eBay sales

Not all eBay sales are taxable.  If you are selling them for less than what you paid, there's no gain to report nor is there a loss. The IRS won't let you deduct losses on personal items.  Also, you should always have detailed records for items you are deducting.

 

So, in your case, as long as you haven't made sales over $25 million in the prior 3 years, you do not have to track inventory values.  You can just record the cost of the items you sold for a profit as cost of sales.  When you are reporting your 1099-K gross proceeds, you should back out the proceeds from the net $0 or net loss sales.

I don’t think your first point is correct? eBay sent me a 1099-k showing totals for all sales I made in the year.

Yes, it is possible that eBay sales may not be taxable however, all eBay sales reported on Form 1099-K have to be reported as income on your tax return.  You are allowed to deduct your basis/cost of the items you sold not to exceed the amount of your sales.  You can not deduct more than your reported sales as you are not a business.  When you deduct the cost of the items sold and the cost is more than your sale amount you have no taxable eBay income and you have reported your Form 1099-K from eBay.

Ok that makes sense. But I still do not understand your explanation of how/where to exactly input the amount of money I spent on the items sold.

 

do I just minus it from the amount of the 1099 and then enter that number as the sales amount? Or do I write it as a deduction some where?

 

thanks for your input 

You can use Part III Cost of Goods Sold on Schedule C to report the cost of your goods sold.

 

On Line 35 Inventory at beginning of year can enter your cost of the items sold which would be the sales amount reported on your 1099-K.

 

Then on line 41 Inventory at end of year you will enter $0.00.  This will make line 42 Cost of goods sold equal to the amount reported on your 1099-K.

 

This will carry over to Line 4 Cost of goods sold (from line 42) in part 1 and be subtracted from your Gross reciepts Line 1

 

Then Line 7 Gross income becomes $0.00.  Many steps but you have reported your eBay income Form 1099-K entered the cost of the items sold for a gross income of $0.00.

Thanks for the input. The 1099 includes the eBay fees + shipping money received from sale as well, so would that still be correct to say that is the beginning inventory amount? It’s showing more than the cost of the inventory. 

ugh this is all so confusing and stressing me out. Appreciate your advice. 

Yes, you will deduct the eBay fees + shipping as expenses in Part 11 expenses.  These expenses have no relationship to the cost of inventory in the prior post.

I am even more confused now. The gross income isn’t zero. I made money off of the sales even though I had purchased the items years prior. This still doesn’t explain where to enter the amount I paid for the items sold. 

You only need to report the individual sales that you made a profit on.  For example, if you sold 5 items and 3 of them were for less than you paid for them originally, you only report the income and expense for the 2 items you made a profit on.

 

To enter cost of sales in TurboTax Online please follow these steps:

1. Open or continue your return in TurboTax
2. Search for self employed income (use this exact phrase, don't add a hyphen) and select the Jump to link at the top of the search resultsI  f you land on the Your 2021 self-employed work summary page, select Review next to the work you're adding income for
3. Scroll down through the expenses and select Start on the line for Supplies
4. Enter the cost of the items sold that you have the documentation for 

 

So the cost of the items I sold I put as an expense under supplies? Can I enter them even I no longer have receipts for when I purchased them?

If the IRS audits your return and you do not have documentation for your deductions they will be disallowed, so it is important to retain detailed documentation about any expense you claim.

Gotcha. And what about my other question? “So the cost of the items I sold I put as an expense under supplies?”

thanks for your advice 

You can use supplies since there really is no category other than COGS. You also have the better option of making it a miscellaneous expense with an explanation.

There's a simple answer: just don't report the 1099-K because  you " just sold old clothes and stuff you had around the house".  Unless you sold any individual items for more than your cos basis (what you paid originally paid for them).

 

References: 

https://ttlc.intuit.com/community/tax-topics/help/do-i-have-to-report-personal-items-that-i-sold/00/26291

 

https://ttlc.intuit.com/community/state-taxes/discussion/i-live-in-illinois-for-2021-my-wife-was-selling-some-in-game-characters-through-ebay-i-think-she/01/2399958/highlight/false#M109330

 

 

Isn’t that just setting yourself up for the IRS to contact you if you don’t report the 1099?

Q. Isn’t that (not reporting the 1099-K) just setting yourself up for the IRS to contact you if you don’t report the 1099?

A.  We don't know for sure. The Government rules on expanded 1099-K reporting are new this year.  We don't know what the IRS is going to do with them (they will be overwhelmed).  But we do know that  there is, for now, no specific place on the tax forms to account for a 1099-K. Where you put it depends on why you got it. Most people will end up reporting zero income or, at least, much less than the amount on the 1099-K.  The red flaggyness is only a tiny bit more  by not reporting it. Either way, you need to be prepared to explain it. 

 

Earlier, in this thread,  somebody said " it is possible that eBay sales may not be taxable however, all eBay sales reported on Form 1099-K have to be reported as income on your tax return".  That's not true. In most cases, you have to calculate the taxable portion and report only that.  Except when reporting it as business income, there is no IRS form to report your expenses and cost of goods  sold.  

 

To cite an example: 529 Tuition Plan distributions are reported on a form 1099-Q.  They're not taxable if used for tuition.  But there is no IRS form to report the 1099-Q and tuition expenses on.  Years ago, we saw numerous complaints from people getting IRS notices for not reporting the 1099-Q.  We don't see those anymore as the IRS  learned their lesson.  Admittedly documenting tuition is easier than documenting cost basis of "garage sale"  items.

