1099 K Payment Card Third Party Pass Thru

[AMG22]

Our website processes transactions for a client. We get paid a set fee and the balance is transferred back to the client.

Example

Item A Costs: $19.95 ( Credit Card)

Transaction Fee: $3.95

Net: $16.00 is returned to our client

1099K Reflects $ 19.95  how do I report that the fact that $ 16.00 was returned to my client

[DawnC]

If you are entering income from a 1099-K, remember that it reports the gross amount ($19.95) of the transactions. It doesn't include any adjustments ($16.00) for credits, refunds, discounts, or fees. You’ll have a chance to enter self-employment expenses in another part of your return.

In the Other Self-Employed Income section, enter:  

1099-K gross                  $19.95 - then add another row and enter

1099-K adjustments       $ -16.00 (use a negative)

Keep detailed records in case of any inquiries.  

[cwqjr]

What if you're neither "self-employed" or a business. I'm specifically asking about Ebay sales paid to Paypal where the buyer paid state sales tax which was collected by Ebay and never came to me, but is included in the 1099 gross.

[DavidD66]

@cwqjr In order for your tax return and the amount on the Form 1099 to agree, report the total amount as revenue, and create an expense/deduction category for the sales tax.  To do so in TurboTax Desktop:

• Type "business expenses" in the Search window, and hit Enter.  Click on "Jump to Business Expenses".
• Click on Start or Edit next to your Business
• Scroll down to "Business Expenses" and Start or Update next to "Other Common Business Expenses"
• Scroll down to the bottom of the page - "Other Miscellaneous Expenses", and click on "Start" or "Update"
• Create a description for the Sales Tax you didn't receive, enter the amount, and click on "Continue"

[cwqjr]

Thanks. I'll try that. Do I have to set up myself as a "business" in TT? Can I take other expenses as long as they are documented? My 1099K and income are completely from private sales on Ebay. For example, may I deduct Ebay and Paypal fees? For most of the items I sold, I have no record of their original purchase so I cannot deduct those costs.

[KathrynG3]

Yes, to offset income with expenses, it is necessary to use the self-employment section if this is a trade or business for you and not just a sale similar to a garage sale.

Yes, as long as your ordinary and necessary expenses are documented, you can deduct them. Yes, you can take eBay and PayPal fees. 

However, if this is not a business for you and you are selling personal items privately, then there is an alternative way of reporting Form 1099-K.

The IRS will expect Form 1099-K to be reported in full. While they allow you to offset the income with related expenses, it is limited to the income received. This will not specifically identify the sales tax collected and remitted by PayPal because your original cost was probably more than the eBay price. 

Keep in mind income received on Form 1099-K has been reported to the IRS at the same time you received your Form 1099-K. Therefore, it is a best practice to report the full amount from Form 1099-K, whether it is as a business, or it is for personal transactions.

If Form 1099-K is for personal items sold, but not as a business, report the income as an investment, not as self-employed income. 

To do this in TurboTax,

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 

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

[cwqjr]

Once I "jump to investment sales", what I see does not match what you're saying. I see "Did you sell any investments in 2020?" and shows personal items among other things. I click "yes" and go to "Here's all the investment accounts we have so far". Shows "no financial institution", and I click "add more sales". Asks me if i got a 1099B or a brokerage statement", which I did not. If I say no, I get "tell us about this sale" - Description, date sold and other fields that I don't know what to with. 

Assuming I get through all this, where will I show the deductions?

Actually, I've given up and entered it as a business, which seems to have worked. I think I technically qualify as a single-person business.

[KathrynG3]

You can continue with this entry, or there is a second option. 

To answer what to do next with what you have entered so far with the first option, reporting the income as an investment sale and when you already have entries in this section:

At Tell us about this sale, start with #4 in the list above so that you can report it as not from Form 1099-B, as Personal Items, and how you acquired it--most commonly, the goods were purchased. 

Alternatively, delete what you have entered so far for your 1099-K from eBay in the investment sales section. Then, proceed with Option 2 and instead report Form 1099-K via Other Miscellaneous Income, which is also acceptable to the IRS. 

• Option 2:
  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.

@cwqjr 

[erndisney]

I have the Home and Business addition of Turbo Tax, I cannot get to either of the options you have suggested to report the Ebay 1099K income, there is a section in the business section to report 10((K, but how do I deduct the Garage sale part of this income. I have lost on these sales, so I don't want to pay taxes on loses.

 Thanks

[PattiF]

1. In the Wages & Income section, scroll to Less Common Income
2. Choose Miscellaneous Income, 1099-A, 1099-C, and Start
3. Choose Other Reportable Income, and Click on Yes on the Next Page
4.  In Other Taxable Income, Enter 1099-K Personal Items Sale, $1000
5. Continue and Add Another Miscellaneous Income Item,
6. Enter Personal Items Sold Reported on 1099-K, -$1000

This will result in no taxable income.

[erndisney]

Perfect !!

 Thanks for your help.

 Ern

[steveszymanski42]

I have a 1099-K covering sales of sports tickets as a hobby. Line 1a reports gross amount but does not include cost of commissions and the cost of the tickets, which when all adjustments were made would result in a loss. 

How do I report all of the cost and commission?

[JamesG1]

Consider these possibilities when reporting sales costs and commissions.

1099-K income may be reported in different ways.  Hobby income is reported as other income but the current tax code does not allow hobby income related expenses to be reported.

To report Hobby income, follow these directions.

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Click Show more to the right of Other Common Income.
• Under Your income and expenses, click the Edit/Add button to the right of Form 1099-K.
• At the screen Did you get a 1099-K? click Yes.
• At the screen How would you like to enter your 1099-K? click Type it in myself.  Click Continue.
• At the screen Choose which type of income your 1099-K is for, select the button for Hobby income.  Click Continue.
• At the screen Let’s get the info from your 1099-K, enter the information.      Click Continue.
• At the screen Your 1099-K summary, notice that the income relates to ‘Hobby’.  Click Done.

The entry will be reported:

• on line 8j of Schedule 1 of the Federal 1040 tax return, and 
• on line 8 of the Federal 1040 tax return.

Your income may also qualify as personal item sales where the income and expense of sales is reported on IRS form 8949 / Schedule D Capital Gains and Losses.  However, capital loss for a personal item sale reports $0 capital gain on line 7 of the Federal 1040 tax return.

To report Personal item sales, follow these directions.

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Click Show more to the right of Other Common Income.
• Under Your income and expenses, click the Edit/Add button to the right of Form 1099-K.
• At the screen Did you get a 1099-K? click Yes.
• At the screen How would you like to enter your 1099-K? click Type it in myself.  Click Continue.
• At the screen Choose which type of income your 1099-K is for, select the button for Personal item sales.  Click Continue.
• At the screen Let’s get the info from your 1099-K, enter the information.      Click Continue.
• At the screen Personal Item Sales, you are told that further information will need to be entered.  Learn More provides detailed information for the next steps.  Click Continue.
• At the screen Your 1099-K summary, notice that the income relates to ‘Sale of Personal Items’.  Click Done.
• Under Your income and expenses, click the Edit/Add button to the right of Investments and Savings (1099-B, 1099-K….)
• At this screen, you will be asked to Review the Personal item sales (1099-K).

At the screen Now, enter one sale…., answer questions about the personal item sale.  Click Continue.

The entry will be reported:

• on Schedule D of the Federal 1040 tax return, and 
• on line 7 of the Federal 1040 tax return.

Capital loss for a personal item sale reports $0 capital gain on line 7 of the Federal 1040 tax return.

@steveszymanski42