1099-K from ebay for 2022

https://www.ebay.com/help/selling/fees-credits-invoices/ebay…

What the heck! The IRS is making ebay, etc, send 1099-K’s this year for any total sales over $600 instead of the $20K last year?!
Does that mean we need to pay income tax on that?
Would I have to do a schedule C in order to enter expenses (like the cost of buying the item I’m selling) to offset the gross amount?

Thanks,
RB

What the heck! The IRS is making ebay, etc, send 1099-K’s this year for any total sales over $600 instead of the $20K last year?!

Here’s what eBay says https://pages.ebay.com/seller-center/service-and-payments/20…

- Starting on Jan 1, 2022, eBay and other marketplaces are required by the IRS to issue a Form 1099-K for all sellers who receive $600 or more in sales.
- The new tax reporting requirement will impact your 2022 sales and taxes that you file in 2023—it will not apply to your 2021 sales and taxes that you file in 2022. Throughout 2022, look for updates from us that will help explain what’s changed and what you need to do next.
- If you haven’t already given us your Social Security number (SSN) or Individual Tax Identification Number (ITIN), we’ll ask you to provide it once you reach $600 in sales.
- No need to worry— you only pay taxes on profits. You won’t owe any taxes on something you sell for less than what you paid for it. For example, if you bought a bike for $1,000 last year and then sold it on eBay today for $700, that $700 you made would generally not be subject to income tax.
- While eBay is unable to give tax advice to our sellers, we want to help make dealing with taxes as easy as possible. Our goal is to help all sellers, casual or those selling as a business, with these new requirements.

Does that mean we need to pay income tax on that?

Yes, but as eBay says you only pay taxes on profits. I will point out that if you have been profiting by selling on eBay, you should have already been declaring that income and paying taxes on the profits. So it appears in your case that the new law will achieve the desired outcome of bringing some of the underground economy above ground.

I will also point out that you may have been missing out on opportunities to fund a tax-advantaged retirement account with profits from your eBay business.

Would I have to do a schedule C in order to enter expenses (like the cost of buying the item I’m selling) to offset the gross amount?

Yes, Schedule C would be the appropriate form.

AJ

13 Likes

No, I’m not making profit. I’m losing money. I just wanted to know if there was a way to claim the loss (or no profit at least) without Sch C. Now I’ll have to track it all, etc. Frankly I was just quitting my long-term Sch C business and was hoping I was done with Sch C’s! Now the very first year I wouldn’t have had to do one, I have to do one anyway!

So, since selling on ebay isn’t much different than a yard sale, I guess people are missing out on claiming losses on Sch C when they have a yard sale, eh?!

One problem is that if you claim a loss on Sch C every year, year after year, due to selling on ebay or a yard sale, etc, that raises a red flag, no?

No, I’m not making profit. I’m losing money. I just wanted to know if there was a way to claim the loss (or no profit at least) without Sch C.
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One problem is that if you claim a loss on Sch C every year, year after year, due to selling on ebay or a yard sale, etc, that raises a red flag, no?

So are you selling items that you/your family have personally used, or is it a business? If you are selling personal items, then here’s what you need to understand from IRS Pub 525 https://www.irs.gov/pub/irs-pdf/p525.pdf

Sale of personal items. If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain. Report it as explained in the Instructions for Schedule D (Form 1040). You can’t deduct a loss.

So, while you may want to claim a loss, you aren’t allowed to when selling personal items. You just need to show that there is no gain to be taxed. If you are running a business (i.e. buying items for resale and selling those), then why do you keep doing it if you are losing money? That seems to raise a huge red flag in your personal finances. If you are doing a combination of personal and business, then you probably need to track things separately for the business from your personal items.

AJ

3 Likes

What a rip. Have to claim a gain but can’t take a loss. Talk about having their cake and eating it also!

So if it’s just personal items, and I can’t claim a loss, how do I fill out the Sch C? The income would have to be what the 1099-K says. And if I can’t claim expenses of MORE than that, then I have to claim expenses exactly equal to the income so the bottom line is zero?
That’s weird, since it is a lie. The expenses will NOT in reality be exactly equal to the income.

Also, they won’t be able to distinguish that it’s just a personal item Sch C vs a business that is constantly zero bottom line.
If they are going to pull this kind of nonsense, there should at least be a way to claim it as personal items sold without faking a business Sch C!

If they are going to pull this kind of nonsense, there should at least be a way to claim it as personal items sold without faking a business Sch C!

I think you have at least 2 other options on how to handle the 1099-K.

1> don’t put it on your 1040 at all. And if the IRS asks about it, let them know that you received a 1099-K for the sale of personal goods that had cost you more than you received when selling them. (And have documentation of what you sold that resulted in the 1099-K and what those items cost you. IMO if you don’t have great documentation of what it cost you, but can give a reasonable estimate on what it cost it’s good enough - they aren’t going to care if the speakers you sold for $50 cost you $60 or $100 if that’s what they normally sold for.)
(Probably not the best option as it could delay any refund for you - but it is an option)

2> put the 1099-K info and an offsetting negative entry in the miscellaneous income. See:
https://ttlc.intuit.com/community/income/help/how-do-i-repor…
(And I’d still preserve any documentation of what was sold that resulted in the 1099-K in case it becomes a question years later)

What a rip. Have to claim a gain but can’t take a loss. Talk about having their cake and eating it also!

