1099K from PayPal... Made just over $5000 for selling quilt related items & I have receipts for supplies.. can this expense offset income?

[tawadley]

I got a 1099K from PayPal for 2024. I sold $5400 of quilting supplies / fabric / quilt tops in Jan & Feb. I thought I might want to start a side business, but decided against it, and didn't sell anything else for remainder of the year. I have tons of receipts that I have kept throughout the years that shows the cost of the fabric and supplies that I bought to make these items.. (1) Is this considered a hobby? (2) Can I deduct any of these expenses (cost of goods) to offset the tax implications of the $5400? I understand that I cannot write off all the shipping charges nor the PayPal fees if this is a hobby (which sucks because if they took those out, I would have been under the $5K threshold for getting a 1099K)... 

[Vanessa A]

1) It would be a business as your intention was to make a profit.  It does not matter that you lost interest or ended the business it only matters that your intention was to be a business.  

2) Yes, since it was a business, you can deduct the expenses related to the business.  In a hobby, none of the expenses are deductible.  As a business, you can also include the cost of the shipping fees and PayPal fees.  

 You would use TurboTax Home and Business or TurboTax Premium to enter income from self-employment. This income will be reported on Schedule C which is part of your overall tax return. This also means you will be subject to SE taxes of 15.3% .

Even if you do not get a 1099-K, you are still responsible for reporting this income.  All income from all sources must be reported on your return if you are filing a return.