So we are kind of panicking here. My wife got a 1099-k from PayPal and Venmo. The Paypal was for 55,075 and Venmo was 6,834. We were completely in shock!! Because we certainly don't have 61,000 in the bank! lol So what happened here is my wife's hobby and obsession is horses and horse tack (saddles, bits, bridles, saddle bags, horse blankets, saddle pads, etc). And saddles can sometimes cost 2,000 to 4,000. So those were the big ticket items. She would buy one and try it out for a few weeks and then sell it at a small loss or break even but sometimes made a small profit. But most times she broke even or sold at a loss. Same with the saddle bags, saddle pads, etc. She probably went through 20 or 25 saddles like this over the entire year. So it wouldn't take long to LOOK like she sold 55 or 60k when the saddles are between 2,000 to 4,000 a piece. She even sometimes "traded" with people. For example, she sold a saddle to someone on facebook for 3,000 and turns right around buys theirs for 3,000. This way both of them were protected as buyers/sellers through PayPal. She did this quite a few times. It looks like money coming in but really it's not because it's going right back out. Basically she was just recycling the same money over and over. And there's hundreds of small transactions involving the small items like bridles, blankets, bags, etc. Most all sold at a loss or broke even.
She really enjoyed this and it wasn't really costing us much for her to have fun with her hobby. But we were blindsided by this 1099-k situation! We certainly don't have 61,000 in the bank from all of this! Out of the 61,000 she MAYBE profited 5,000 or 6,000 over the whole year but probably not even that. We don't want to report this as a business because it's NOT. And after this, she will no longer be buying, selling, trading anything! And even if we wanted report it as a business, we really don't have records to document what was sold, what the losses were, or what the exact profits really were.
I found a thread from another guy and he had almost the exact same situation with his wife but she was buying and selling purses. And the response below is what he was told to do. So is this correct? Is this how we should handle this too? I am not looking to cancel it all out. We are willing to put a profit around 10,000 (even though it wasn't anywhere near that much) if will help not raise any red flags.
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To report your wife's 1099-K from eBay and her cost of goods sold (COGS) in TurboTax follow these steps:
Next, you will have to report your COGS. Follow these steps to report your COGS:
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.
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I did put ours in like shown above but haven't sent it in yet. See the pic. So is this entered correctly? Is this even ok?? Any help is appreciated!!
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The process has changed since the IRS has changed the requirements of the 1099-K
We posted that set of steps because the 2023 1040 wasn't designed to handle reporting the 1099K for people like you that sold personal belongings. Personal Items are not really Cost Of Goods Sold, I think I had people use some other description, but no matter, it is done differently for 2024.
I will post the new steps, but I must also add that you will need to make the best attempt you can to enter the items that were sold at a gain.
The items sold at a loss are no matter, you can't claim the losses on sales of personal items, HOWEVER you DO have to pay tax on personal items sold at a profit. And the losses cannot be used to offset the gains. So, you will need to dig through the sales that were done because you need dates, purchase prices and sales proceeds.
The good thing is you only need to do this for the things she sold at a profit.
Delete the 1099-K forms you entered under Other Miscellaneous Income including the adjustment entries.
Enter the 1099-K under
Wages and Income
1099-MISC and Other Common Income
Income from Form 1099-K
START
For the screen that asks "Which type of income is your 1099-K for?" Select "Personal item sales"
Continue and enter the 1099-K
DO NOT make any adjustments on this screen
Continue and on the next screen enter the amount that were the things that were sold for no gain.
(so if the 1099-K reports 55,075 but 45,578 was sold for no gain, enter 45,578 here.)
When you have all the 1099-k entered, click done (BUT YOU ARE NOT DONE)
go back to the wages and Income section
Scroll down to Investment Income
Scroll down to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other
START
Find the list that says "Personal item sale" and click to open
You need to list the items that sold at a gain
The proceeds must match the remaining (taxable) amount on the 1099-K (the amount you did not exclude earlier)
The profit is treated as a Short-Term Capital gain, reported on Schedule D and flows to your 1040 line 7
Make an honest attempt to be as accurate as possible. Keep copies with your tax file.
WOW! thank you so much!! We really appreciate this!
So we went through it and everything seems to be ok. But it did ask me to review this below. One for paypal and one for venmo. These are the taxable profits and the numbers are right. I believe I just ignore it and hit continue on these correct?
Let me update this answer to make it clearer.
SELLING PERSONAL ITEMS ONLINE
This example is for a 2024 1099-K you receive in 2025.
Let’s use an example with “easy to follow” numbers.
