I received a 1099K for personal property sold through PayPal. When I itemize the cost of personal property items, it calculates a loss in turbotax.

[KathrynG3]

Discounts or cash back rewards are not taxable. To exclude them when they are included on Form 1099-K, follow these steps:

• Go to Form 1099-K in your tax return. To return to this area of your return in TurboTax Online, follow these steps:
  1. From the left menu, click on Federal
  2. Under the Income & Expenses tab, scroll down to Self-employment income & expenses and click Edit/Add
  3. Click Edit next to the net income
  4. Under Income, scroll down to click the button on the left Add income for this line of work
  5. Under Common Income, select the radio button for Other self-employed income, includes 1099-K, cash, and checks, scroll down and select Continue
  6. At Tell us about the other self-employed income for your Education work, where you previously entered Form 1099-K, add another line with the applicable description of a subtraction. For example, Less Free Product Trials, or Less Cash Back Rewards.
  7. Enter the amount as a negative number by starting the entry with "-" and click  Continue.

@drnag
 

[drnag]

@KathrynG3 This is extremely helpful! I also have some income on the 1099-K that should have been 1099-MISC except it was below $600 so the payer did not issue a 1099-MISC. Should I just let it be on the 1099-K so the tax gets paid, or enter as a negative number here and positive income elsewhere despite no 1099-MISC

[KathrynG3]

Yes, the income that could have eventually been reported to you on Form 1099-MISC can stay on Form 1099-K for tax reporting purposes. It is a best practice to keep good records to trace all the income sources to prove what is being reported.

In the event of a partial reporting on the forms, which potentially exists with Form 1099-MISC, Form 1099-K, etc., the best practice is to always report it on the tax return exactly as it was received initially. 

Then, make the adjustments as necessary to get to the accurate total. 

For example, if a business made $10,000 total, receiving Form 1099-K from PayPal for $7,500 which included $7,100 from one main source and $400 from someone else also on PayPal, but still business related, then in TurboTax, report $10,000 by entering Form 1099-K for $7,500, and add a line for Other business income of $2,500. Keep business notes which would track all the sources of income including each of these components.

I'm glad this is helpful! 

@drnag

[Szehner]

If it's not income because it is personal use items sold at a loss, what form is the 1099k inputted on in the tax return?  I moved to a state with a $600 reporting threshold and I am now receiving the 1099k.  I realize you can't "deduct" the loss, I just dont want to pay tax on yard sale items that the IRS deems not taxable and I don't want to omit the 1099 and trigger an audit. 

[JamesG1]

The income is most likely flowed to self-employment income or capital gain/loss on Schedule D.  To find where the income was reported on your 1040 Federal tax return, follow these directions.

• Down the left side of the screen, click on Tax Tools.
• Click on Tools.
• Under Other helpful links, click on View Tax Summary.
• Down the left side of the screen, click on Preview My 1040 to see the actual tax return that you prepared.
• Down the left side of the screen, click Back to return.

Self-employment income will be reported on Schedule 1 Additional Income and Adjustments to Income on line 3.  The form total flows to the Federal 1040 on line 8.

Schedule D entries can be found on the Federal 1040 on line 7.

You may also print or view your full tax returns prior to filing after you have paid for the software.

[robby_d1]

Turbo tax will not let me enter a negative number. States “must be at least 0”

[PattiF]

For Massachusetts residents, the following information is relevant if the 1099-K was for less than $20,000.

Yes, Massachusetts and a few other states have lowered the threshold for reporting income from PayPal on a 1099-K. The Massachusetts State Tax website says that if the income on the form did not meet the federal threshold of $20,000, then the 1099-K only needs to be reported to Massachusetts and not included with the IRS return. There is a separate link to MassTaxConnect as shown in the link in the paragraph Submission of Forms 1099-K to DOR using combined Federal/State Filing Program. Massachusetts 1099-K Submission

The FAQ section of the same web page has a section "Since I received a Form 1099-K, does that mean I owe tax?" FAQ 1099-k Massachusetts Number 2 addresses selling personal items at a loss while downsizing.

[Jessa25]

Thank you for this! I have the same issue, but turbotax doesn't allow me to put a negative amount? It says 'must be at least 0'.

[PattiF]

There is a way to enter a negative amount in TurboTax to offset the income from the 1099-K.

• Go to Miscellaneous Income
• Then Other reportable income, Click Start
• Add Offset to Form 1099-K in Description and a Negative number in Amount 

[Jessa25]

I see. Can I also file my 1099k form under miscellaneous income instead of filing it under Self-employment? The payment I got from here wasn’t really income from a business but instead from cashbacks (eg. Rakuten) and money refunded from free product trials.

[KathrynG3]

If your Form 1099-K is for personal items sold, similar to having a garage sale, and you were not in a trade or business, the IRS allows you to also deduct the related expenses for the sale up to the amount of the sale.

If you do not need the self-employment section, you have two options to report Form 10999-K in TurboTax. Both following options will report Form 1099-K and also zero it out on your return. This will mean you appropriately pay -0- tax on the non self-employed income.

