1099-k offsetting?

That is well laid out and works. The point is to  eliminate the income. We had a conversation and one of the managers had the idea of using Sch D as well. Another said she would be tempted to not report it. I am super conservative when it comes to the IRS. As long as you claim the income and then eliminate it, you are fine. The method you found above works and seems easy to follow. The part where it says to enter an adjustment- that is the key where you will enter a matching amount to zero out the income.

You already entered: 1099k, personal property sales and amount.

Next, enter 1099k, cost of personal property, negative same amount

I don't know where to enter this info at?

enter an adjustment to reflect the cost of these items as an offsetting, negative amount up to the amount of the income.

To clarify where to enter the negative amount:

1. Go back to Option 2, Step 5. Enter the applicable description and amount and Continue. (For example, the entries were Description Personal Property Sales and 100)
2. TurboTax now shows Other Miscellaneous Income Summary. 
3. Select +Add Another Income Item on the lower left side.
4. At Other Taxable Income enter Cost of Personal Property for description and the negative amount and Continue. (To continue with the example, the amount would be -100.)
5. Now returned to Other Miscellaneous Income Summary, select Done.

@David971

I found where to enter it!

Correct ... selling personal items for a loss is not deductible so all you can do is offset the income to zero it out.  

I think the offset is the best option for me.

I tired to enter it as a hobby and i had to pay tax on the reported amount on the 1099-k even though it was a complete loss.

I also used schedule c like most suggest but then i was taxed at a higher rate but i could have deductions but after reading more into it this way would only work for a short time as you can not claim a complete loss every year as a business.

Does this still apply in 2022 to work?

If you receive this form 1099-K for selling a used electronic item you no longer need on Ebay, you most probably sold this item for less than you paid for them. You have made a loss on personal items. This loss on personal items is not deductible and is not reported on your tax return.

If this is the case, you do not need to report this form 1099-K on your tax return. Just keep it in your tax records along with any proof that it was for the sale of the electronic item.

Please read this TurboTax Help topic for more information.

@ijanderson29

Wondering if my same situation would apply? 

I bought concert tickets for 8 friends at $173 a piece (back before covid). I just sold 4 of them at $150 each and am now getting a 1099K from ticketmaster since the gross income is $600. I will have to fill out this 1099 come tax season but I also need to offset this as I’m actually taking a loss in the long run on these 4 tickets. Would I follow this same process? 

Thanks so much in advance, this has been a real headache. 

there seems to be a difference of opinion on reporting - one opinion 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/1099-k-for-personal-items-sold/00/2458180 

another

https://ttlc.intuit.com/community/taxes/discussion/1099-k-amp-personal-items/00/78901 (the link in the thread does not work)

here's another that suggests reporting on form 8949

https://www.lawofficesofjasonknott.com/where-to-report-form-1099-k-on-your-tax-return/ 

all this shows is no one is absolutely sure how to report a 1099-K for the sale of personal items.  the article by Knott does have some logic in that the IRS has no way of knowing that the proceeds were from the sale of personal items sold at a loss. I would use schedule 1 misc income and not 8949.  not reporting it could result in an IRS notice adjusting your return.  you would then have to dispute the change. addressing the issue upfront should avoid the notice.

others may hold to the opinion not to report it at all. 

if you report on your return, the cost would be equal to the sales price since no loss is allowed on the sale of personal items

This works for federal but does not import accurately to my state return (NJ).  Trying to put negative amounts on the 'Other Wage Adjustments' or 'Other Non-Wage Income' sections does not seem to work.  Any suggestions for how to address?  I'm thinking somehow deleting the income/ form from my state return would make the most sense since I maintain support for why it's erroneous income.

Do you know how to get this to cascade down to state tax returns (NJ)?

This method still works and should carry over on to your state return with the net amount showing up there.  

You can re-enter the negative amount into your New Jersey return if necessary to get the taxable amount to where it should be.  But if it was entered correctly on the federal return then it should be carrying to the New Jersey return as well.  

I suggest you re-check your original entries.

