1099k paypal for personal items

[kartheeksrm]

I received a 1099k for personal items. Though i don't meet the 20k limit and 200 transactions due to the state i live in it classified me and issued a 1099k for little over a thousand. 

How can i differentiate to theirs that it's not a profit motive and is different than any other 1099k from things like uber and lyft. 

Also i am couple of dollars over a thousand, if i refund one of my old transactions, it will fall below 1000, will i need to still declare in that case?

[KathrynG3]

Income received on Form 1099-K has been reported to the IRS at the same time you received your Form 1099-K. The income must still be declared. The IRS expects all income, regardless of payment method, to be included on your tax return.

However, this income can be offset by the expense to purchase the items up to the amount you earned. In other words, if you bought something for $100 and sold it for $10, the IRS would allow the expense for this item to be $10.  

Since you are not earning in a business capacity, and to offset the income with the allowable expense, there are two options. 

Option 1 (TurboTax Premier or higher):

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 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 

Option 2 (all TurboTax levels):

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
   1. First, enter Form 1099-K as received. It is essential that the full amount be entered.
   2. Next, enter an adjustment to reflect the cost of these items as an offsetting, as a negative amount up to the amount of the income.

Please see this help article for more information: What is Form 1099-K?

[Edited 01/30/2021 |5:57 AM PST]

@kartheeksrm 

[MoneyBags1]

Thanks for this info about how to handle a Paypal 1099k when you don't have a business and just selling personal items at a loss.  I have seen another post recommending to use a positive and negative Miscellaneous Income to zero it out if all items are sold even or at a loss.  Is it better use Investment Sales like you suggest or Miscellaneous Income like this other post?  The 1099K does have the "Filer's TIN" number (Paypal in this case) which I assume needs to be listed somewhere so the 1099k can automatically be related to what the IRS also received correct?  My states (IL) threshold for getting a 1099-K is reduced for everyone over $1000.

Here is the post:

Since your sales were reported on a 1099-K and the IRS receives a copy, you will need to report the sale of your used clothing on Ebay.  However, you can "zero out" the income since you sold the clothing for less than you originally paid, so it won't affect your taxes. 

Enter it under Wages & Income tab at the top: 

1. Scroll down and click Start next to Miscellaneous Income
2. Choose Other reportable income
3. Answer Yes to "Any Other Taxable Income?" 
4. Under Description put "1099-K Personal Property Sales "
5. Enter the amount from the 1099-K in the next box and click continue
6. Click on "add another income item", 
7. Under Description this time put "1099-K Cost of Personal Property"
8. Enter the same amount but as a NEGATIVE number.
9. On the Other Miscellaneous Income Summary make sure you see the 2 items, one positive and one negative and Total is $0.

Note: The IRS will not allow you to deduct a loss on personal items that you sell.

[rallenh]

These directions don't work on TurboTax Deluxe 2020 Version [number removed].

[KathrynG3]

Yes, you can add the Filer's TIN to the description to relate it to the correct Form 1099-K.

Yes, for TurboTax Deluxe, Option A will not apply. Use Option B to report Form 1099-K.

There are several options to report Form 1099-K with any associated negative amount on your tax return that would be acceptable to the IRS.

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

• Option A 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 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 
       
• Option B 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.
     • Next, enter an adjustment to reflect the cost of these items as an offsetting, as a negative amount up to the amount of the income. 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.
        

For reporting Form 1099-K from self-employment with offsetting amounts that is associated with a trade or business you own and operate, TurboTax offers two self-employed options. From the Wages and Income section, go to Self-employed income and expenses and select Start/Revisit to begin with reporting Form 1099-K.

• Option 1: 
  • Report Form 1099-K as received in the COMMON INCOME section under Other self-employed income, includes 1099-K, cash, and checks
  • Report any cashback or rebates under LESS COMMON INCOME using Rebates and refunds, includes any income returned to customers
• ​​​​​​​Option 2:
  • ​​​Scroll down to EXPENSES and click in the lower left hand corner, Add expenses for this work
  • Scroll to Other miscellaneous expenses select the toggle, scroll to the bottom of the page and click Continue 
  • Enter a Description for your offsetting amount, such as Form 1099-K costs or Form 1099-K cashback rewards and Continue​​​​​​​

@MoneyBags1

@rallenh

[rallenh]

@KathrynG3 excellent! Thank you! (I did end up doing what @MoneyBags1 outlined)

Thanks to both of you.

[KathrynG3]

You're welcome!

[cbsprings]

where do you enter the deduction for value paid on the items that you sold and reported on 1099k

there is no other line

[DaveF1006]

You would report this as expenses under inventory in the expense section in your Turbo Tax Self-Employed .Program or home and Business if you re using the software version.

[whiteswantrading]

Hi KathrynG3

Are you sure that one could report Investment Sales as a summary? It would be more beneficial since it would tax long term personal property gains at the lower capital gains rate vs using Misc Income. However, it doesn't seem that Turbotax allows you to leave the dates as something other than a date or various. It appears that one has to enter all the transactions which would be a daunting task if there are lots of transactions to report.  8949 filing instructions also seem to indicate the same but I'm not sure. Were you able to do it on your version? I attempted this on Turbotax Premier. Thanks.

[Opus 17]

@whiteswantrading 

If you are selling personal items for less than their original cost, this is not an investment. You can’t deduct a capital loss on personal items. The instructions for how to report a 1099-K as non-taxable income using a second negative adjustment will work, but may result in an IRS letter asking more questions.  The IRS instruction in this situation is to leave the 1099-K off your tax return, file by mail, and attach a copy of the 1099-K and an explanation as to why it is not taxable income.

If you have a gain from the sale of personal property, then you must determine whether you are operating a “ongoing trade or business“ or this is a hobby. If it is an ongoing trade or business, then you need to report the gross income on schedule C and your cost of items would be your cost of good sold.  If it is not a schedule C business, then you would report the gains from the sale of personal items on schedule D and you cannot deduct the losses of personal items.

You would indeed be expected to add the transaction details of each item separately.  If you have sold so many personal items for gain that you can’t add that many transactions, you might reconsider that you actually have a schedule C business.

[Juz42]

Hi!

Any feedbacks on how it went for you with this method? I am trying to do the same thing but wanna make sure it worked. Thanks

[Juz42]

Hi,

I am hesitating between your method (via Mail) or the Other Income (amount - expense) method.  Anyone has any update to share?

Thanks

[Opus 17]

---

@Juz42 wrote:

Hi,

I am hesitating between your method (via Mail) or the Other Income (amount - expense) method.  Anyone has any update to share?

Thanks

---

Because the IRS is so backlogged on paper returns right now, I recommend the other income (negative offset) method, at least for this season.  Keep any related documentation for at least 3 years in case you need to respond to an IRS letter. 

[Juz42]

Thanks again!