eBay seller at a loss

[TheMitchman]

Hello,

I sell used personal items (books, movies, etc.) on eBay. I generate no taxable income because I sell the items for less than what I paid for them. I will receive a 1099-K for Tax Year 2022. 

How will I account for my sales on my 2022 Form 1040? Do I need to complete a Schedule C? What records do I need to keep and provide to show that I made no profit?

Thanks!

[KochuK]

Hi TheMitchman, thanks for posting the question.

Below is from Opus17 TurboTax Community posting:

Quote

The difference between a hobby and a business depends on your intent.  Here is the 9 factor test the IRS uses.

https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business

Basically, if it is a regular and ongoing effort with a profit motive, it is a business, even if it is small

Unquote

Therefore, if you report on Schedule C, Profit or Loss from Business, your cost basis is likely to be the fair market value at the time of sale since it is an used items. Fair market value at the time of sale to an unrelated 3rd party in an open sale platform is a good indication of your adjusted  cost basis. (not the amount paid by you when the item is new)

Hope the above helps.

[TheMitchman]

Thanks KochuK,

If based on the 9 factor test I determine that my activity is a hobby, what are my reporting responsibilities? Do I need to account for the amount on my 1099-K on my 1040?

Thanks!

[KochuK]

Hi The Mitchman,

Beginning in 2018, the IRS doesn't allow you to deduct hobby expenses from hobby income. you must claim all hobby income and are not permitted to reduce that income by any expenses.

For hobby expense deduction, unless you can itemize deductions on Schedule A, it is not helpful.

https://turbotax.intuit.com/tax-tips/self-employment-taxes/4-tax-tips-for-money-making-hobbies/L89qz...

https://ttlc.intuit.com/community/taxes/discussion/how-do-i-declare-hobby-income/00/765831

Thanks.