 03/08/2022 11:33 AM PST]

@jjzonka

[jjzonka]

Thank you, I have no receipts for any of theses items, they were all my childhood collections and my personal items, so how should I obtain these costs as these items typically sell for greater than their purchase price. Last year in turbo tax I left these items blank and claimed all profit and then took fee deductions. This year I was going to do the same and keep my cost as zero, but I was informed that was not allowed. I’m so confused by this and not sure how to get these prices and I don’t want to cause any red flags for this little amount of money. Wondering if I can’t find these costs if I should not use turbo tax and need to file with a cpa. All assistance is really appreciated. 

[jjzonka]

I forgot to add in my last post that the majority of my personal items made a profit, I have no problem claiming it all as profit if this is allowed and then just take appropriate deductions.

[JohnB5677]

Income resulting from auctions akin to an occasional garage or yard sale is generally not required to be reported. However, there may be exceptions. If an online garage sale turns into a business with recurring sales and purchasing of items for resale, it may be considered an online auction business. 

Refer to IRS Fact Sheet

Since you've done this for a while, it does sound like a business.  If you do not wish to take the time to research the cost of the items, you can elect to pay the tax on the full sale price. 

To enter the 1099-K

1. Enter it under the Wages & Income 
2.  Scroll down to Miscellaneous Income = Start

3. Choose Other reportable income

4. Answer Yes to "Any Other Taxable Income?" 

5. Under Description put "1099-K Personal Property Sales "

6. Enter the amount from the 1099-K in the next box and click continue

7. Click on "add another income item", 

8. Under Description this time put "1099-K Cost of Personal Property"

9. Enter the amount if you choose to

10. Be sure to link to your business

Note: The IRS will not allow you to deduct a loss on personal items that you sell.

[jjzonka]

Thank you, will this be done on my schedule c, I filed a schedule c last year as advised by turbo tax, entered the 1099k amount and left the cogs blank. I’m assuming this was wrong from your reply. This year, I have a 1099k for about 3100 and income from PayPal about 700 ( I will get the exact amounts of course) so I enter both of these on the sch c with my fees?  But should I put a zero in costs and state personal property no receipts?

[jjzonka]

I forgot to add last year turbo tax had me under self employment income and expenses and told me to do the same this year. How would I put no cost of items in this and claim all as a profit? Even with deductions of fees I still have over a 1000 profit, if I don’t claim and cost for items sold

[ZoltanB45]

It would go on the schedule c and you can still enter the cost of the good sold even without a receipt. As long as it isn't ridiculous, you will be fine. If you had  a larger amount of sales like, $20000 and you put $15000 in Cost of goods Sold, IRS might come back and ask for receipts or do a search to figure out the cost.

[jjzonka]

Hello, 

My total sales were around 4000 before deducting fees. I don’t have any receipts or cost of goods sold because they were toys from our childhood etc. I don’t know where to even begin to estimate this on these collectables, is it wrong to put my cost as zero? Last year I left this line blank and didn’t even put a zero and claimed all profit, I hope I don’t get flagged for this. If I can’t put zero, how are these costs estimated? What was the last expert referring to when he told me I could enter zero and another expert told me before if you look on this thread that some cost needs to be entered, so I really need clarification. If you don’t have receipts how would zero be a number that is ever questioned? I’m just trying to do the right thing and appreciate any information.

[ZoltanB45]

You don't have to put anything in the cost of goods sold if you didn't pay anything for it. If the IRS sees this happening year in and year out and if you are receiving the earned income credit, then there might be an issue.  Some people play with business revenue to get highest possible credit which is fraudulent.

[jjzonka]

Hello, 

I do not get the earned income credit, my w2 wages are too high. I made a total of around 4000 this year, by the time I subtract ebay fees, PayPal fees, shipping costs, and a few shipping expenses, I believe my profit was around 2200. I want to make sure I’m doing the right thing with these personal items so I thought without receipts the irs could not question an amount of zero. If I truly should not put zero, how do I validate the cost of these used items?