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1099-K Third Party Mercari Selling and Processing Fees

I am in the process of filling with my 1099-K. The 1099-K is from Mercari and my unadjusted gross includes "Item Cost", "Buyer Paid Shipping Cost", "Buyer Merchant Fees" and "Sales Tax Charged to Buyer". For my income, I am not actually receiving this unadjusted gross amount as Mercari charges "Selling Fee" and "Processing Fee" per transaction. Is there a way to file these fees as expenses, and if so, what expense/how would I file these fees?

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1 Reply
JamesG1
Expert Alumni

1099-K Third Party Mercari Selling and Processing Fees

I presume that you are entering the IRS form 1099-K as income directly into an IRS form Schedule C Profit and Loss from Business.  If so, you will be able to report each of the expense items that you named as a business expense within the Schedule C.

 

Presume that the revenue breakdown for your income follows these numbers. The IRS form 1099-K reported $10,000 but you were responsible for several related sales fees and sales tax and you actually received $7,900.

 

Item cost (selling price)               7,900

Buyer paid shipping cost            500

Buyer merchant fees                   500

Sales tax charged to buyer         100

Selling fee                                      500

Processing fee                              500

 

IRS form 1099-K                           10,000

 

Report the full $10,000 as your income for the self-employment activity. You may report the full $10,000 in one entry under Other self-employed income or you may report $7,900 as IRS form 1099-K income and $2,100 as Other self-employed income.

 

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If you choose to report the full $10,00 as your self-employment, you have reported the substance of the IRS form 1099-K even though you have not followed the exact process within the tax software.  IRS form 1099-K is not a form 'required' to be reported like a W-2.  Its purpose is to aid in the reporting of taxable income and that is what we will be doing.

 

In addition, make sure that your personal tax records can show the difference between what the IRS form 1099-K reported and the numbers that were reported on the Federal 1040 tax return should the IRS have a question at a later time.

 

The various fees can be created as miscellaneous expenses to provide as much detail as you would like to report as Schedule C expense.

 

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