1099k question - EBay

[jjzonka]

I forgot to add I also paid SE tax

[ColeenD3]

SE tax is not deductible. No Federal income tax is deductible.

[jjzonka]

I don’t think you saw my post prior to that which was the question. I have been referring to the same question in this thread and received three different answers from three different tax experts in regards to my cost of goods sold configuration for a 1099k with ebay and having no receipts for these old items. Some told me I had ti find costs others told me I can put zero if I don’t receive the EIC which I don’t. I need to figure this out before I do my taxes.  My main question is, I have no receipts for theses items do I need to find a base cost for each one and if so how? Or, can I put my cost of goods as zero and count my 1099k all as profit and just deduct my seller costs etc? As I read on a previous post the IRS can never question zero. 

[ColeenD3]

There is no perfect answer.  We are trying to work with you to find a solution to your problem. The answer that works the best is to include your COGS, but you don't have that information. You will need to look at all the answers and determine which feels right and reasonable for you. 

[jjzonka]

Can you suggest how cogs can be calculated without receipts, where I can find acceptable numbers, is there anything within the turbo tax program to assist with this? 

[AliciaP1]

@ColeenD3 is correct.  You need to use your own judgment regarding the expenses you will or will not claim. 

However, if the IRS reviews your return and inquires about any expenses you have reported and you do not have documentation to support the expenses, your deductions would likely be disallowed.  You may be subject to penalties and interest if that happens.

@jjzonka

[jjzonka]

Is the general rule to use fair market value on personal goods? If so does turbo tax have any reference for this? Or, with out receipts is is saver to use zero. I’m not asking what to claim and what not to claim I’m asking the correct way to do it in personal goods and are looking for your expertise so I can finally file though you?

[ZoltanB45]

If you purchased the item, the cost basis would be what you paid for the item. If it was inherited, then the cost basis would be the fair market value on the day you received it.

Turbo tax does not have a source to figure the FMV on a particular item. The FMV at a time is generally the amount someone would pay for that item at that time. I would not say using zero as the COGS is the safest, because the profit from a "business" may create an earned income tax credit. 

[jjzonka]

Would using good will or Salvation Army donation value guide be a good reference? I used zero last year, will that be an issue ir red flag as I never received the EIC due to my W2 wages.

[ColeenD3]

It's better than nothing. The problem with this is that the cost was more than the thrift store value. 

[jjzonka]

I’m so confused and I’m trying so hard to still be able to use turbo tax this year without having to go to a cpa as I’ve used you for the last 8 years. When people sell used items online, if they do not have receipts from items 20 plus years ago what does the irs recommending using for cost estimation if they don’t want zero? This is the only answer I am trying to get. Last year my cogs were told to be left blank with no receipt and to just deduct the cost of all office expenses and ebay expenses I have receipts for which I did. I get no extra credits from the irs due to this small amount of income due to my w2 s, so the EIC is not a factor. I was going to leave again zero this year but was told I should get to find the fmv so this is what I’m trying to do and really need a solution. I understand the thrift store is less than I paid but with no receipts would this be acceptable by the irs?

[JulieS]

If you don't have any documentation of the original cost, you can use $0 as your cost. The IRS will not go after you for that as reporting $0 as the cost will result in the highest tax due. 

[jjzonka]

I’ve been asking this all along and previous answers I was told was no because this could impact the EIC and be considered fraud, can you please see the previous thread? So putting zero will not cause a red flag? 

[jjzonka]

Addition to my last so I can enter a zero on sch c for cogs but still deduct my ebay, PayPal, and shipping fees etc which I have receipts for? 

Also the amount that was from PayPal with no 1099k do I just enter as other sales or income which did not generate a 1099k?

[JulieS]

Yes, you can enter $0 as your cost of goods sold and still enter your eBay fees, PayPal fees and shipping as expenses.

Yes, you should enter the additional income that is not on your 1099-K as other income.