If you sold your used personal items on Ebay, you almost certainly sold them for less than what you paid for these items. You have thus incurred a loss. Losses on personal items are not deductible and are not reported on your tax return.
If this is the case, you do not need to report this form 1099-K on your tax return. Just keep that form in your tax records along with any proof you may have that it was for the sale of personal items at a loss.
I’m now more confused than ever I called a cpa near by and he adviced I definitely have to report it since IL threshold is 1,000. He said all I need was to know the value of things I sold.
You are allowed to sell personal property without creating taxable income.
You should report the 1099K income as Less Common Incom. Other Taxable Income and then report the value of the personal items as a negative reversing entry in Other Taxable Income:
You will result with two entries - 1099K Income From Sale of Personal items - and - Cost of Personal Items Reported on 1099K - one positive and one negative offsetting. each other to result in zero additional taxable income.
Hi Just to make sure I understood correctly I put 1,000 and then add other income and put -1000 ?
Yes, that is correct. Label them so it is clear you are associating with the 1099-K reported income.
Is there an update to this for 2021 filing? Looks like Intuit changed the process for this.
Yes, there has been an update to the reporting requirements for Form 1099-K. It is important that you report the information on your 1099-K. The IRS receives a copy of your 1099-K and will take action if you do not report the 1099-K on your tax return.
You may not be running a business and are only selling personal items. However, the IRS considers your sales activities on eBay as a business due to the fact that you sold items and the IRS requires that all income be reported.
Follow these steps to enter your Form 1099-K information:
1. Open or continue your return.
2. Search for Schedule C and select the Jump to link in the search results.
3. Answer the questions about your business.
4. On the screen Let's enter the income for your work, select Other self-employed income.
5. If you’re returning to Schedule C, select Review or Edit next to your work and then answer the questions about your business.
6. On the screen Tell us about other self-employed income, enter your 1099-K info.
7. Select Continue when finished.
If you are entering income from a 1099-K, remember that it reports the gross amount of the transactions. It doesn't include any adjustments for credits, refunds, discounts, or fees. You’ll have a chance to enter self-employment expenses in another part of your return.
This link How do I enter a 1099-K in TurboTax Online? has information that you may find helpful.
Seems like this option is only available for self-employed option. Kind of crazy to have to pay an extra $99 for the self-employed Turbo Tax just for this.
If you are not in the business of selling personal items it's possible to report the income without filing Schedule C. If you sold any of the items for a profit, then you should report the sale as an investment sale on the tax return. Any items sold at a loss would not be a deductible loss or required to be reported. You must keep all your records as proof of each transaction with the tax records should you need to verify later.
The following information will be helpful to make your decision.
This is an interesting situation. Since these are personal items the losses cannot be reported, but because eBay sent you a 1099K - if you don’t report the gross income from the 1099-K the IRS will trigger an automatic audit. So as I understand these personal sales should be reported as Investment sales and one should report the “expense” for the investment sale to net out the income (without doing a Schedule C).
Yes, however you must report any gain you received on specific items when and if that occurs. And by reporting the sales this way you are also indicating you are not in the business of buying and reselling items regularly for your livelihood.
You are not required to report sales of personal items that are sold at a loss. The reporting requirements have been updated for the third party handling the money transaction for individuals.
You may want to review the business versus hobby rules as well so I have included a link for you.
@DianeW777 @I read that page and I don’t see anything there for individuals not selling for profit (personal sales). Starting this year the threshold is only $600. So if I sell a few large furniture items when I’m moving houses I’m going to get a 1099k (Even Facebook marketplace is now asking for tax information to send 1099-k). The question now becomes how to report this 1099k and the corresponding expense to get a net income of 0 without using schedule C. It sounds like you’re recommending to use of the investment sale option. I haven’t done this yet but I'm guessing that there’s an option to enter the cost basis which should match exactly the amount reported on the 1099k because we cannot have a loss reported on personal property sale (assuming there’s no profit in this sale).
Yes, if you do not consider this a hobby or a business then the investment sale is the best and correct way to report the sales. The link was posted to give you information about a hobby versus a business. If you are not in the business or hobby of buying and selling, except in a few instances this is neither a hobby or a business. The new rule was put in place to track the third party vendors' activity but it creates a challenging experience for the taxpayer.
There is an option to remove sales and cost of items sold if there is a loss on certain items. It does not provide a blanket exemption or removal of income for items where a gain occurs. Your records will be very important. The advantage of using the sale of personal items is that you have the ability to reduce any gain by the cost of the item that produced the gain. And if that item was held for more than one year, you would also have the capital gain tax treatment on any gain (lower tax on this transaction than your ordinary tax rate on your other income).
The IRS does know that the sale of household items or clothing usually results in a loss because they depreciate and they are not used for business purposes.
In the end you must decide what best describes your situation.
@InformedB
So I file the 1099K like im supposed to, and then I go to Less Common Income, and click on which item exactly to list my expense? I don't see an option labeled Other Taxable Income , or it it another method to list the 1099K that I'm not understanding.
I guess my bigger question is if I can claim this as selling personal goods, where do I do that and list that it was loss, because its hard to find where Im supposed to do that.
This can be reported as the sale of items not associated with a business so this won't be considered as self-employment income.
For reporting Form 1009-K for personal items sold not associated with a trade or business, you can report this as Miscellaneous income.
By enter 1099K as received you mean in the "Self-Employment Income and expenses" tab right?
For reporting these sales as investments, I have a 1099-K from PayPal that just lists monthly totals (yearly total around 1800 not a ton but obviously over the reporting threshold). Some months were only $10 one month was over $1000. Should I just lump them all together into a single line item with a 12/31/21 sell date or list each month separately. Some months had multiple transactions some only one.
No, follow the steps listed by @PattiF. If you are not in business, but are selling personal items as you would a garage sale, then you can zero out the income since you definitely sold items for less than what you paid for them.
@namontes
I was planning to document a roughly 10-15% profit on them as I'm not really sure and if I ever got audited or something I would at least have made some good faith effort to claim something on it.
I'm not seeing any option to enter an adjustment. Or would I be entering it as a separate income line with a negative value?
You said, "Or would I be entering it as a separate income line with a negative value?" Yes, add a second negative entry.
@PattiF @ Does this work for states with minimum reporting requirements of $600 (like VA)? Will the state come after me because I did not explicitly file the 1099-k? If I use the method you outlined how will the irs and state know that this income is for the 1099-k that I r
The IRS will put it together. Similar to someone who gets multiple, 1099's, they would not enter them individually but add it together in their revenue.