Hello,
This year, I began getting rid of a lot of old "junk" and no longer needed item using Facebook marketplace, etc.
A majority (most) of the items that I have sold are far less that what I've originally paid for them and/or what the items are worth. I have been receiving payment mainly though Paypal Goods and Services. Lately I've noticed that the pennies I'm making have been adding up, close to the $600 dollar threshold when Paypal reports these earning to the IRS.
It is my understanding that "sold goods" aren’t taxable as income if you are selling a used personal item for less than the original value. My question is, what is the best way to track or prove that when it comes to filling out my taxes? I'd like to continue selling my unwanted things, but if my Goods and Service sale exceed $600 I believe I'll receive a 1099-K at the end of the year, how should I be documenting these sales it as an overall loss versus income? Does that make sense?
Hope this is in the right discussion area - big thanks in advance for any insight.
rjs
Keep track of the cost of the items you sell to track or prove your taxable income. The best way is to create a spreadsheet or some other record for each sale listing the sale price and cost.
You can always deduct the cost of the items you sold. Other deductions depend on whether you are selling items as a business to make a profit or as a hobby.
Getting rid of junk sounds like hobby income, meaning you can only deduct cost of goods sold AND you cannot claim a loss, so if you sold an item for $100 that you bought to $200, then your deduction against your Form 1099-K would be limited to $100.
You can find more helpful info at:
Hi @Sundayimani ,
Thank you for your insight and feedback!
So yes, totally hobby income, and I'm not really looking to deduct any loss, like I said I've just been selling off old goods. For instance, I've been selling older records because I've learned there has been interest.
For the purpose of the spreadsheet, some are so old it's hard to remember what I paid for them, and receipts are long gone. Can I estimate what I paid for them back in day? Or would you recommend finding a current value vs. what I'm selling them for, and showing the difference? In the end, I just want to cover myself when it come to the receiving a 1099, and showing that I'm only selling personal items less than value for the most part.
Thanks again!
rjs
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You can either use estimates or a current value (if you believe it’s lower than what you paid). If you were audited, IRS would probably want an explanation of how you valued your items. Having some documentation such as a recent sale price on an online marketplace would help in the absence of receipts.