@ltbailey0 

Thanks for the quick reply! I've rechecked the entries on the federal and confirmed the income has offset. TurboTax is not pulling the offsetting entry to the NJ state return. Further, when I plug in the negative/ offsetting amounts on the NJ return it is not taking effect as evidenced by the 1099k amount still showing on the income summary page. 

There was an issue the last 2 years with TurboTax not allowing negative numbers which resulted in me having to print my state return and I'm skeptical that the issue has been fixed. Can you escalate?

What is the nature of the 1099-K income that you are reporting?

When the original 1099-K is entered into the TurboTax software, you are presented with eight options.

For instance, the option Personal Item Sales leads to reporting the income on Schedule 8849 / Schedule D which should flow properly to the NJ tax return.  

Please clarify.

@Lbailey0 

Thanks for the continued help.  The one that's giving me trouble is from PayPal and the nature of the transactions are actually for online gambling since I used PayPal to fund and withdraw.  To the extent I have anything taxable from a gambling perspective, I'm covering that with W2-Gs so this is erroneous income.  Based on this, I selected the last option Other --> Other.

I can confirm that for the 1099-K I received from eBay which relates to the sale of personal goods my offset seems to have carried through to the state return.  I selected the 'Personal item sales' option for this form and put in the offset in line with the first post in this series.

Here's what you do

 For the K-1 income reporting, Personal income, then Less Common Income, then Prizes, Awards and Gambling Winnings, then update until you reach this screen

For the W2 G reporting, you'll take it one screen back like this;

And then finally, to back out the duplicate income Go into Less Common Income, Misc Income, Lets work on Misc income,, Did you receive Other Wages-answer Yes till you get to the screen Any Other Income, hit yes, then source of Other Income, Other, then in description enter duplicate income and put a negative for the duplicate income amount like this

P.S. The 60,000 is for illustration purposes only. Put the negative duplicate income amount as in your situation.

Best

Did you ever get a response on how to offset online gambling transactions from PayPal through a 1099-K?

Yes, there is a way but you will need to enter your 1099K a different way. Before I mention how to do it, there are a few ground rules.

1. You may only enter gambling expenses up to the amount of gambling winnings.
2. Gambling winnings are itemized deductions.  Depending on your filing status, your standard deductions are as follows.

• Single taxpayers: $12,950
• Married taxpayers filing a joint return: $25,900
• Heads of household: $19,400

if you have itemized deductions that exceed the standard deduction amount listed, you may itemized.  itemized deductions are for things like ome mortgage, state taxes paid, medical expenses the exceed 7.5% of your adjusted gross income, charitable contributions.  If you don't have any of these and if your gambling losses do not exceed the amounts i have listed, chances are you won't be able to itemize and claim your losses.  If you can however, here is how to enter your 1099K gambling income and claim your losses.       

1. Go to Federal Taxes tab ( Personal Tab in Self-Employed)
2. Click Wages & Income
3. Select I'll choose what I work on 
4. Then go to Less Common Income
5. Click Gambling winnings
6. When it asks if you receive the W2G say no
7. When it says let's Check for Winnings not on a W2G the nyou have two choices to make. Select either gambling or lottery winnings or prizes and awards. The losses are only deductible if you choose gambling.
8. Now you will enter the gambling winnings not reported on a W2G.
9. the next screen will ask if you have gambling losses in 2022. here you will enter losses that are equal or less than your gambling winnings.
10. If you entered your 1099 K elsewhere, you will need to remove it from that section and report it here., This is the only section where you can claim your gambling losses.
11.  Again, if you don't have enough itemized deductions for the year, leave your 1099K where it is because you won't be able to claim the losses.  

@marti3td 

First, let me say this work around works but you have to follow the directions carefully and understand the implications for audit purposes. This was a real challenge for me in TT Premier 2024, Windows version as there is a bug that prevents access to the 1099-K form using Step-by-Step. You can still go to forms view and search for 1099-K and access it there.

The ultimate goal is to report the eBay income via the 1099-K but then offset it so you have no tax liability. There needs to be a written record in your final tax documents to verify both, that you reported the 1099 income but also the offset. If you simply fill out the 1099-K and click the 1099-K Reconciliation line 2b, both the income and tax liability disappear BUT also the Schedule 1 reported income disappears too. That is bad since it then appears that you forgot to report your 1099-K income, you need to provide an audit trail in your IRS filing forms that show the income and the offset.