I will point out that it’s the same with your personal residence - you can’t take a loss, but have to claim a gain - some or all of which may be exempted - but not always. I’ve had to pay capital gains taxes on the sale of a personal residence before.

If they are going to pull this kind of nonsense, there should at least be a way to claim it as personal items sold without faking a business Sch C!

Since 2022 is the first year that this rule will be in place, they may be working on something to do so. Or they may give guidance on how to report it on a different form later in the year, when we get closer to 2022 tax filing. We’ll just have to see.

AJ

Yes, but as eBay says you only pay taxes on profits

So if I sell some old textbooks, I should have receipts from my original purchase to “prove” I’ve taken a loss?

So if I sell some old textbooks, I should have receipts from my original purchase to “prove” I’ve taken a loss?

If you’re selling 100s of textbooks each year, yeah, you probably should.

If you’re selling a dozen textbooks that any reasonable person would assume you acquired a few years ago when you were in college, I don’t think you have to have receipts. Any auditor is going to look at it and say “Gee, looks like Roy probably bought these 12 textbooks for about $100 each, and sold them for about $80 each. It’s possible he bought them used for $60 and sold them for $80 a year later, but I have no proof of that. I’m not going to waste my time taking this to a courtroom. The judge would be pissed at me for wasting their time.”

2 Likes

Thanks for that link foo1bar!

  1. On the next screen, enter the Total income reported on your Form 1099-K. Don’t enter any expenses.
  2. Select Done
  3. To deduct the cost of items sold: while still in Miscellaneous Income, select Start next to Other reportable income
  4. Answer Yes on Any Other Taxable Income?
  5. Enter Form 1099-K in the Description field. Enter the total cost of the items sold in the Amount field as a negative number. Note that the amount can’t exceed the income reported on Form 1099-K.

It says in #7 not to enter expenses. Why? On that screen it has a field for income and a field for expenses. Why not just put both there? These instructions say to put the income under hobby here, but to NOT put expenses there, but to put them elsewhere, under “Other Taxable Income” as a negative.
???

Any thoughts on why they say, in the link you gave, NOT to enter expenses in the “hobby” section? There is a field for expenses.

Any thoughts on why they say, in the link you gave, NOT to enter expenses in the “hobby” section? There is a field for expenses.

I don’t see anything at the link that was posted upthread that addresses hobby income. I also don’t use TT, so I don’t know why they have an expense field in the hobby section. But the reason you don’t enter expenses there is that the tax code doesn’t allow the expenses as a direct offset to income. The expenses, other than the direct cost of goods, are only deductible as itemized deductions. I can only assume that an entry in the expense field that you see will not carry to Schedule A.

You really need to ask TT support about this.

Ira

1 Like

Any thoughts on why they say, in the link you gave, NOT to enter expenses in the “hobby” section?

Thoughts on why they say it?
No - no real thoughts on that.

Thoughts on why to do it the way they say?
Because they were very explicit in their instructions.
If I follow their instructions, I can reasonably expect things to turn out how they say they should. If I don’t follow their instructions, any bad outcome is on me then, isn’t it?

4 Likes

“I don’t see anything at the link that was posted upthread that addresses hobby income.”

It says: “Answer Yes on Do you have hobby income or expenses?”
Then it says:

On the next screen, enter the Total income reported on your Form 1099-K. Don’t enter any expenses.
Select Done
To deduct the cost of items sold: while still in Miscellaneous Income, select Start next to Other reportable income
Answer Yes on Any Other Taxable Income?
Enter Form 1099-K in the Description field. Enter the total cost of the items sold in the Amount field as a negative number. Note that the amount can’t exceed the income reported on Form 1099-K.

I’m not into blind obedience. I would like to know WHY they say not to enter expenses (limited to the amount of income) in the hobby section. They give a field for hobby expenses, which won’t allow any more than the hobby income entered. It makes perfect sense to enter it there! So why they say to put hobby income in the hobby section but hobby expenses elsewhere (as negative “Other reportable income” is beyond me. Doesn’t that seem odd to you? It sure does to me.

I’m not going to worry about it until next year.

I’m not into blind obedience. I would like to know WHY they say not to enter expenses (limited to the amount of income) in the hobby section.

I would point out that the rule that you are asking about does not affect the returns currently being processed. That’s in addition to the fact that the IRS hasn’t actually published anything on how the rules will be implemented. So you are way too early to be asking specifics about tax software that has not yet been updated to reflect what you are asking about.

I’m not going to worry about it until next year.

Since even early editions of TT that reflect the new rules probably won’t be available until at least December, that’s probably a good decision. In the mean time, be sure you are documenting everything having to do with your sales on places like eBay.

AJ

Thanks AJ. Good advice.