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.
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!
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:
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.
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......
@jackie9997
No, you need to report the 1099K as it is. However you can report it as Other Miscellaneous Income.
[Edited |02/28/2021|, 12:21pm PST]
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
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.!
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!
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:
This is what the OTHER turbo tax expert told me to do... so that is what we did.
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.
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?
Enter in the 1099-K information where you would enter in self-employment income. Then choose the type of income received, which is 1099-K. Once you enter the sales, turbo tax will ask if you want to record expenses. In the expense section, choose inventory as an expense type. Enter zero for the value of beginning and ending inventory. The next screen will ask the cost of the goods. Put the value of the goods sold in the cost of purchases box and continue. If it is worth more than what you got, then you won't be taxed on the sale.
Dave20 (20 plus year user of TurboTax!)
I am filing 2021 taxes using TurboTax Delux cd on my desktop. I received a 1099-K because I sold two expensive items of on ebay for a total of $1070. The actual original cost was $2,650. I am not in business, this was like a one time garage sale. The 1099-K "Instructions for Payee" says was issued because "I received payments that exceeded $20,000 gross reportable transactions and an aggregate number of transactions exceeded 200 for the year."
This is obviously not true, and I suspect that Ebay just getting ready for 2022, and sent 1099-Ks to everyone.
Question: Since the American Rescue Plan change (below) begins with transactions starting January 2022, so it doesn’t impact 2021 taxes, am I correct that I am not required to report this 1099-K under the year 2021 rule: $20,000 and 200 transactions criteria? Do I just keep the 1099-K with my 2021 tax records?
If I am required to report, and I report it under misc. income using the 1099-K numbers, do I reference the 1099-K, if so, how?
" American Rescue Plan change begining with transactions starting January 2022, so it doesn’t impact 2021." taxes.
Yes, You need not report 1099-K since you sold only your personal items at a loss and it is not a regular business.
Is it possible that the IRS would take issue with your implicit claim that 1099-K reported sales were personal items sold at break even or loss if you are not self employed? On what basis might the IRS argue against the implicit claim when you do not include the 1099-K sent to you?
IRS says to report your Form 10kk-K on your tax form, even if all the items were personal sales sold at a loss.
Unless you enter your Form 1099-K and offset the income, IRS will assume the Box 1a amount is 1000%.
Here's what IRS says:
Report your proceeds (the Form 1099-K amount) on Part I – Line 8z – Other Income, using the description "Form 1099-K Personal Item Sold at a Loss."
Report your costs, up to but not more than the proceeds amount (the Form 1099-K amount), on Part II – Line 24z – Other Adjustments, using the description "Form 1099-K Personal Item Sold at a Loss."
In the example of a refrigerator sale, if you received a Form 1099-K for $600 for the refrigerator for which you originally paid $1,000, you should report the loss transaction as follows:
Form 1040, Schedule 1, Part I – Line 8z, Other Income. List type and amount: "Form 1099-K Personal Item Sold at a Loss …. $600" to show the proceeds from the sale reported on the Form 1099-K
and,
Form 1040, Schedule 1, Part II – Line 24z, Other Adjustments. List type and amount: "Form 1099-K Personal Item Sold at a Loss…. $600" to show the amount of the purchase price that offsets the reported proceeds. Do not report the $1,000 you paid for the refrigerator because the loss on the sale of a personal item is not deductible.
See Form 1099-K Frequently Asked Questions: General
@stantonporsche
no way on turbotax deluxe or any other version of turbotax to get offsetting number on schedule 1 line 24z.
the work around would be to enter it manually but not sure if that might cause filing issues.
to get entry on line 8z is also a challenge. you can get description of item
1099-K personal items at a loss
by entering info on LESS COMMON income
Miscellaneous Income, 1099-A, 1099-C
but you have to make 2 entry
person item at a loss 200
person item at a loss -200
for example , so that turbotax will zero out and not owe any taxes
this will enter info on schedule 1, line 8z but seems like you need to manually enter 200 because it shows up as zero.