eBay will be issuing Forms 1099-K to anyone who had Gross Sales of
more than $600 in 2022. I understand Gross Sales to include eBay fees
and shipping costs, both of which would normally be subtracted from
Gross sales to calculate the net
Most discussions of Form 1099K say it should be reported on Schedule
C, but that only makes sense for people who are operating a business
on eBay.
For those of who have sold individual used personal items as a hobby
instead of a business, it seems more logical to report the Gross Sales
from Form 1099-K on either Lines 8i or 8z of Schedule 1, and then
deduct the total of eBay fees, shipping and the acquisition cost of
the items sold, on Line 24z of Schedule 1. (Keeping records of these >individual items in case the IRS wants to see them.)
It is also my understanding that, as a hobby, the amount on Line 24z
cannot exceed the Gross Sales reported by eBay on the Form 1099-K.
And, in my case at least the cost of goods sold will have to be
estimated since I no longer have many of the purchase receipts.
Does this make sense?
"Victor Roberts" wrote
eBay will be issuing Forms 1099-K to anyone who had Gross Sales of
more than $600 in 2022. I understand Gross Sales to include eBay
fees and shipping costs, both of which would normally be
subtracted from Gross sales to calculate the net
Most discussions of Form 1099K say it should be reported on
Schedule C, but that only makes sense for people who are operating
a business on eBay.
For those of who have sold individual used personal items as a
hobby instead of a business, it seems more logical to report the
Gross Sales from Form 1099-K on either Lines 8i or 8z of Schedule
1, and then deduct the total of eBay fees, shipping and the
acquisition cost of the items sold, on Line 24z of Schedule 1.
(Keeping records of these individual items in case the IRS wants
to see them.)
It is also my understanding that, as a hobby, the amount on Line
24z cannot exceed the Gross Sales reported by eBay on the Form
1099-K. And, in my case at least the cost of goods sold will have
to be estimated since I no longer have many of the purchase
receipts.
Does this make sense?
I posted a message about this more than a year ago, and this is
what I wrote back then. I still think my option 2 is the best
course to follow, although I do keep a good record of everything I
sell with estimates on their cost basis in the unlikely event the
IRS comes a knocking.
This is my post from October 2021:
Casual eBay sellers are up in arms over the new rule for 2022 that
requires 1099-K for sellers with $600 or more in sales with no
minimum transaction count. It's not a problem for high-volume
sellers who already deal with this, and it also won't affect the
low-volume seller who might only sell a few items per year.
But what is the best strategy for the casual mid-range seller who
treats eBay as an online garage sale and sells extra and unneeded
items from around the house for more than $600 per year. It's not
a business for these kind of sellers, and they probably sell most
things for less than what they originally paid. So in their minds
they are making money by selling stuff they no longer need, but in
the strict accounting sense, they are really taking a loss.
Let's assume a taxpayer has eBay sales for the year of $1500, but
the original purchase price for the items sold is $2500. Assume
that like many taxpayers today, the seller takes the standard
deduction because they don't really have enough deductions to make
itemizing worthwhile. What is their best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities
in the tax law.
2) Don't report any of it and assume the IRS won't worry about
such a small amount. In the event an audit happens, explain to
the auditor that it was for items that had a cost that exceeded
the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C
reporting sales and expenses, which in this case would show a net
loss.
Is there another strategy I'm missing? Personally, I think for
relatively small amounts option 2 might be optimal.
Stuart O. Bronstein <spam...@lexregia.com> wrote:
. . .I just read through the instructions on various forms and didn't find a helpful, explicit statement like, "If income is reportable on a more
But that does bring up one other question, if anyone knows the answer
- is a payor, under proper circumstances, ever supposed to give both
a 1099-Misc and a 1099-K on the same money?
specific form than 1099-MISC, use that form and do not report duplicate income on 1099-MISC."
--
. . .
But that does bring up one other question, if anyone knows the answer
- is a payor, under proper circumstances, ever supposed to give both
a 1099-Misc and a 1099-K on the same money?
. . .
Separately, the instructions for Form 1099-MISC (page 3) explicitly
state that this form is not to be used to report payments that are
properly reported on Form 1099-K
Let's assume a taxpayer has eBay sales for the year of $1500, but the >original purchase price for the items sold is $2500. Assume that like many >taxpayers today, the seller takes the standard deduction because they don't >really have enough deductions to make itemizing worthwhile. What is their >best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities in the tax >law.