For reporting Form 1009-K for personal items sold not associated with a trade or business, you have two options:

• Option 1 in TurboTax Premier or higher: reporting Form 1099-K as investment income
  1. Go to the search box and enter Investment Sales
  2. Select Jump to Investment Sales
  3. Select Other at the next screen, OK, what type of investments did you sell? and click Continue
  4. At Tell us more about this sale, enter in the name, such as Form 1099-K eBay Personal Property Sales and the Payer's EIN and click Continue
  5. At Now we'll walk you through entering your sale details, under the first dropdown menu, What type of investment did you sell? Select Personal Items
  6. Answer How did you receive this investment with an option from the dropdown menu.
  7. Enter the Description. If you are uncertain what date you purchased the goods, select Something other than a date so that TurboTax will enter Various
  8. Next, enter your Sale Proceeds and an equal amount for the Total Amount Paid and click Continue. The description for the cost should include Cost of Personal Property
  9. Select None of these apply at Let us know if any of these situations apply to this sale and Continue
  10. Continue through the rest of the prompts 
  11. Select Add another sale to add the next Form received 
       
• Option 2 in TurboTax Deluxe or higher: reporting it via Other Miscellaneous Income is acceptable to the IRS.
  1. From the left menu, go to Federal and select the first tab, Wages & Income
  2. Add more income by scrolling down to the last option, Less Common Income, and Show more
  3. Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
  4. Choose the last option, Other reportable income and Start and Yes
  5. Enter the applicable description and amount and Continue
     • First, enter Form 1099-K as received. It is essential that the full amount be entered.
       • For a description, include Form 1099-K and Personal Property Sales
     • Next, enter an adjustment to reflect the cost of these items as an offsetting, negative amount up to the amount of the income.
       • For the cost description, include Form 1099-K and Cost of Personal Property 
       • In other words, if the goods cost you $100 and Form 1099-K was for $10 in sales, the maximum cost allowable would be $10.

Otherwise, Form 1099-K must be included in the self-employed section of the return. In the self-employed section, negative income cannot be reported. Self-employed persons must use the rebates option under income or report any offsets as miscellaneous expense.

@Jessa25

@PattiF

@robby_d1

@Szehner

[Szehner]

I'm confused, I thought that a 1099K for personal items sold at a loss was not reportable or deductible.  MA and VT have the lower $600 reporting threshold and the FAQ on their official websites gives specific examples of when a 1099 isn't reportable as income.  One example speaks to selling used personal items at a loss and states the income on a 1099k in that scenario is not reportable or taxable. In addition, IRS publication 544 states losses on the sale of personal property are not tax deductible.  I'm trying to ensure I am not reporting things on a tax return that do not belong or taking deductions that are not allowed

[TomYoung]

"I'm confused, I thought that a 1099K for personal items sold at a loss was not reportable or deductible."

You are absolutely correct.  It's perfectly OK to not report Form 1099-K on your federal income tax return when the dollars reported on the 1099-K pertain to you ad hoc sale of personal property at a loss.  It's exactly the same situation as when you hold a garage sale to get rid of the junk you've accumulated and all the proceeds are in cash. 

Well, it's exactly the same except that the IRS gets that Form 1099-K with some dollar amount on it , while they never know and have no way of knowing about the cash from the garage sale.  So there is a chance - a very, very, very small chance in my opinion - that the IRS might send you a communication of some sort asking "where's that Form 1099-K on your income tax return?"  In this situation you'd think a polite letter back to the IRS explaining the situation - sale of personal property at a loss - would put the issue to bed.  But, with the IRS, you never know.

Because so many people live in terror of the IRS even looking their way, all kinds of "workarounds" have been devised to "report" the 1099-K proceeds with some sort of offsetting costs such that there's no affect on taxable income.  The hope is that the IRS computers make some sort of "match" on your income tax return to that Form 1099-K, and leave you alone.   But, with the IRS, you never know.

[Steve2286]

I live in Illinois and received a 1099-K from PayPal as well for $5,800 in sales.

In 2020, I bought and sold sports cards/memorabilia that I have found from when I was a kid. I bought these 5-20+ years ago and have lost money on the majority of them from when I originally purchased them. The IRS wants to take over $2,000 away from my return because of these sales. Is there any way around this? I didn't make any money off of them. I'm simply decluttering stuff from my house, but doing so like a garage sale online. I had a whopping 11 card sales in 2020 so it's not a lot.

[KathrynG3]

Yes, it is acceptable to claim ordinary and necessary related expenses in a sale of personal property. However, these cards are more like collectibles. Reporting it as an investment sale will allow a subtraction up to the cost of the sale. To do this in TurboTax, follow these steps:

• In TurboTax Premier or higher: report Form 1099-K as investment income 
  1. Go to the search box and enter Investment Sales
  2. Select Jump to Investment Sales
  3. Select Other at the next screen, OK, what type of investments did you sell? and click Continue
  4. At Tell us more about this sale, enter in the name, such as Form 1099-K and the Payer's EIN and click Continue
  5. At Now we'll walk you through entering your sale details, under the first dropdown menu, What type of investment did you sell? Select Personal Items
  6. Answer How did you receive this investment with an option from the dropdown menu.
  7. Enter the Description. If you are uncertain what date you purchased the goods, select Something other than a date so that TurboTax will enter Various
  8. Next, enter your Sale Proceeds and an equal amount for the Total Amount Paid and click Continue
  9. Select None of these apply at Let us know if any of these situations apply to this sale and Continue
  10. Continue through the rest of the prompts 
  11. Select Add another sale to add the next Form received