1099k From paypal

[Anonymous]

So I received a 1099k from PayPal even though I didn’t receive more than 20k or have over 200 transactions. I only received a little over $1500
My question is, how do I report this on my taxes. The situation is that most of the money received was from selling things on eBay, do I have to pay taxes if I sold used items for less than I bought them? If so is there a way I can deduct the price I payed for the item originally. Also a small amount of money I received was from a payout because I stream on twitch. This is already reported on another 1099, do I have to report it again and get taxed twice. If so is there a way I can avoid double reporting it? 

Thanks in advance for any help!

[JulieS]

If you sell used items and are not engaged in a business, you do not have to report the amount as self employment income.

If you sell used items and want to be considered as doing it as a business, you can deduct the cost of the items from the selling price as well as fees and postage. In that case you would complete a self-employment schedule for that activity. 

The streaming income is also reported on the 1099 from Twitch, so you don't have to do anything else with it. 

Form 1099-K is now being issued to anyone with more than $600 in third party transactions, but the IRS is aware that not all transactions are taxable income. 

For instance, I often send money as a gift to relatives using Paypal. 

To learn more about this topic, click here.

[Anonymous]

Ok, but if they send the 1099k to the irs won’t they want me to report it. Am I going to have any problems if I don’t report it? I just don’t want to get audited for not reporting a form. Also I forgot to mention that I use a business PayPal since I don’t want donators and subs to see my address

[DaveF1006 · Accepted solution]

Yes, you should report it but you can back out the income if you are very specific about what you do. 

1. Go to wages and income>less common income. 
2. Go to Miscellaneous Income, 1099-A, 1099-C
3. Go to Other reportable income
4. In the description field, " enter 1099k income for personal items sold on Ebay. Then put in the amount of the 1099K.
5. After entering this, there will be a summary page that appears.  Select add another miscellaneous income item. 
6. Here put in description 1099K is for personal items sold through ebay. This is not a business. Enter a negative amount for the amount of the 1099.
7. What this does is show the positive and negative amounts on line 8Z, which cancels out the income. 
8. Be specific in your description fields for both of the miscellaneous income entries so the IRS will see how you justify this isn't taxable income. You will to make clear that this is for personal items sold and you are not actively engaged in a business of buying and selling.

[Anonymous]

Ok and let’s say if I sold something for more than I purchased, how do I go about that, do I have to tax that entire amount or can I deduct the original purchase amount? For example let’s say I bought some shoes that I wasn’t looking to resell however when I did choose to sell I got $100 more than I paid. Do they tax just the $100 or the entire sale amount 

[DaveF1006]

If it is a personal item you resold, it is still not income unless you are in the business of actively purchasing and reselling merchandise.  

[Anonymous]

Wow thank you, you have been extremely helpful!

[Anonymous]

Final question, does it matter if my PayPal account is a business account, selling things on eBay isn’t part of this I just use a business account for my twitch streaming hobby so viewers can’t see my address and name when they sub or donate?

[DaveF1006]

No it doesn't matter that your pay pal is a business account. It is all about the nature of your income and if you are in the business of buying and selling personal items. Your Twitch Streaming Hobby is the true nature of your business.

[Anonymous]

Thanks so much!

[Anonymous]

How would I handle the 1099k if the eBay sales and my twitch hobby are on the same 1099k. Would I just do the same thing you said but subtract the twitch income and put that in a seperate line so it can be taxed?

[RobertB4444]

Yes.

[forologia]

Thanks for your  help Dave

Could you please clarify:

When I arrive on the summary page I  found the $3,000 (I had entered on the previous page with the description "for personal items sold on ebay" )

So do I then enter a second item $ -3000 with the slightly modified description "personal items sold thru ebay.  This is not a business"  Will the 0  total then be entered on my 1040 and if so what line?

Thanks again for helping me so I can finally file!!

[DianeW777]

No.  A hobby is not a business and due to the current tax law the hobby expenses are not deductible.  You can decide if it is a hobby or a business using all the factors.  It may simply be a sale of personal use items. Once you review the information you can make your entry on your tax return.

Companies have received new reporting rules that require they report to the IRS any sales that equal or exceed $600. This means you are issued the Form 1099-K and the IRS receives a copy as well.

• IRS General FAQs on Payment Card and Third Party Network Transactions

If it is not a hobby or a business but simply a sale of personal items and there is a profit you will report as a sale of investment property.

If there is a loss there is no sale to report because the sale of personal use items is not allowed.

The sale of personal items is considered investment income is there is a profit or gain.  The gain is determined based on your cost basis in the asset your sold.  Purchase price and any sales expense are what is allowed to be used for the cost basis to determine gain or loss. Personal losses are not required to be reported and those losses are not allowed to offset or reduce other taxable income.

• Keep all of your records pertaining to the sales with your tax return.

These are considered investment sales for tax purposes and reported on Schedule D.  TurboTax CD/Download and TurboTax Premier Online will handle these transactions.  You can use the following link for instructions on how to enter into your tax return.

• How to enter investment sales

 Any income received for services or goods is taxable.  You have to decide if it's a hobby or a business for tax purposes. Review this page from IRS:

Key elements:

To enter hobby income and expenses in TurboTax please follow these steps:

• Business or Hobby?

1. A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
2. A business allows you to deduct the costs necessary to obtain the income.  The law explains that 'you must be engaged in the activity to produce a profit'.  The test under IRS is that you must show a profit three out of every five consecutive year.
   • Deducting Business Expenses
   • Where do I enter Schedule C

• Once in your tax return, click on Federal Taxes tab
• Choose Wages and Income
• Scroll down to Less Common Income and click Start to to right of Miscellaneous Income, 1099-A, 1099-C
• Click Start to right of Hobby income and expenses

@forologia

[Edited: 03/10/2022 | 12:59p PST]

[ponch]

@DaveF1006  It's only one way for reporting it -- to upgrade to Deluxe version and pay for it.

Am I right?