1099K from PayPal

[JoeBx]

Hello,

I'm not self-employed and I have a W-2 form, but I have sold several items on eBay, and PayPal sent me a 1099-K form. I didn't get any profit, because I sold items at lower prices than I purchased them earlier. It was like a garage sale. How should I file the 1099-K form in my case? I tried "Other Common Income", but TurboTax says "We don't need to create a separate entry for your 1099-K info in TurboTax. That's because your 1099-K income should already be included in other income, such as your self-employment or rental income". If I click on the "Self-Employment" it requires to upgrade for $155. These sales on eBay were as a part of my hobby, I just sold items I don't need anymore.

Thanks.

[KathrynG3]

There is another area in Less Common Income to capture these details.

If you are not on eBay as a trade or business, the IRS allows you to offset the income with the cost of the items sold to the extent of your earnings. In other words, if you purchased an item for $100 and later sold it for $10, then report the $10 income and offset it with only $10 of expense.

To do this in TurboTax, follow these steps:

• From the left menu, go to Federal and select the first tab, Wages & Income
• Add more income by scrolling down to the last option, Less Common Income, and Show more
• Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
• Choose the last option, Other reportable income and Start and Yes
• Enter the applicable description and amount and Continue
  • First, enter Form 1099-K as received. It is essential that the full amount be entered.
  • Next, enter an adjustment to reflect the cost of these items as an offsetting, negative amount.

[JoeBx]

Thank you very much for the fast response! I still have some questions, could you please clarify this for me?

1) I clicked on the last option "Miscellaneous Income" and besides the "Other reportable income" and found another option in the list - "Hobby income and expenses". If I sold some items from my collection on eBay and I didn't make a profit, can I report it as a hobby income and expenses? What is the difference between "Hobby income and expenses" and "Other reportable income" in my case?

2) You advised me to enter an adjustment to reflect the cost of these items as an offsetting, negative amount. If I purchased an item for $500 and then sold it for $400, what negative amount should I enter - $500 or $400? Can I enter the original amount I spent?

[AmyC]

1.Hobby income is something you do for fun rather than to make money, not in it for a profit. Other reportable income is simply the bucket for any other income that is taxable. Hobby income is fine for you and very easy to use.

2.Enter your income and then enter your expenses. The law does not allow you to claim expenses greater than your income. Enter both income and expenses as a positive number.

[JoeBx]

Is there any way to report hobby income for free? I tried to select the "Hobby income and expenses" and "Other reportable income", but each of them requires to upgrade to "Turbotax Live Deluxe" for $90.

Thank you.

[Irene2805]

In order to report any kind of  Less Common Income (including "Hobby" or "Other Reportable" Income) you have to upgrade to the Deluxe version of TurboTax, not necessarily Deluxe Live.

You may also wish to investigate the IRS Free File Program.  To qualify:

• Your 2020 household AGI is $39,000 or less;
• You qualify for the Earned Income Tax Credit (EITC); or
• In 2020, you served as active duty military (including Reservists and National Guard) with a maximum AGI of $72,000, and you have a military-issued W-2

For more information please see:  Changing to the IRS Free File Program - ttlc.intuit.com

[JoeBx]

I clicked on the "Hobby income and expenses" and entered the same amount into the "Hobby income" and "Hobby expenses" fields, because I didn't make any profit selling used items on eBay. But it looks like TurboTax didn't deduct Hobby expenses from the Hobby income, because now it shows me a FEDERAL TAX DUE amount.

[KathrynG3]

The IRS does not allow income identified as Hobby income to be offset by hobby expenses.

If you sold items much like selling personal goods at a garage sale, then, it is acceptable to report the costs as well as the income because this income would not be classified as a hobby or income from your own trade or business. 

