1099K from PayPal

[vuacorona]

First time I received 1099-K from PayPal, how do I enter these data using Turbo Tax Deluxe? Thanks

[KrisD15 · Accepted solution]

If you sell items online as a business, enter on Schedule C
If you sell personal items online similar to a garage sale enter following these steps:

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 any personal items such as birthday gifts.
CONTINUE
On the next “Personal Item Sales” screen, make the correct selection. 
Choose “I sold some items at a loss or had no gain” if you made a profit on any individual sale
Choose “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, (they sold for less than or only for as much as you paid to purchase the item in the first place) you would not need to enter any sales.Enter the amount of the 1099-K that represents the cash you got for selling items at cost or under. 
So, if the 1099-K reports $1,000 and the only item you sold at a profit was an item that sold for $50, you would enter 950.
$950.00 on that 1099-K does not need to be addressed. 
Also, remember that this is NOT saying you MADE $50, only that someone paid $50. The profit would be less because you need to subtract what you paid to buy it. 
CONTINUE

Finish the interview and select done on the “Your 1099-K summary” screen, 

YOU ARE NOT DONE

(If the 1099-K is reporting personal sales, and not any one sale resulted in a profit, you are done. There is nothing to report)

However, if you made the first choice that only SOME items sold at a loss, that would mean that at least one item sold at a gain, for a profit. 
Now you need to report the sale, go 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.
Enter one sale at a time.
Report when purchased, when sold, how much you paid to buy it and how much they paid to buy it from you

The next screen asks for selling fees, but those are USUALLY deducted before they pay you, so would not be included on Form 1099-K
If they were not deducted previously, enter here

Once done, you should see the amount of proceeds you needed to address ($50) and the profit you made from that (those) sales. 
The profit is Capital Gain listed on your 1040 line 7
 

[ronr32]

@KrisD15 thank you for your detailed response...it helped put me on the right track. however, I am concerned by the following outcome. Also the IRS guidelines (below) add a different twist.

I sold 10 personal items on ebay – 2 for a minor loss

Total 1099-K box 1a = $13,020

For the 2 items sold at a loss, I collected $1,302 ( the net loss amounted to -$20.95)

By following your recommendation of -------------------------------------------

“Choose “I sold some items at a loss or had no gain” if you made a profit on any individual sale

So, if the 1099-K reports $1,000 and the only item you sold at a profit was an item that sold for $50, you would enter 950. $950.00 on that 1099-K does not need to be addressed.”

Following the recommendation above, I entered $1,302 in the box “Enter the total proceeds for items sold at a loss or no gain.”

My tax return shows $1,302.00  on Schedule 1 line 8 on line “aa” c (loss from sale of personal items reported on form 1099-k). Line aa states, “The excludable items from below from Form1099 are included on Schedule 1, line 8z, along with a corresponding negative adjustment to remove from gross income.”

However, Schedule 1, line 8z, is BLANK. As a result is my income being overstated by $1,302?

IRS guidelines offer a different approach ---------------------------

"What to do with Form 1099-K" states the following:

Personal items sold at a loss

A loss on the sale of a personal item can't be deducted from your taxes. But you can zero out the reported gross income so you don't pay taxes on it.

If you sold items at a loss, which means you sold the items for less than you paid, there is no tax liability. You have 2 options to report the loss:

• Report the payment on your tax return at the top of Schedule 1 (Form 1040) PDF. This will ensure you don’t pay taxes you don't owe; or
• Report the loss on Form 8949, Sales and Other Dispositions of Capital Assets, which carries to Schedule D, Capital Gains and Losses.

OPTION 1 above suggests entering the amount from the 1099-K total received that was sold for a loss or no gain at the top of Schedule 1 (not line 😎 as depicted below. 

Why is trubotax not reflecting the personal sales loss proceeds anywhere on Schedule 1?

Option 2 suggests reporting the losses on 8949. It would simpler to enter the total under Option 1 than detail the individual transactions within 8949.

Thank you!

[KrisD15]

The loss is not entered on Schedule 1 because the income is adjusted BEFORE the entries are made on Schedule 1. 

If your 1099-K reports 13,020 and it is reporting personal Item Sales, the program will not enter 13,020 as income. 

First it will subtract what doesn't matter, in your case 1,302 from the amount listed on the 1099-K. 

In your case, that leaves 11,718 that you received for selling items that resulted in a gain for you. 

This is STILL not listed as income, because this is just money that was sent to you, but you had to pay for the items that you sold, so only the profit is considered income. 

Second, you list the items that sold (and all the sales proceeds plus selling fees added up the the 11,718 you received) and you enter what you paid for them and any selling fees to figure out your net profit. 

FINALLY that net profit is what gets listed as income. 

My program does list the excess on the Schedule 1, although it is not computed for the amount that transfers to Form 1040. 

That 1,302 should not be included in your income, so it needn't be subtracted out. 

Both programs simply disregards that amount, and lists it on Schedule 1. 

Please continue to see if the 1,302 is listed after you finish reporting the sales. 

[ronr32]

Thank you for the prompt response.

Yes, can confirm the 1,302 is appearing on Schedule 1 as you suggest.  That solves my concern.

Thanks - again!