The "right" way to show that offset would be to enter it directly on Schedule 1, line 24z but that appears to be impossible in TT 2024. After the better part of 2 hours online with TT support, getting dropped and promised return calls, I reread this post and the light bulb went off. Here is how I (hopefully) solved my reporting and audit trail requiremnent.

1) Go to forms views and search for the 1099-K (I couldn't get it to come up in Step-by-Step)

2) Enter the info from the 1099-K but none in the "1099-K Reconciliation" section. This gets the income reported on Schedule 1, line 8j (where it belongs.)

3) Next, follow the post instructions to report the same income (as a negative number) in the additional income section of Schedule 1, line 8z. This certainly isn't elegant but it provides the IRS with an audit trail and proof that you reported the income and then offset it.

Many thanks to the original author and hopefully this will help others get through this challenge.

if I want to offset personal items sold I check the amount box1a is to high  and then enter what’s in box1a? 

If the 1099-K reports online sales, and ALL the sales sold at a loss (or had no gain) which is a weird way of saying that none of the sales made a profit, don't adjust on that screen, select "personal sales" for the type of income, and then select "All items were sold at a loss or had no gain."

That should be the end of it if ALL the items did not make a profit. 

If EVEN ONE item sold at a profit, you would select the other option "I sold some items at a loss or no gain" (which is a weird way of saying "at least one item sold for a profit") and enter the amount of the sales that DID NOT make a profit. 

Next, you would enter the sale or sales that did make a profit in the investments section.

@leland-king 

leland-king,

There are two reasons to file a tax return: 1) report your income, 2) pay your taxes.

If you take a bunch of personal property that you purchased more than a year ago and sell it on eBay, then you will have received "payments for personal property sold at a loss." So, the first step is to report the 1099-K income on YOUR tax return.  It needs to show up somewhere on Schedule 1, the IRS suggests line 8J.  Next you need to offset that income, as you simply converted capital assets into cash at a loss, so you don't have to pay taxes on it.  Again, the IRS suggests that you do that by entering the amount of income from "payments for personal property sold at a loss" in Schedule 1, Line 24J.  Sounds simple and it would meet both requirements stated above.

Here is the problem, regardless of how you classify the income on the TurboTax 1099-K, it will never enter the offset on Schedule 1, line 24J.  Worse yet, if you check box 2b (payments for personal property sold at a loss) on the TT 1099-K form, "1099-K Reconciliation" section, your entry on line 8J, or 8Z DISAPPEAR!!!!  Now you haven't met the first requirement stated in line 1, "report your income".

You can play games all day long with different revenue classifications on the 1099-K and the corresponding destinations (e.g., Sch D long term capital gain) but none of them will properly capture the reported income and offset it so you don't incur additional taxes. 

THIS IS A TURBO TAX LIMITATION AND PROBLEM THAT HAS BEEN IN THE PROGRAM SINCE AT LEAST 2022!

The best solution I could find to satisfy both requirements at the top of this post was to:

1) Classify the 1099-K income as "Hobby Income".  That enters it on Schedule 1, Line 8J meeting requirement 1.

2) On Schedule 1 click on the line 8Z field, which opens the 1040/1040SR Wks, then click on line 8Z again, which takes you to the "Other Income" worksheet.  There you can enter a note (i.e., 1099-K Sales of personal items at a loss" and then enter a negative number equal to your 1099-K income.  This way there is a clear audit trail to show that you did report the income and that it is not taxable!

It would be so much simpler if Intuit/Turbo Tax would do this automatically using line 24Z but that option isn't available, hence the plethora of workarounds that have been debated and posted over the last two years since eBay income thresholds have come down to where virtually every personal selling personal property gets a 1099-K.

I should also mention that the last time I was on the phone with TT support trying to get them to explain how to get Schedule 1, line 24Z to populate properly, the support person tried to convince me to pay $60 for Live Tax Advice.  I assured them that I didn't need Live Tax Advice, I needed TurboTax to properly report and record 1099-K income.

@malukens  is there anyway we could sharescreen and u could kinda walk me through?