Handling PayPal's and other's 1099-K for Cashback and Resell Items

[abhinavgautam]

I received a 1099-K from Paypal that included cashback for online purchases and payment for an item I resold.

I understand that the cashback would not be taxable income. How would I file that amount on my return in order to be not taxed?

The payment I received for reselling, is that taxable even if it's a hobby to sell 3-5 items a year? If so, do I file its original cost as an expense on Schedule C? What if the item was bought in 2020, but then resold in 2021?

[ColeenD3 · Accepted solution]

Yes, all hobby income is reportable income. Hobby income is not reported on Schedule C. Hobby expenses are no longer deductible. Hobby expenses

If this is a business, then you would report it on Schedule C.

For the cashback part of the question, please see this answer from @AmyC:

You must report and then explain - subtract. If you truly had no business or earned income, you will report the 1099K and then report a negative amount under other income. 

 Follow these steps:

1. Go to Federal section
2. Scroll down to Less Common Income
3. Select Miscellaneous Income, 1099-A, 1099-C selection
4. Select Other Reportable Income,  START
5. Any other taxable income, select YES
6. Enter description, 1099k not taxable
7. Enter the NEGATIVE amount in the box next to your name.
8. Click Continue

[abhinavgautam]

Thanks for the clarifications. 

It was not a registered business as LLC or Sole Proprietorship. I bought a few items brand new, did not open them, and then decided to resell them with the sale resulting in a profit. 

Do I still report the bought and sold price on Schedule C or somewhere else on my return? What if the item was bought in 2020 (not claimed on the tax return for that year) and sold in 2021?

[Vanessa A]

Yes, if you intended to make a profit then you would report them on Schedule C by selecting the following:

• Federal
• Income
• Self-Employment

Here you will enter the cost you paid as cost of goods sold, even if you bought them in 2020, the year that you purchased them does not matter, and the income you earned. 

If you bought these things for personal use and they just sat in your closet then you wanted to clean it out, but you made a profit you would report this on Schedule E by 

 clicking the following:

• Federal
• Income
• Show More next to Investment Income
• Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) 
• Select Other
• Continue through and select personal items for the type of investment
• Then walk through the questions and enter the sale of your items and the cost