Confused about 1099-K situation from selling personal items on Reverb.com

[margin_walker]

According to the 1099-K I just received, I sold around $5800 worth of my own personal music gear (19 items) last year on Reverb.com, but after calculating the total amount of my net earnings (after remitted sales tax and Reverb listing fees) it only adds up to about $5300. Does the difference between what the items sold for on the website, including tax, and the net earnings I ended up getting count as an overall loss? Meaning I won't get taxed for any of it? I know the $600 threshold got delayed to 2023 tax reporting, but I live in California which still has the $600 threshold.

[JamesG1 · Accepted solution]

The 1099-K reports $5,800.  Your records show that, after selling expenses, you earned $5,300.  

You will be able to report the selling expenses when you detail the individual sales in IRS form 8949.  You will access that IRS form 8949 at Federal / Wages & Income / Investments and Savings / Stocks, Crypto, Mutual Funds...

Personal items sold for less than their basis (most likely, the original purchase price) report $0 capital gain on line 7 of the Federal 1040 tax return.

Personal items sold for more than their basis report the gain on line 7 of the Federal 1040 tax return.  See this example.

                      Selling        Cost

                      Price        Basis

Couch            $500              $2,000        Capital loss on personal item = $0 loss

Jewelry          $400               $300           Capital gain on personal item = $100 gain

Chair              $100               $100           No capital gain or loss

$1,000        $2,400

Schedule D will report a $100 long term capital gain.

Federal 1040 tax return line 7 reports $100 long term capital gain. 

To report Personal item sales in TurboTax Online, 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.

Make sure that you retain any information about the items sold should you be required to demonstrate to the IRS that this is not taxable income.

[Hal_Al]

Neither the $5800 or the $5300 is your reportable income.  Your reportable income is the difference between what you sold each item for and your cost basis (usually what you paid for it).  Your report only the income on items  sold for more than your cost basis. Your ignore the items sold for less.  As, other said, some items, sold for a profit, may qualify for capital gains treatment.  If all items were sold for a loss, you have no income to report.  However, the IRS gets a copy of the 1099-K and may be looking for it on your return.

There is no specific place on the tax forms to account for a  1099-K. For a detailed discussion, see this other thread here, in the forum. https://ttlc.intuit.com/community/taxes/discussion/i-sold-some-personal-items-on-ebay-and-received-a...

[margin_walker]

For selling price do I list the cost that the buyer paid, which includes sales tax, or do I list my net earnings on the sale? Also, some of the music gear that I sold I got through trades for other music gear, but I didn't keep track of which item I traded away and the price of the item. In that case do I put the cost as $0 and I will be taxed for the net earnings I got from the sale?

[margin_walker]

Since the $20,000 threshold is still in effect for 2022 does that mean I don't need to report any of my online sales through Reverb for that year? This has been a massive headache for me and I would rather not have to go through the trouble of figuring all of this out if it's not necessary to report it on my tax return. I play music as a hobby and never had the intention of profiting off of any of my gear sales

[Hal_Al]

You don't have to report a 1099-K just because you got one. You only report it if you made a profit on any item(s). 

You do not use 0 cost basis for traded items. You cost basis is the basis of the item you traded away. It's safe to assume there was no gain. 

[margin_walker]

Oh ok thank you for the clarification! How about a situation where I bought a guitar online from the UK (for £400) and ended up selling the neck and body separately, for $165 and $276 respectively? Would I be able to use the same £400 cost basis for both sales since they're separate parts from the same guitar? And would I use the current £ to $ exchange rate or use the exchange rate of when I bought the guitar, which was January 2022?