To do this in TurboTax:

• Option 1: reporting income from eBay via Other Miscellaneous Income 
  1. From the left menu, go to Federal and select the first tab, Wages & Income
  2. Add more income by scrolling down to the last option, Less Common Income, and Show more
  3. Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
  4. Choose the last option, Other reportable income and Start and Yes
  5. Enter the applicable description and amount and Continue
     • First, enter the income as received. It is essential that the full amount be entered.
     • Next, enter an adjustment to reflect the cost of these items as an offsetting, as a negative amount up to the amount of the income. In other words, if the goods cost you $100 and Form 1099-K was for $10 in sales, the maximum cost allowable would be $10.

• Option 2 available in TurboTax Premier or higher: reporting eBay income as investment income
  1. Go to the search box and enter Investment Sales
  2. Select Jump to Investment Sales
  3. Select Other at the next screen, OK, what type of investments did you sell? and click Continue
  4. At Tell us more about this sale, enter in the name, such as Form 1099-K eBay and the Payer's EIN and click Continue
  5. At Now we'll walk you through entering your sale details, under the first dropdown menu, What type of investment did you sell? Select Personal Items
  6. Answer How did you receive this investment with an option from the dropdown menu.
  7. Enter the Description. If you are uncertain what date you purchased the goods, select Something other than a date so that TurboTax will enter Various
  8. Next, enter your Sale Proceeds and an equal amount for the Total Amount Paid and click Continue
  9. Select None of these apply at Let us know if any of these situations apply to this sale and Continue
  10. Continue through the rest of the prompts 

[JoeBx]

Thank you for the answer.

I opened Less Common Income > Miscellaneous Income, 1099-A, 1099-C > Other reportable income, there are two fields, I entered the full amount as received with description and clicked Continue. On the Other Miscellaneous Income Summary page I can add another income or edit the existed one, there is no any field to enter an adjustment to reflect the cost of these items as an offsetting.

As for Investment Sales, it asks about Date sold or disposed. If I made multiple transactions during the year, how should I handle this situation? Also it asks to enter the name of the person or financial institution that brokered this sale.

As I know, PayPal will send 1099-K to IRS, but investment income is reported through 1099-B or 1099-S, is this ok?

[KathrynG3 · Accepted solution]

For the first option, go ahead and select Add another income. On this entry, indicate that it is an offset to Form 1099-K and enter it as a negative. This is going to show both the full amount and the full subtraction on your return, and that is what you want. The IRS needs to match that first number. Your offset is allowable to the extent that it does not exceed the proceeds.

Yes, it is ok to report personal sales in the investment sales section. Investments that are reported do not always have Form 1099-
B or Form 1099-S.

• For the person or financial institution that brokered the sale, you can use the name of who issued Form 1099-K to you, in this case, PayPal.
• For the date, select Something other than a date so that TurboTax will enter Various for you.

@JoeBx 

[carlavorhees]

I do not see where I can make an adjustment to the 1099k income under the miscellaneous income section. what am I missing here? 

[PattiF]

Try these instructions. You will have two items entered in Other reportable income when done.

• In TurboTax Deluxe or higher: reporting it via Other Miscellaneous Income is acceptable to the IRS.
  1. From the left menu, go to Federal and select the first tab, Wages & Income
  2. Add more income by scrolling down to the last option, Less Common Income, and Show more
  3. Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
  4. Choose the last option, Other reportable income and Start and Yes
  5. Enter the applicable description and amount and Continue
     • First, enter Form 1099-K as received. It is essential that the full amount be entered.
       • For a description, include Form 1099-K and Personal Property Sales
     • Next, in other reportable income also,  enter an adjustment to reflect the cost of these items as an offsetting, negative amount up to the amount of the income.
       • For the cost description, include Form 1099-K and Cost of Personal Property 
       • In other words, if the goods cost you $100 and Form 1099-K was for $10 in sales, the maximum cost allowable would be $10.

[Dcorr82]

Follow up question from #5 response

Using turbo tax now and have 1099-K from ebay which I earn some funds but had expenses that would offset the income earned.  On the Other Taxable Income section and enter the description and amount under my name from the 1099-K form.  After clicking continue I don't see a spot to enter the expenses to get the net income.  Please advise. 

[MaryM428]

If eBay does not issue a 1099-K then there is no need to enter that on TurboTax.

@Dcorr82