1099-K for personal items sold

[Ohmycivil]

I have a store on Reverb.com that I sell my used personal musical gear. I purchased all the gear new at retail, but eventually sell it as slightly used for a loss. I received a 1099-K for the income I received for selling this gear. I am trying to figure out the best way to offset this income. It is a considerable amount at $26,000 or so. But I initially paid almost $34,000 for the gear throughout last year. Any help would be appreciated.

[ColeenD3 · Accepted solution]

This seems to be a little more than just selling off old items laying around the house and less than having a business. You can follow the steps below, from a post from PattiF, , but do not enter any expense larger than profit. Secondly, it is possible you could have to justify this to the IRS, since the items are new, although used and sold at a loss.

This can be reported as the sale of items not associated with a business so this won't be considered as self-employment income

In order to do that you can either report it as investment income or other miscellaneous income. Make sure to include expenses of the sales and the original cost of the items.

For reporting Form 1009-K for personal items sold not associated with a trade or business, you can report this as Miscellaneous income.

• From the left menu, go to Federal and select the first tab, Wages & Income
• Add more income by scrolling down to the last option, Less Common Income, and Show more
• Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
• Choose the last option, Other reportable income and Start and Yes
• 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 as a negative number to reflect the cost of these items and the sales expenses.

[Ohmycivil]

Hi Coleen:

Thanks for the prompt response. I followed the instructions you provided and entered the amount as shown on the 1099-K I received from the site (reverb.com). I am a little confused on the last part when it says to "enter an adjustment as a negative number to reflect the cost of these items and the sales expenses." Does that mean I need to add another "miscellaneous income item" and make it a negative amount? If so, will this amount be the amount I originally paid, or the same amount as entered before to cancel out the income evenly? Thank you for your help!

[ColeenD3]

Yes, you will need to make another entry to have a negative amount. Since this is not a business, you can't take a loss, so enter only an amount up to the amount of sales, not what you actually paid.

[tpham913]

I've also found that people have suggested using the Form 8949. What is the correct form to use for 1099-K?

[JulieS]

It depends on what activity caused the 1099-K to be issued. The posts above relate to the sale of personal use property at a loss. Form 1099-K is usually reporting business income and is generally reported on Schedule C.

Click here to learn more about reporting 1099-K income. 

[peterooi]

@ColeenD3 You are spot on with your post per IRS Website,

https://www.irs.gov/businesses/understanding-your-form-1099-k#:~:text=If%20you%20receive%20a%20Form%....

However on TurboTax 2022, after we key in the 1099K and stipulate Personal Items, the entry gets populated in the 1099B section typically for stock sales. 

If we follow your path, the correct path, this mean would would not technically key in the 1099K but rather just manually report every sale item correct?

Thank you in advance for your response.

[JamesG1]

Correct.  You will be entering each sale item on IRS form 8949 / Schedule D Capital Gains and Losses.

Personal items sold for less than their basis (most likely, the original purchase price) report $0 capital gain on line 7 of the Federal 1040 tax return.

Personal items sold for more than their basis report the gain on line 7 of the Federal 1040 tax return.  See this example.

                             Selling           Cost

                              Price             Basis

Couch                    $500              $2,000        Capital loss on personal item = $0 loss

Jewelry                  $400               $300           Capital gain on personal item = $100 gain

Chair                     $100               $100            No capital gain or loss

                               $1,000           $2,400

Schedule D will report a $100 long term capital gain.

Federal 1040 tax return line 7 reports $100 long term capital gain. 

To report Personal item sales in TurboTax Online, follow these directions.

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Click Show more to the right of Other Common Income.
• Under Your income and expenses, click the Edit/Add button to the right of Form 1099-K.
• At the screen Did you get a 1099-K? click Yes.
• At the screen How would you like to enter your 1099-K? click Type it in myself.  Click Continue.
• At the screen Choose which type of income your 1099-K is for, select the button for Personal item sales.  Click Continue.
• At the screen Let’s get the info from your 1099-K, enter the information.      Click Continue.
• At the screen Personal Item Sales, you are told that further information will need to be entered.  Learn More provides detailed information for the next steps.  Click Continue.
• At the screen Your 1099-K summary, notice that the income relates to ‘Sale of Personal Items’.  Click Done.
• Under Your income and expenses, click the Edit/Add button to the right of Investments and Savings (1099-B, 1099-K….)
• At this screen, you will be asked to Review the Personal item sales (1099-K).
• At the screen Now, enter one sale…., answer questions about the personal item sale.  Click Continue.

The entry will be reported:

• on Schedule D of the Federal 1040 tax return, and 
• on line 7 of the Federal 1040 tax return.

Capital loss for a personal item sale reports $0 capital gain on line 7 of the Federal 1040 tax return.

Make sure that you retain any information about the items sold should you be required to demonstrate to the IRS that this is not taxable income.

@peterooi 

[peterooi]

@JamesG1  Thank you for your response. Your method is doing to via 1099B correct? However when you read IRS guidance it says:

f you receive a Form 1099-K for a personal item sold at a loss, report the information on Form 1040, Schedule 1, Additional Income and Adjustments to Income with offsetting transactions. For example, if you receive a Form 1099-K for selling your couch online for $700 you will report:

• Part I – Line 8z – Other Income – Form 1099-K Personal Item Sold at a Loss $700
• Part II – Line 24z – Other Adjustments - Form 1099-K Personal Item Sold at a Loss $700

So are you saying that it can be reported on the 1099B per your description contrary to the IRS website?

Thanks

[JohnB5677]

"The Form 1099-K is an information return. Use this information return in conjunction with your other tax records to determine your correct tax."

As stated, you can use what you have to, "to determine the correct tax".  You have several alternatives available to you listed above.

  Understanding Your Form 1099-K  

[Nancyzee]

Since TurboTax doesn't list line numbers (line 8z and line 24z), where would the "other income" and "other adjustments" be entered? The only option I see for offsetting personal items sold at a loss is to check box 1A (amount that shouldn't be included on the 1099-K). I was planning to enter the whole amount of the 1099-K, but also I don't know whether I'm supposed to enter this number as a positive number or with a minus sign in front of it. Thanks.

[KrisD15]

To clarify, what is the 1099-K reporting? Only personal items sold (no loss allowed)?

Also or only items sold at a gain? 

[Nancyzee]

The 1099 is reporting gross sales for used clothing sold on Poshmark. My net proceeds are about $500 less than what is being reported because Poshmark takes a 20% commission. The clothing sold is clothing that I originally bought for myself or my children, so there is really isn't any profit.

At first I tried putting it in as self-employment income, but the problem I ran into was that there wasn't any place to put in the cost of the items sold, only places to put in business expenses like gas, home office, etc.

Reporting it as personal property seems like the right approach, but I still don't know what the correct way to indicate that that there wasn't any profit.

Thank you.

[KrisD15]

If the 1099-k is simply reporting proceeds, much like a garage sale, from selling personal items but not trying to make a profit (and not selling any items at a gain)

Enter the 1099-k under

Income

Other Common Income

Income from Form 1099-K

Start 

"Did you get a 1099-K?" YES

SELECT PERSONAL ITEM SALES on the "Choose which type of income your 1099-K is for" screen

Continue

Enter the information from the 1099-K

Continue

Select "ALL ITEMS WERE SOLD AT A LOSS OR HAD NO GAIN" on the "Personal Item Sales" screen

Continue and Done

That's all you need to do, there is no income and no loss (personal item sales cannot generate a loss)