1099-K for EBay Sales in Illinois

[afung49]

I sold some items on EBay as a personal seller. I do not run any kind of business. I sold items from my personal collection. I received a 1099-K from EBay and PayPal for the sales. The sale does not meet the federal requirements for reporting but Illinois requires reporting since the sale amount exceeded 1,000.00. How do I report this in TurboTax?  I am not a business so this amount is not in any other forms. Any help would be greatly appreciated.

[ToddL99]

You can report the 1099-K amount as "Other Reportable Income" (see steps below).  In the case of casual (non-business) sales of personal property on eBay  or through PayPal, these payments are properly reported as Miscellaneous Income and will not be subject to self-employment taxes.

There isn't a separate entry for your 1099-K info in TurboTax. That's because your 1099-K income should already be included in other income, such as your self-employment or rental income (or pass-through entity).

To enter the 1099-K amounts:

• Go to Less Common Income, Miscellaneous Income and Other reportable income. Enter "Lawsuit settlement" in the Search Box and Select "Jump to lawsuit settlement" "to get to this screen (this is just a search term that will get you to the right interview)

• Continue to the screen "Other Taxable Income". Enter the description as "Casual Sales" and the amount reported on the 1099-K

The amount will be entered on line 8 of  Form 1040

[bbeach85]

This does not make sense to me as the amounts reported from Ebay and Paypal on the 1099-K are the gross amounts paid by the buyer and not the net amount paid to the seller.   How would you deduct Ebay fees, postage paid by the seller, etc.?     If you enter the amount directly from the 1099-K as "other income" are you taxed on that full amount?

[MaryM428]

Enter your 1099-K and then enter a negative transaction for the expenses of the sale.

For reporting personal property sold and also including the offsetting cost, follow these steps:

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 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.

You need to keep records of the cost of the item, the amount that you sold it for, and the costs of the sale.  Keep those records with your other tax records in case you ever have to explain how you came up with the amounts that you deducted as negative entries.

[Foxleema]

@MaryM428,

Under step 5 you state, "Next, enter an adjustment to reflect the cost of these items..."

My question is, where do I enter the adjustment? Once the Description , "1099-K Personal Property Sales"

and the Amount "$5287" is entered and I click Continue, that's the end of that dialogue box. 

Are you saying to make another entry under "Other Taxable Income" and use a negative number in the Amount box to offset the income listed for the 1099-K?

Thanks!

[MaryM428]

Yes, I am saying to enter another entry with the cost of sales as a negative number.  That will remove that amount of money from being taxed.

@Foxleema

[billmadonia]

This is the first year I received form 1099-k from EBAY . What is the best way to report this income and claim expenses like postage, supplies, original cost, gasoline and even a designated place in my home for this hobby/business ?

[DianeW777]

It depends. First you must decide if you are in business or if it's a hobby.

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:

• Business or Hobby?

Key elements:

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. Exception is cost of goods (COGs) ONLY.
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.

It's important to understand a couple of things.  One, the expenses that can be deducted start from the time it was open for business.  Any expenses to research, analyze and legally begin the business are called 'start up expenses'.  You have a choice on how you want to handle those. Likewise you can take advantage of the de minimis safe harbor for small business if you purchased any equipment to use in your real estate business.

1. Start up costs - if you had any expenses before you actually opened for business services such as legal fees, market study or organization fees
   • The IRS allows you to deduct $5,000 in business startup costs and $5,000 in organizational costs, but only if your total startup costs are $50,000 or less.
2. Any equipment that was placed in service and has more than a one year estimated life such as a lawn mower must be listed individually with the date of purchase and the cost including any sales tax paid.  The will be listed under assets and each asset must be entered by itself in this section.
   • If you have assets that cost less than $2,500, it's just easier and faster to enter their total cost under the miscellaneous costs. This is a special rule. The de minimis safe harbor is simply an administrative convenience that generally allows you to elect to deduct small-dollar expenditures for the acquisition or production of property that otherwise must be capitalized under the general rules.

All of this information is entered on Schedule C which requires TurboTax Online Self-employed or TurboTax CD/Download Home & Business.

• Where do I enter Schedule C

Please update here if you need further assistance and one of our tax experts will help you.