Received 1099-K from Reverb and PayPal, but sold only personal items at a loss. This link suggests no need to report: https://ttlc.intuit.com/replies/3995054 - thoughts?

[DawnC · Accepted solution]

That is correct.  You do not need to report income from the sale of personal items unless you made a profit.  Keep the 1099-K with your tax records but do not enter it into TurboTax.  

[Suzanne1801a]

How is this correct to not enter it into the turbo tax when some states require that you report any additional income from the sale of personal items that exceeds $600 dollars? I too have this same question, where to I report this 1099-K that was sent to State and Federal entities aka IRAS, even though my costs of the items were much more then my income receieved.  I know this would be a loss but I am not running a business, I was just downsizing and sold some personal items on eBay.  Next thing I knew I received a 1099-K from PayPal. I can not see this being a schedule C because it is NOT a business.  Please advise.  Thanks!

[PattiF]

If your Form 1099-K is for personal items sold, similar to having a garage sale, and you were not in a trade or business, the IRS allows you to also deduct the related expenses for the sale up to the amount of the sale.

Otherwise, Form 1099-K must be included in the self-employed section of the return. In the self-employed section, negative income cannot be reported. Self-employed persons must use the rebates option under income or report any offsets as miscellaneous expense.

If you do not need the self-employment section, you have two options to report Form 10999-K in TurboTax.

Both following options will report Form 1099-K and also zero it out on your return. This will mean you appropriately pay -0- tax on the non self-employed income.

For reporting Form 1009-K for personal items sold not associated with a trade or business, you have two options:

• Option 1 in TurboTax Premier or higher: reporting Form 1099-K 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 Personal Property Sales 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. The description for the cost should include Cost of Personal Property
  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 
  11. Select Add another sale to add the next Form received 
       
• Option 2 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.

[Suzanne1801a]

PattiF12, thanks for the information, I will give this a try since clearly we are not running a business nor are we self employed... we are merely, getting rid of items we no longer use that someone else might be able to use.  And yes, many of these are a total loss because we paid much more then we are selling the items for.

Again, Many thanks.

[jackie9997]

Do you only need to report the profits? I am in a similar boat. I sold some items around the house and received a paypal 1099-K for $4K because I am in VA. This wasn't all profit. Maybe just about $300 of it. I am not a business......

[MayaD]

@jackie9997 

No, you need to report the 1099K as it is. However you can report it as Other Miscellaneous Income.

1. Select  Federal from the left menu.
2. Select Wages & Income
3. Scroll down to Less Common Income, and click Show more
4. Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
5. Choose the last option, Other reportable income and click Start
6. Enter the applicable description and amount and Continue
   1. First, enter Form 1099-K as received. Enter the full amount, and for a description, include Form 1099-K and Personal Property Sales
   2. 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 and for the cost description, include Form 1099-K and Cost of Personal Property.

[Edited |02/28/2021|, 12:21pm PST]

[jackie9997]

Well for 2020 I just put the whole 1099K to Misc Income and listed it. For 2021 I will spreadsheet any costs and profits to try to offset for 2021. Thanks again 

[Suzanne1801]

Enter two lines for the 1099k

1. showing the income under misc income

and then a second one showing the same information but enter what is cost you originally but enter it with a minus in front of the money and then that will show 1099 minus cost equal actual income reported.! 

[Suzanne1801a]

You enter two line items.  1 showing the 1099K information  (example: $1500 in income)

then on the next line you enter the exact same Verbiage but enter your Cost in a negative entry... (example: -1300.00  This will give you a reported income of $200... (1500 - 1300 = 200).  hope this helps!  

[JeffreyR77]

This example is not an example of personal items being sold at a loss. 

First, personal items sold at a loss, the loss is not deductible, the transaction would need to be shown as a reversing entry to wash the 1099-K reported income. 

Second, if the items are being sold for a profit, there is a question if there is a profit motive and whether the 1099-K income should be reported as Schedule C income and the cost as cost of goods sold Inventory and other business expenses can then be deducted for the year.

For personal items sold at a loss with income reported on a 1099-K, you can report in TurboTax as follows:

[Suzanne1801a]

This is what the OTHER turbo tax expert told me to do... so that is what we did.

[Suzanne1801a]

• Per pattif12 aka turbo tax expert that reponded to me... here is how we dealt with the 1099K we received when selling old personal items on ebay.
•  
• Option 2 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.

[DawnC]

For personal items sold in a garage sale type sale:

If you made a profit - it is reported as an investment sale and you may have to pay tax, but only on the gain.   Where do I enter investment sales?

If you did not make any money off the sales of personal items, you don't have to report the sales.  It is not considered taxable income on the federal or state return.   If you sold something for $100 that you originally purchased for $150 - there is no income.   When the state says you have to report income over $600, they are talking about taxable income.     In this example, you have no income, you do have a loss, but it is not deductible.   The easiest way to handle a loss on personal items sold is to not report the sale and keep detailed records of the costs and sales prices of the items in the unlikely event you receive an inquiry.   As long as you keep your records, you do not need to enter the sales.   

If you are going to opt to report the 1099-K, as misc. income entry, the negative entry needs to be for the exact amount you entered for the 1099-K.   This is because if the sale generates a loss, it is not deductible and if you take it, you are definitely going to get an inquiry and probably a tax bill.    And if there is a gain, you should report it as an investment sale as those are taxed differently than misc. income.   

Do I have to report personal items that I sold?     @Suzanne1801a    @jackie9997

For selling all other items (not a garage sale type transaction)  A Tax Filing Factsheet for eBay Sellers  - you can't deduct hobby sales expenses.   

[hjimsmith42]

HELP!!!!
I followed the Jan 2020 advice from the top of this thread, and then was recently hit with a tax notice from the IRS for underreporting my 1099-K income on my 2019 tax returns.  
I responded to the IRS with an apology and an amended tax return showing the 1099-K income and the subtraction since it was from personal property not sold at a profit.

The IRS rejected that response and still wants taxes paid on the gross amount of the 1099-K.

I sold my personal musical equipment on Reverb at a loss to help pay divorce settlement costs.

How do I appease the IRS?