2) Don't report any of it and assume the IRS won't worry about such a small >amount. In the event an audit happens, explain to the auditor that it was >for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C reporting
sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?
Let's assume a taxpayer has eBay sales for the year of $1500, but the >original purchase price for the items sold is $2500. Assume that like many >taxpayers today, the seller takes the standard deduction because they don't >really have enough deductions to make itemizing worthwhile. What is their >best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities in the tax >law.
2) Don't report any of it and assume the IRS won't worry about such a small >amount. In the event an audit happens, explain to the auditor that it was >for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C reporting >sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?4) Report the $1,500 as other income on Schedule 1 line 8z.
Be sure to include "Form 1099-K" in the description. Make
another entry on line 8z for negative $1,500 with a
description something like "Personal items sold at less than
cost."
Bob Sandler
--
On Monday, November 21, 2022 at 8:17:43 PM UTC-5, Bob Sandler wrote:
Let's assume a taxpayer has eBay sales for the year of $1500, but the
original purchase price for the items sold is $2500. Assume that like many >> >taxpayers today, the seller takes the standard deduction because they don't >> >really have enough deductions to make itemizing worthwhile. What is their >> >best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities in the tax >> >law.
2) Don't report any of it and assume the IRS won't worry about such a small >> >amount. In the event an audit happens, explain to the auditor that it was >> >for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C reporting
sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?
4) Report the $1,500 as other income on Schedule 1 line 8z.
Be sure to include "Form 1099-K" in the description. Make
another entry on line 8z for negative $1,500 with a
description something like "Personal items sold at less than
cost."
Bob Sandler
--
Just to be clear, the correct place to report this income is not on Schedule 1, or Schedule C, it's on Schedule D via Form 8949. Personal tangible property is a capital asset.
Ira Smilovitz, EA
Leonia, NJ
On Monday, November 21, 2022 at 8:17:43 PM UTC-5, Bob Sandler wrote:
Let's assume a taxpayer has eBay sales for the year of $1500, but the
original purchase price for the items sold is $2500. Assume that like many
taxpayers today, the seller takes the standard deduction because they don't
really have enough deductions to make itemizing worthwhile. What is their >> >best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities in the tax
law.
2) Don't report any of it and assume the IRS won't worry about such a small
amount. In the event an audit happens, explain to the auditor that it was >> >for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C reporting
sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?
4) Report the $1,500 as other income on Schedule 1 line 8z.
Be sure to include "Form 1099-K" in the description. Make
another entry on line 8z for negative $1,500 with a
description something like "Personal items sold at less than
cost."
Bob Sandler
--
Just to be clear, the correct place to report this income is not on Schedule 1, or Schedule C, it's on Schedule D via Form 8949. Personal tangible property is a capital asset.
Ira Smilovitz, EAThat gives Rick another strategy, with two variations.
Leonia, NJ
Reporting it on Form 8949 makes it easy to report the income
and show no gain or loss, and therefore no taxable income.
In Rick's example (1099-K for $1,500, original cost $2,500):
EITHER
(5a) Show proceeds and cost of $1,500
OR, more accurately,
(5b) Show proceeds of $1,500, cost $2,500, code L
(nondeductible loss) in column (f), and a $1,000 adjustment
in column (g).
In either case, I would put "Form 1099-K" in the
description, in the hope that the IRS will match the
proceeds to the 1099-K and recognize that you reported the
income.
Bob Sandler
--
"ira smilovitz" wrote in message news:cfec5a33-f176-4614...@googlegroups.com...
On Monday, November 21, 2022 at 11:37:43 PM UTC-5, Bob Sandler wrote:
On Monday, November 21, 2022 at 8:17:43 PM UTC-5, Bob Sandler wrote:That gives Rick another strategy, with two variations.
Let's assume a taxpayer has eBay sales for the year of $1500, but the >> >> >original purchase price for the items sold is $2500. Assume that like >> >> >many
taxpayers today, the seller takes the standard deduction because they >> >> >don't
really have enough deductions to make itemizing worthwhile. What is
their
best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities in
the tax
law.
