How to Report 1099-K Income from Occasional eBay Sales

[eblanco]

I received a 1099-K from PayPal for transactions of about ~$700 during 2019 stemming from the sale of personal items on eBay. These sales are just ways for me to get rid of things I no longer want, and do not provide me with a steady source of income. I am not sure how and where to report this for 2019. Can I put this under "miscellaneous income" as "hobby income and expense for 2019?" Additionally, I reconciled the gross amount on the 1099-K with data from my PayPal account and noticed that items that were refunded were included in the gross amount, but of course I refunded this money to the buyer. Can this amount be listed as a hobby expense alongside any eBay selling fees and cost of shipment. I am in Massachusetts, if that makes any difference. Thank you in advance for your replies.

[RobertG]

People routinely sell personal items at a loss.  You can't claim a loss on the sale of personal items, but you do have to report gains, if you ever have any.

Here is how to report them in TurboTax:

In the search box, type in 'stock'

Select jump to stock

You will see a screen that says 'Did you sell stocks, mutual funds, bonds, or other investments in 2019?' say yes

The next screen says OK, what type of investments did you sell? select Other (land, second homes, personal items)

Then Name of brokerage  use PayPal

What type of investment did you sell?, Personal items

How did you receive this investment?, I purchased it 

You can select 'various' for the date purchased, and use the last sale date for the date sold

Enter $700 for the proceeds, and an equal amount for the amount paid.  

You will show no gain or loss from the transaction, but the sale will appear on your return

[eblanco]

Hi Robert, thanks for your response! If I list them as personal items that were sold, wouldn't I need to have receipts for each item I originally acquired to substantiate this claim? 

[RobertG]

In the unlikely event that you were audited, it would be best to have receipts.  

I would suggest that you make a list of what was sold, an estimate of what your paid for it, and how much it was sold for.

You had to acquire the items you sold somehow, and it is reasonable to assume that you bought them.  

The first question an IRS auditor will ask you is 'How did arrive at the the numbers you claimed on your return?'  If you used a reasonable method, they will usually accept it.

IRS audits are expensive to the Government in terms of human resources.  They don't spend a lot of time on small numbers.

[gladwig-]

Robert,

Thanks for your response to this question. As Mass/Vermont require reporting for amounts > $600, this has to be a very relevant question for many.

 Some follow-up questions if I may:

1) Sales on ebay have costs (listing, % of sales, shipping). How are these accounted for in this method?

2) I imagine IRS checking software will be looking for a value that matches the 1099-K from paypal. Where will this  end up in the return and will it match?

3) The hints and questions from turbo-tax when utilizing this method seem to imply this is for situations where you have a 1099-B and do not mention a 1099-K. Is this a flaw in TurboTax that should be improved?

4) Many posts here and in Ebay forums will suggest that this should be reported using schedule C. Further, TurboTax will lead you down that path as well when you have a 1099-K. Are the equivalent? Given that this is so common, has the IRS provided any specific guidance on this? How can one know which is the correct method? I'll add that I've typically had my taxes done by an accountant and they also treated these as sales of capital assets - so your advice seems to match their actions.

Lastly, the menu sequence was a bit different than described, Not sure if this makes a difference

TT: Here’s the investments we have so far   : Input [Add More Sales]

TT: Did you get a 1099-B or Brokerage Statement for these sales? Input[NO] :comment: because I got a 1099-k.

TT: Choose the type of investment you sold: Input: Selected Personal Item.

TT: some basic Information about the sale:

Property Description: [description]

Net Proceeds: [value from box 1a of 1099-k]

Date of Sale:[Various]

TT: Tell us how you acquired this property:  selected [Other Method]

Comment: These items were purchased as tools in businesses in which I was a co-owner and depreciated in the course of business. When the businesses closed, these items were too difficult to sell and were simply stored for more than a decade. I consider them ‘personal items’ at this point.

TT: Enter Cost Information

Cost basis:[0 + cost to sell and ship items on ebay]

Date if Acquisition: [Various]

TT:When was this Investment Acquired?

Did you acquire this investment before 12/31/2019 : [yes]

The result:

TT:You have a Long-Term Gain from this sale.. and It shows a gain of proceeds – cost basis.

This shows up in Shedule D as a long term gain.

Thanks again.

[RobertG]

1. Costs of the sale are part of your basis in the sale, or you can add them as brokerage fees.

2. the 1099-K should match the sale price.

