Making “garage sale” type sales on ebay should not be taxable, but how do you zero out the income reported on the 1099-K?
Turbo Tax says here: A Tax Filing Factsheet for eBay Sellers - TurboTax Tax Tips & Videos
" According to the IRS, if your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report income from those sales."
But since the sales will be reported to the IRS on form 1099-K, how can you not report that?
Thanks,
Rick
While Intuit says their topic has been updated for 2022, the IRS links that they provide are rather old and have a warning:
so I would question their advice, especially since the rules changed for 2022 so that 1099-Ks are issued for receipts greater than $600. The additional advice that they give in the article:
Assuming that you originally bought the used items for more money than you are selling them for, you don’t have to report the income received from the eBay sale. For example, if you sell a bicycle that you paid $500 for two years ago for $350 on eBay, you usually don’t have to notify the IRS—and you can’t claim a loss on it.
manages to keep the total income under $600, so conveniently, they don’t have to explain what to do if you bought a bike for $2000 and sold it for $1000 (Which, IMO, is more likely than the example that they provided, if you’re going to bother selling a bike through a marketplace where you may have to ship it.)
Congress changed the rules so that anyone who has receipts of more than $600 through outlets like eBay is no longer considered to be doing an ‘online garage sale’, so if you get a 1099-K , you need to document it on your tax return, or you will likely get a question from the IRS.
Sorry - just realized I didn’t answer your initial question:
You can document it as a hobby (where you don’t get to deduct losses) or as a business (where you can deduct losses, but also would have pay self-employment taxes on any profits).
From IRS Pub 525 2021 Publication 525 (irs.gov) hobby income is reported on Form 1040, line 8i
Activity not for profit. You must include on your return income from an activity from which you don’t expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Enter this income on Schedule 1 (Form 1040), line 8i. Deductions for expenses related to the activity are limited. They can’t total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). See Not-for-Profit Activities in chapter 1 of Pub. 535 for information on whether an activity is considered carried on for a profit.
Business income is typically reported on a Schedule C or C-EZ.
Rather than using Intuit’s articles, you might want to peruse the IRS FAQs on 1099-Ks for individuals Form 1099-K Frequently Asked Questions: Individuals | Internal Revenue Service (irs.gov)
AJ
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OK, thanks. But how to zero out that 1099-K income? I do sell on ebay but it is ALL “garage sale” stuff.
Do I have to set it up as business?
Thanks,
Rick
It depends on the facts and circumstances. Selling ‘garage sale stuff’ doesn’t mean that it’s not a business. Are you doing the selling as a business, by reselling you bought with an intention to sell after you used it for a while, or by fixing up things you bought and reselling? Or are you just selling stuff that you originally bought for personal use, with no intention of selling again?
AJ
1 Like
“just selling stuff that you originally bought for personal use, with no intention of selling again?”
Yes, that one.
Then that sounds like a hobby, and you should look at the links about not-for-profit and hobby income that I provided upthread. That said, I would say that selling more than $600 a year on eBay year after year seemed, at least to Congress, to be more of a side business, rather than a hobby, which is why the rules changed.
AJ
2 Likes
Hobby? Not really. None of it is hobby stuff. It’s garage sale stuff.
You have 2 choices. Hobby income or business income. It depends on the facts and circumstances.
Then why are you selling it on eBay and not at a garage sale?
AJ
2 Likes
Because it’s a lot easier. And usually get higher prices. And I live in an area where virtually no one would come or want what I’m selling.
Those sound more like business income facts and circumstances. But you need to read the definitions (as referenced upthread) to understand how your facts and circumstances fit the definitions to decide how to document your income.
AJ
1 Like
I don’t see how it’s a business. I’m not in it for the profit and I virtually always lose money. I wouldn’t wish this business on anyone!
I find a book I don’t want any more and sell it.
Or a DVD.
Or a kitchen utensil.
Anything lying around that we don’t use any more.
Clearly garage sale type stuff.
Anyway, I guess I can call it a business and always have a loss, since it’s all garage sale type stuff where the price we get is lower than the price we paid. So gosh, that would deduct from our other actual income!
Just be aware that continually losing money on a business isn’t necessarily a good look either.
Some things you say would indicate it is a hobby for you, while others indicate that it’s a business for you. So, again, YOU NEED TO READ THE INFORMATION ABOUT HOBBY INCOME VS. BUSINESS INCOME REFERENCED UPTHREAD TO SEE HOW YOUR FACTS AND CIRCUMSTANCES APPLY.
AJ
4 Likes
I’m constantly seeing mention about 1099K’s from ebay but no one seems to talk about Amazon. I imagine if you sell more than $600 on Amazon, they do a 1099K also.
2 Likes
Probably because Amazon does more screening of those who sell on their platform, so the sellers are more likely to be set up as a business than those who sell on eBay.
Yes, all 3rd party payment processors, including but not limited to:
eBay
Amazon
PayPal
Etsy
Square
are required to issue 1099-Ks
AJ
1 Like
One thing I haven’t seen mentioned is that even though your hobby expenses are not currently deductible, you can still deduct the cost of goods sold.
So if you are cleaning out your home in a virtual garage sale, the cost of the items sold is still deductible. It can’t create a loss, but it can fully offset your sale proceeds.
—Peter
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Right, Peter. That is my plan. I’ll call it a hobby and zero it out. Thanks, Rick
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I actually have a similar issue with Ticketmaster. My wife and I buy season tickets for our college football team. Of course, we only make it up for a few of the games, and resell the rest. Ticketmaster will 1099 me if the sales exceed $600 - which they will, but not by much. However, once I account for my purchase price for the season tickets (or a percentage, based on how many games I re-sold), we’re probably not even breaking even. So my assumption is that I’ll calculate my cost on those tickets, enter “cost of goods sold” into TurboTax, and the gain becomes $0.
$600 barely covers the cost of a Ticketmaster convenience fee, print your own tickets fee and other fees they charge
Mike
2 Likes
I hear ya man. We used to have Texans season tickets (2002-2017) and would sell games we didn’t plan to attend. A couple of years the tickets we sold actually paid for our season tickets as well as parking. Now selling pre-season games didn’t happen. You couldn’t even pay someone to buy your tickets. Pre-season is a total waste yet you are forced to buy 4 extra games every year as part of the package.
Don’t know if they were sending out 1099’s back in that era or not.
Regards,
ImAGolfer (retired '03)
Except that hobby expenses are no longer deductible (at least until 2026, when, under current law, they will become deductible as miscellaneous expenses on Schedule A) so you would need to set it up as a business. As previously stated, having a business that continually loses money makes it look more like a hobby, so that could be questioned.
AJ
1 Like