Ebay 1099-K and cancelled (refunded) transactions

[c_man99]

After researching this and taking everyone's advice into account, I uploaded the 1099-K as "Other" and then made two negative entries for the gross amount[s] of both the laptop / printer, stating they were refunded and what they were. I have all the documentation in case they ask. The vacuum was received as a gift several years ago, and thus is considered a gain from selling personal items. Can I claim the shipping (part of the gross payment, buyer paid exact calculated shipping) as a negative entry also, even though I'm not a business and thus not filing a schedule C? 

[JamesG1]

Yes, you can claim the shipping cost as part of the adjusted basis in the computation of the basis of property received as a gift.  

Assume these facts pertaining to the vacuum which you received as a gift.

Donor's purchase price        $400

Donor's shipping                    $20

Adjusted  basis                       $420

In this example, the $420 adjusted basis would apply to the statement The donor's adjusted basis just before the donor made the gift on this IRS website.

[c_man99]

Ok, then I can (also) write off about $40 in shipping. Keep in mind alot of this is greek to me, but I am still learning. So when I make a third negative entry, I would note the vacuum but only put the negative shipping cost (~$40) and put that it was for calculated shipping.

This brings up another question: Should I file the 1099-K as Personal (non-taxable), and put postive & negative entries into other income? Or file the 1099-K as Other (taxable) as it currently is, and put only negative entries (for cancelled items + shipping) into other income? I checked the IRS guide, and I think it said the latter (even for personal items).

[GeorgeM777]

Not exactly sure what you mean by "writing off" the $40 in shipping.  To follow-up on the comments from @JamesG1, if the shipping costs for the vacuum were $40, then you include that amount in the cost basis for the vacuum.   By adding it to your cost basis in the vacuum, it does not necessarily get written off per se, but it does get accounted for when calculating whether you had a gain from the sale.

Yes, reporting the 1099-K as other income, with corresponding negative entries, is the correct approach. 

@c_man99

[c_man99]

When I attach the 1099-K as "Other" income, the entire amount (over $700) is coming up as taxable; wheras if it's Personal, it isn't. So when you mention the cost basis of the vacuum, I'm assuming that you mean for accounting purposes and not an actual entry. If I made a positive entry for it that would be like a double-positive.

[JohnB5677 · Accepted solution]

Instructions to enter your cost basis and proceeds in another section for your losses/gains (see instructions below). 

We’ve collected your 1099-K information, but you’ll need to add more info about your sale in another section. For TurboTax Online:

1. Select Continue on this screen.
2. On the Your 1099-K Summary screen, select Done.
3. From the Income Landing table, navigate to Investment topics, and select Start or Revisit for "Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
4. Go to Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) on the Income & Expenses screen. Select Edit/Add. 
5. On Your Investments and Savings Summary screen, you’ll see a line item for your 1099-K income. Select Edit or Review and enter the information for the first personal sale item.
   • Be sure to select Personal Items under the What type of investment did you sell?
   • The Cost or other basis amount should be the amount you originally paid for the item.
6. Select Continue when you’re finished to go to the Review your Sales screen.
   • If there was more than one personal item sale included in the 1099-K amount, select Add another sale to add each item.

If you sold your personal item(s) for a loss, that loss cannot offset other income on your tax return like capital loss items (stocks).

If you sold your personal item(s) for a gain, then you’ll need to pay short- or long-term gains tax on it, depending on how long you held the item. This is why you should enter each item separately and not net them together.

[c_man99]

John, I changed the 1099-k back to Personal & recorded the items under the "Personal Item Sales" section. I think this is smarter than filing it as 'Other' & putting the unsold items as misc. negative entries elsewhere on the return. I think I am starting to get a better idea of what is going on.

How to I properly record the cost basis of the two cancelled items? I put "Buyer Refunded, not shipped" and the item as the descriptions. The proceeds are the entire payment including shipping. Should "total amount paid" (below that) be the exact same amount as proceed (net zero)...or should I specify what I actually paid for them, and use the expense field on the next screen for the refund?

[Vanessa A]

If the buyer was refunded and you did not ship the item, you would not enter an actual cost basis for these 2 items.  If you did and then added an expense, you would be decreasing your income too much. 

If even though they were not shipped, your 1099K is showing that you received payment but they never showed the payment reversed anywhere else on your 1099K, then you would enter the exact same amount that is showing as income as an expense to erase that income. 

[c_man99]

The 1099-K is showing the gross payment(s). !099-Ks (from eBay) do not show adjustments, refunds or reversals. I think that is pretty standard. If I put the refund amount (same as net proceed) into expense to net zero those two item(s), what do I put in as the "cost"? What I actually paid for them? I don't think it can be left blank.

[c_man99]

Something I want to add to that is: that is how I currently have it. I have the proceed as the payment, cost basis as actual item cost (to me) and expense as the payment. Each of those item(s) say Gain/Loss $0.00. You can't go below $0.00 and reduce your taxes.

[Vanessa A]

You are correct.  If these are personal items, you cannot go below $0.  However, if you did not actually sell the item, then you would not want to enter the total cost of goods. When I go through and enter $0 for Cost Basis, it does allow me to proceed. You should be able to enter $0 because there are times, when a person truly has no basis, such as they found it along the road. 

[c_man99]

For the two item(s) that didn't sell, where it says: "What type of investment did you sell?"

Should I choose Personal or Other?

[Vanessa A · Accepted solution]

Personal

[c_man99]

Thanks alot everyone for your help, especially John & Vanessa! I know I got down in the weeds with stuff, but I was able to pull everything together with your instructions. I have a clearer understanding of TurboTax / 1099-K now, and I hope this helps others going forward.