3. You don't need a 1099 to report a sale of something.

4. You can use a schedule C if you are in business to make a profit, if not, you run into the hobby loss rules. (When the IRS Classifies Your Business as a Hobby)

It looks like you are reporting the sales correctly.

[Juz42]

Hi,

I am trying to follow your instructions, but I am asked by Turbotax to switch to PREMIER in order to continue. Is this normal?

Thanks

[DianeW777]

Yes. If you have a gain from sales transacted on eBay then you must use TurboTax Premier Online to enter those transactions. Keep in mind that any losses from the sale of personal items is not a required entry because personal losses are not allowed to be used to offset other taxable income.

Enter sales when they occurred, for example if you sold several items to one individual on one date, then gather your cost basis or fair market value on the date of sale (use whichever is less) and the sales price.  Likewise if you sold only one item.  The key is that only gains should be reported if this was sales conducted for personal use.

TurboTax will automatically upgrade your product if necessary.  You can choose to use TurboTax CD/Download Basic for this activity as well if you choose.

• How do I change from TurboTax Online to TurboTax CD/Download?

Report your sale as an investment sale.  Be sure to answer all the questions accurately. Keep all of your records pertaining to the sales with your tax return.  These are considered investment sales for tax purposes and reported on Schedule D.  

You can use the following link for instructions on how to enter into your tax return.

• How to enter investment sales  

[charthestar]

My 1099-k for 2021 from eBay shows $1266.55 (and mind you they didn't remove cancelled transactions, their fees, or my shipping fees) but even so,  its not $20,000 and no where near 200 transactions. I'm in California, which is not on the list for State exceptions for those who reside in states with additional reporting requirements have received a 1099-K, even if they have not met the 200/$20,000 threshold (list below is what I understand are the exceptions)

• Arkansas - $2,500 in gross payments with no threshold on the number of transactions
• District of Columbia - $600 in gross payments with no threshold on the number of transactions
• Illinois - $1,000 in gross payments and a minimum of 4 transactions
• Maryland - $600 in gross payments with no threshold on the number of transactions
• Massachusetts - $600 in gross payments with no threshold on the number of transactions
• Mississippi - $600 in gross payments with no threshold on the number of transactions
• New Jersey - $1,000 in gross payments with no threshold on the number of transactions
• Virginia - $600 in gross payments with no threshold on the number of transactions
• Vermont - $600 in gross payments with no threshold on the number of transactions

So, why am I stuck with eBay sending me a 1099-k to deal with for tax purposes?

[JohnW152]

That may simply be eBay policy.

You can receive 1099-Ks from some entities even though the form may not be required by the IRS, or by a state revenue board. 

Some entities send out 1099-Ks to all of their vendors, even when they’ve only processed a few transactions, and they don’t meet a certain dollar threshold.

Please see the TurboTax article Form 1099-K Decoded for the Self-Employed - TurboTax Tax Tips & Videos and the IRS’ Understanding Your Form 1099-K for more information. 

@charthestar

[jthumphrey56]

I'm having a problem following the path you talked about. I'm using Quicken 2021 and it appears your information was for Quicken 2020. Has it changed or am I just not following your suggestion?

Thanks,

James

[ColeenD3]

Where you enter your 1099-K depends on why you received it. 

From <https://www.irs.gov/instructions/i1099k>

There is no one answer to the 1099-K problem. Everyone's situation is a little different. However, if you fail to enter income of any type, other than what is expressly excluded, you will hear from the IRS. A very important aspect is did you sell the item/s for a gain or a loss.

There are so many permutations to this. These are just some of the questions regarding 1099-K.

1) Some of the things I sold pertained to a business, but some did not.

You have to separate the sales that were actually business vs those that were not. You have a hybrid situation.

 2) None was business income. I sold old things I had laying around the house. This is not a business. You must include the 1099-K but you can zero out the income since you had no profit.

3) I did this so it's kind of a business but not really. Yes. It's a business. Report on Schedule C.

4) I bought and resold but it was a one-off type of thing.  You had a sporadic activity. It is other income.

[Vman44]

Assuming I'll get 1099K's from Ebay and Reverb sales for 2022. I've sold some baseball, football, hockey collectible cards, golf stuff on ebay, and wonderful Electric bass guitars on Reverb. I've lost some money on two guitars, had high shipping costs do to size and weight, and made a small profit on another. Any suggestions on how to report these, or is the method the same as you have explained above.

[Vman44]

My cousin is a tax accountant, and said exactly that. Schedule D