You love clown dolls and purchase one everywhere you go.
You always pay $5.00 per doll.
After your doll collection reaches 100 dolls, you lose interest and decide to sell them.
You list some of the dolls online and sell 25 of them for $6.00 each. $1.00 is deducted for fees, so you are sent $5.00 for each sale $125.00 total. For the 25 dolls sold, you break even, no gain, no loss.
You list and sell 73 more dolls for $3.00 each. They each have a $1.00 selling fee, so you get $146.00 total. For these 73 dolls, you sold at a loss.
You have two dolls left that you think are special, one looks like Elvis and the other is an alien. You’ve had Elvis for years, the alien you just purchased in July of 2024.
You list the Elvis doll as an auction and people go nuts. Finally, the winner pays $1,000.00. Again, $1.00 is deducted. You are sent $999.00.
You also list the alien doll at auction, and it sells for $100.00. They take the $1.00 selling fee and send you $99.00
You buy a pizza to share with your friend and your friend sends you $10 for their half. There is no fee.
Your Uncle sends you $35 on your birthday. There is no fee charged.
You are not in the retail business, you do not make a living selling items online. You don’t buy things and sell them to make a profit. This was like having a garage sale.
Your 2024 Form 1099-K reports $1,414.00 (125 + 146 + 999 + 99 + 10 + 35 = 1414)
In TurboTax enter the 1099-K under:
Income
Other Common Income
Income from Form 1099-K START
On the “Did you get a 1099-K?” screen, select “Yes”
On the “Which type of income is your 1099-K for?” screen, select “Personal item sales” CONTINUE
Enter the 1099-K as it was reported and select the box for “This amount in box 1a is too high or includes some personal transactions” in order to enter the birthday gift and pizza money.
Enter $45.00 for the pizza and birthday transactions.
CONTINUE
On the next “Personal Item Sales” screen, make the correct selection.
In our example we choose “I sold some items at a loss or had no gain” because we made a profit on the Elvis and alien dolls.
Note: If all the items you sold were sold at a loss or just broke-even, you would select the other option, “All items were sold at a loss or had no gain” If ALL the items were sold and you did not realize a gain on any single item, you would not need to enter the sales.
Because we made the selection that “only some items had no gain”, we need to enter the amount representing the items that sold for no gain, no profit. We enter 271.00. How did I get that number? We broke even on the first 25 we sold and made $125.00, we had a loss on 73 dolls but still made $146.00, so we add those numbers together and get $271.00. We are saying that $271.00 doesn’t even count, since there was no profit in that amount.
CONTINUE
Finish the interview and select done on the “Your 1099-K summary” screen,
BUT YOU ARE NOT DONE
At this point we have told the program that we received $1414.00 on a 1099-K, that $45.00 were personal transactions and $271.00 was for selling personal items that did not result in a profit. That leaves $1,098.00 to account for.
$1,098.00 represents what was received for selling two dolls, but that was not all profit.
Now we need to tell the program how much profit we made.
Go back to:
Income
Investment Income
Stocks, Cryptocurrency, Mutual Funds, Bonds, Other click UPDATE
The next screen should show “Personal items sales (1099-K)”
Click REVIEW to open
The next screen has an input screen for the Personal items you sold at a profit/gain.
The two dolls we sold for a profit will be entered here, one sale at a time.
First we enter the Elvis doll.
It was purchased November 15, 2021, sold August 1, 2024.
Enter $999.000 for Proceeds ($1,000.00 – $1.00 fee)
Enter $5.00 for Total amount paid
Note: We select “None of these apply” for the “Let us know if any of these situations apply to this sale” screen. That is because the fee was taken out before the funds were sent. The 1099-K already accounted for the $1.00 selling fee that was charged per sale. The amount in box 1a was already reduced for the selling fees and only reflects what was actually sent. IF the fee was paid a different way and not reconciled on the 1099-K, you would enter the selling fee on this screen. The selling fee is per sale, so you cannot claim the selling fees on all the items, only for this one particular sale.
Next we enter the Alien doll.
As you can see on the “Review your sales” screen, we accounted for the $1,098.00 as we said we needed to do.
The gain is $1,088.00 since we received $1,098.00 for selling dolls that cost us $10.00.
$994.00 is long-term capital gain because we owned Elvis for more than a year before we sold it.
$94.00 is short-term capital gain because we owned the alien doll for less than a year before we sold it.
Capital gain is listed on your 1040 line 7.
[Edited 01/21/2025 I 9pm PST]
I think I got it. But if you could send me a direct message I can show it to you so you could check it over. Thanks!
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