All of these replies have left me even more confused than when I originally asked the question. 

You can't have it both ways. You want to deduct expenses and you have purchases that you turned around and resold. At the same time, you say, "his isn’t like an established business I’m living off of". 

 

1) One possibility is that this is a business. You enter your income on Schedule C and take your expenses. You will not have a basis for the "old clothes and stuff I had around the house".

 

2) This is other income. You had no profit motive and you can't take any expenses. 

 

3) It is a little of each. Some things you purchased things for resale. You have receipts that you can include as purchases and include as an expense. You do not need to keep an inventory unless this turns into a business. You can also take the E-bay fees and shipping costs for those items only. Enter that portion of the income on Schedule C.

 

The things you had laying about the house are other income and you can zero that amount of income since you purchased the items a long time ago and sold them for less than your paid.

 

You will need to make sure that the income on Schedule C and the other income together add up to the amount on the 1099.

 

Other Income

 

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  (but not more than the sales price. You can't produce a loss.)

 

Another option Is to report it on Schedule D as the sale of a personal item. Since you can't deduct a personal use loss, you are covered.

 

 

"American Rescue Plan"....  If that isn't the worlds biggest oxymoron, I don't know what is. This is going to cause major headaches for millions of low income folks.

 

I have read every reply above and no one clear answer was given. I think there were a couple different places on the Schedule C to do this and the last line in the reply above mentioned a Schedule D.  SMH!

 

Here is my simple scenario: I purchased a few rolls of silver coins over the years at various trade expos and do not have any receipts. I sold them this year on eBay for 826 dollars and actually sold them for what I paid for them in the first place. I will get a 1099K. Where should I put this info and where do I put the negative amount so I don't have to pay taxes since I didn't make a profit? 

 

Build Back Broke!

"A  few rolls of silver coins" is an investment.  You have a a Schedule D situation (you sold an investment).  Sales price minus cost equals you capital gain (or loss).

 

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in  Home & Business)

 - Wages & Income

Scroll down to:

-Investment Income

   -Stocks, mutual funds, Bonds, Other (coins is other)

If you are a one-time or casual seller on eBay then you are not a business and Schedule C Profit or Loss from Business is not an option to report your sales on eBay.

 

To report your 1099-K from eBay  and your cost of goods sold (COGS) in TurboTax follow these steps:

1. Log in to your TurboTax account if it is not open.
2. Select the Wages & Income tab.
3. Scroll down to Less common income click Show more.
4. On the page Let's Work on Any Miscellaneous Income click on Other reportable income.
5. On the page Any Other Taxable Income?  select yes.
6. On the page, Other Taxable Income enter eBay 1099-K for the description and the amount.
7. Select continue and answer No on the next page.

Next, you will have to report your COGS.  Follow these steps to report your COGS:

1. Log in to your TurboTax account if it is not open.
2. Select the Wages & Income tab.
3. Scroll down to Less common income click Show more.
4. On the page Let's Work on Any Miscellaneous Income click on Other reportable income.
5. On the page Any Other Taxable Income?  select yes.
6. On the page, Other Taxable Income enter eBay 1099-K COGS for the description and the cost of the items sold as a - amount for example  -1,200.
7. Select continue and answer No on the next page.

This process will report your gross income reported to you on the 1099-K in the first entry and then "back-out" your  COGS in the second entry.  As you are aware this is the first year of the new filing requirements for Form 1099-K and there is no one single step to report the sale and COGS if you are not a business.

@brianzx7

This is a great explanation - thanks!

 

When reporting the 1099-K from eBay on Schedule D, what can I report under cost of goods sold (COGS)? Can I include shipping paid, as well as eBay fees?

 

Also, if I purchased an item for $100, paid $6 in tax and $10 for shipping - is my cost basis $100 (because that's what I paid for the item before tax and shipping) or $116 (the total amount of the purchase)?

 

 

Thank You,

 

This is super helpful!  I have been selling my old toy collection that my parents had stored in their attic for years and similar to others on here, there are no receipts or records for these toys (sealed and open), sports cards, etc.  Is it best practice to then just have COGS match the 1099?  I just exceeded the threshold of 20k in 2022.

It depends.  The question you need to resolve is what is your basis in the toys you sold.   When COGS equals the gross proceeds amount on your 1099, there will be no gain on the sale.   A no gain on the sale is acceptable on a tax return as long as it is accurate.  The best practice then is to take reasonable efforts to ensure the sales are accurately reported.  

 

If your old toy collection is personal use property, then any gain is taxable income and is reported on your tax return.  A loss on the sale of personal use property is also reported on a tax return; however, it is not deductible at all.  Personal use property is anything that you use for your enjoyment.  It can include things such as appliances, cars, art, and toys.   

 

Investment property is different in that investment property is purchased with the express intent to profit from its sale.  Thus, you will need to decide whether your old toy collection represents personal use property or investment property.  If the latter, then gain is reported as capital gain, and losses are reported as capital losses.  Short-term and long-term categories apply to investment property.  

 

Given that there are no receipts, have you tried searching on-line for pricing information for the toys?  Another option might be to find historical pricing for similar toys.  Lastly, if the manufacturer is still in business, you might inquire with that company for any historical pricing data they might be able to provide.  

 

@Gramma502