2) Don't report any of it and assume the IRS won't worry about such a >> >> >small
amount. In the event an audit happens, explain to the auditor that it >> >> >was
for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C
reporting
sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?
4) Report the $1,500 as other income on Schedule 1 line 8z.
Be sure to include "Form 1099-K" in the description. Make
another entry on line 8z for negative $1,500 with a
description something like "Personal items sold at less than
cost."
Bob Sandler
--
Just to be clear, the correct place to report this income is not on
Schedule 1, or Schedule C, it's on Schedule D via Form 8949. Personal
tangible property is a capital asset.
Ira Smilovitz, EA
Leonia, NJ
Reporting it on Form 8949 makes it easy to report the income
and show no gain or loss, and therefore no taxable income.
In Rick's example (1099-K for $1,500, original cost $2,500):
EITHER
(5a) Show proceeds and cost of $1,500
OR, more accurately,
(5b) Show proceeds of $1,500, cost $2,500, code L
(nondeductible loss) in column (f), and a $1,000 adjustment
in column (g).
In either case, I would put "Form 1099-K" in the
description, in the hope that the IRS will match the
proceeds to the 1099-K and recognize that you reported the
income.
Bob Sandler
--
I don't think this gives Rick "another" strategy. I think this is the >*only* strategy that meets the requirements of the Code. Reporting this >income anywhere other than Form 8949 is wrong.
Ira Smilovitz, EA
Leonia, NJ
Except what we are talking about is not really income per se. It's money received from eBay that represents the sale of goods at a loss. Bob's suggestion to report the money with an offset that shows it's zero income is a good one as a way of signaling to the IRS that the funds are not income in the event they decide to question it. My premise is that doing nothing is also a legitimate alternative because my only legal obligation is to report actual income to the IRS, which this is not. If I literally do nothing and don't report the funds at all, the worst case is the IRS asks me about it
and I explain that this was not income but merely the casual sale of some good at a loss.
Independently and separate from all this, I also think as a practical matter that the IRS will be flooded with so many 1099-K forms from small eBay sellers in relatively small amounts of, say, $2500 or less, as in my
example, that it would be impractical and unlikely they would go after
people on this. eBay has an enormous number of small sellers.
--
--
On Monday, November 21, 2022 at 11:37:43 PM UTC-5, Bob Sandler wrote:
On Monday, November 21, 2022 at 8:17:43 PM UTC-5, Bob Sandler wrote:That gives Rick another strategy, with two variations.
Let's assume a taxpayer has eBay sales for the year of $1500, but the
original purchase price for the items sold is $2500. Assume that like
many
taxpayers today, the seller takes the standard deduction because they
don't
really have enough deductions to make itemizing worthwhile. What is
their
best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities in
the tax
law.
2) Don't report any of it and assume the IRS won't worry about such a
small
amount. In the event an audit happens, explain to the auditor that it
was
for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C
reporting
sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?
4) Report the $1,500 as other income on Schedule 1 line 8z.
Be sure to include "Form 1099-K" in the description. Make
another entry on line 8z for negative $1,500 with a
description something like "Personal items sold at less than
cost."
Bob Sandler
--
Just to be clear, the correct place to report this income is not on
Schedule 1, or Schedule C, it's on Schedule D via Form 8949. Personal
tangible property is a capital asset.
Ira Smilovitz, EA
Leonia, NJ
Reporting it on Form 8949 makes it easy to report the income
and show no gain or loss, and therefore no taxable income.
In Rick's example (1099-K for $1,500, original cost $2,500):
EITHER
(5a) Show proceeds and cost of $1,500
OR, more accurately,
(5b) Show proceeds of $1,500, cost $2,500, code L
(nondeductible loss) in column (f), and a $1,000 adjustment
in column (g).
In either case, I would put "Form 1099-K" in the
description, in the hope that the IRS will match the
proceeds to the 1099-K and recognize that you reported the
income.
Bob Sandler
--
I don't think this gives Rick "another" strategy. I think this is the
*only* strategy that meets the requirements of the Code. Reporting this >income anywhere other than Form 8949 is wrong.
Ira Smilovitz, EA
Leonia, NJ
On Tuesday, November 22, 2022 at 1:27:49 PM UTC-5, Rick wrote:
"ira smilovitz" wrote in message
news:cfec5a33-f176-4614...@googlegroups.com...
Except what we are talking about is not really income per se. It's money
On Monday, November 21, 2022 at 11:37:43 PM UTC-5, Bob Sandler wrote:
On Monday, November 21, 2022 at 8:17:43 PM UTC-5, Bob Sandler wrote:That gives Rick another strategy, with two variations.
Let's assume a taxpayer has eBay sales for the year of $1500, but
the
original purchase price for the items sold is $2500. Assume that
like
many
taxpayers today, the seller takes the standard deduction because
they
don't
really have enough deductions to make itemizing worthwhile. What
is
their
best tax strategy?
1) Just report the $1500 as income and chalk it up to inequities
in
the tax
law.
2) Don't report any of it and assume the IRS won't worry about
such a
small
amount. In the event an audit happens, explain to the auditor that
it
was
for items that had a cost that exceeded the 1099-K amount.
3) Pretend it's an actual business and fill out a Schedule C
reporting
sales and expenses, which in this case would show a net loss.
Is there another strategy I'm missing?
4) Report the $1,500 as other income on Schedule 1 line 8z.
Be sure to include "Form 1099-K" in the description. Make
another entry on line 8z for negative $1,500 with a
description something like "Personal items sold at less than
cost."
Bob Sandler
--
Just to be clear, the correct place to report this income is not on
Schedule 1, or Schedule C, it's on Schedule D via Form 8949. Personal
tangible property is a capital asset.
Ira Smilovitz, EA
Leonia, NJ
Reporting it on Form 8949 makes it easy to report the income
and show no gain or loss, and therefore no taxable income.
In Rick's example (1099-K for $1,500, original cost $2,500):
EITHER
(5a) Show proceeds and cost of $1,500
OR, more accurately,
(5b) Show proceeds of $1,500, cost $2,500, code L
(nondeductible loss) in column (f), and a $1,000 adjustment
in column (g).
In either case, I would put "Form 1099-K" in the
description, in the hope that the IRS will match the
proceeds to the 1099-K and recognize that you reported the
income.
Bob Sandler
--
I don't think this gives Rick "another" strategy. I think this is the
*only* strategy that meets the requirements of the Code. Reporting this
income anywhere other than Form 8949 is wrong.
Ira Smilovitz, EA
Leonia, NJ
received from eBay that represents the sale of goods at a loss. Bob's
suggestion to report the money with an offset that shows it's zero income
is
a good one as a way of signaling to the IRS that the funds are not income
in
the event they decide to question it. My premise is that doing nothing is
also a legitimate alternative because my only legal obligation is to
report
actual income to the IRS, which this is not. If I literally do nothing
and
don't report the funds at all, the worst case is the IRS asks me about it
and I explain that this was not income but merely the casual sale of some
good at a loss.
Independently and separate from all this, I also think as a practical
matter
that the IRS will be flooded with so many 1099-K forms from small eBay
sellers in relatively small amounts of, say, $2500 or less, as in my
example, that it would be impractical and unlikely they would go after
people on this. eBay has an enormous number of small sellers.
--
--
Per the IRC, the sale of *any* personal property is a capital transaction. >Per the 26 USC 61, Gross income is defined as follows:
"Except as otherwise provided in this subtitle, gross income means all
income from whatever source derived " Sections 101-140 specifically list
the exceptions to gross income. You won't find the sale of used personal >goods listed there. Whether the transaction results in a gain or a loss is >immaterial.
As an aside, you can't indicate to the IRS that it isn't income, because it >is. What you are trying to do is indicate that the income isn't *taxable* >income (because the Code states that you are only taxed on the gain
resulting from the sale of property). The proper way to show that this is
not taxable income is through the two choices that Bob Sandler proposed.
As to whether the IRS will pursue any of the small eBay sellers or those
that report their income on the wrong form, probably not. But that doesn't >mean that it might not come up if there is some other reason for the IRS to >look at a specific return. And... as a credentialled professional, I can't >ethically suggest that a taxpayer not comply with the rules as they exist.
Ira Smilovitz, EA
Leonia, NJ
One question this triggers for me is how are the major tax software packages >(Turbo Tax, TaxAct, H&R Block, etc.) handling this issue? Aside from the >fact that the 1099-K receipt will now be triggered by lower amounts, does >anyone know if the major packages have added sections or dialogues to assist >small eBay users who have never had to deal with this issue before?
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