1099-k are you a hobby or a business when selling personal items?

[4k1_98]

I sell personal items on ebay that i bought new 1,2 years ago and usually get about half of what i paid for it. I sell enough to make $2000 a year with some years being higher and lower.

I think the 1099-k from paypal is counting sales tax and money i received for shipping as income. My accountant is telling me that it is just a hobby and i can not make a Deduction when it is seen as a hobby.

I live in a state with the $600 limit and i work a regular job for a company.

I am wondering what others are doing that sell personal items on ebay?

[coron_3381]

some helpful info but too broad. Some of whats stated in the first link is good but not altogether helpful and could get many audited. Does the individual have receipts to back up the original purchase price? There are fees involved etc.....but the moment you put this on a Schedule C, you are declaring it a business and are now subject to SS/Medicare tax as well as Fed'l and State income taxes. You cannot declare a hobby and deduct expenses against. Our former president took that ability away when he changed the tax codes. 

Proceed with caution. 

[coron_3381]

The accountant is dead on here. You may not call something a hobby and deduct expenses. 

[dnasilver]

There is no income on items you bought and sold for less. A 1099 does not mean income. It is only a flag of potential income. Any accountant worth their salt knows how to handle. Does you acct think holding a garage sale is a hobby? How is using an electronic form of a garage sale a hobby? Get a new acct.

[dnasilver]

Yes, many people have hobby's that involve pricey collectibles.

[jscar59]

I have bought most of my collection at train shows......Who gives receipts at train shows?.lol

this is getting to be a joke.

[jscar59]

I have collected trains for over 30 years, Some pieces were close to $2,000 a piece....so

selling off your collection for over $20,000 over a year would not be hard to do.

[popblox]

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@jscar59 wrote:

I have bought most of my collection at train shows......Who gives receipts at train shows?.lol

this is getting to be a joke.

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You’re not required to have to have receipts showing how much you spent on your inventory, the IRS accepts the fair market value to price your items.

[mam98031]

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@coron_3381 wrote:

some helpful info but too broad. Some of whats stated in the first link is good but not altogether helpful and could get many audited. Does the individual have receipts to back up the original purchase price? There are fees involved etc.....but the moment you put this on a Schedule C, you are declaring it a business and are now subject to SS/Medicare tax as well as Fed'l and State income taxes. You cannot declare a hobby and deduct expenses against. Our former president took that ability away when he changed the tax codes. 

Proceed with caution. 

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@coron_3381 

It is NEVER a good idea to just take what is shared on the threads regarding something as complicated as your personal tax situation and then run with it without doing your own research.  If the links I provided you are giving you enough information then Google the subject yourself and see what else you can find or consult a Tax Expert.  

On the subject of receipts, that is addressed in the links I provided, so you just have to read through the material.

Well that isn't true about the Schedule C.  And of course it depends on how you are defining a "business".  For IRS purposes the form is used for recording your gross receipts and then deducting expenses to land at the adjusted income you need to report.  You do NOT have to be a legally formed "business" to use the form.  You certainly can be but it is not a requirement.

What IRS calls Hobby incomes can be reported on the Schedule C if you need to be reporting this income and expenses.  That does not require you to be a LLC or a Corporation.  And there is no formal paperwork to set up a Sole Proprietorship, it is just what they call doing business under your own name or a DBA associated with your SSN.

I think you are thinking of Self Employment taxes.  And yes, I've had those very year I have had a profit from online selling or in my consulting business.

You absolutely can declare Hobby Income.  Now with that said, would you be more specific on what you are referring to that changed due to the President.  Link please.  I'd like to update myself.

[mam98031]

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@coron_3381 wrote:

The accountant is dead on here. You may not call something a hobby and deduct expenses. 

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https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business

[mam98031]

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@popblox wrote:

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@jscar59 wrote:

I have bought most of my collection at train shows......Who gives receipts at train shows?.lol

this is getting to be a joke.

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You’re not required to have to have receipts showing how much you spent on your inventory, the IRS accepts the fair market value to price your items.

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Keep in mind that this applies to sellers that are just selling off their own personal stuff.  Not sellers that purchase this stuff with the intent to resell.  The two aren't treated the same.

[coron_3381]

I think you are mixing and matching the rules re: hobby vs business. 

• Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
• Whether you have personal motives in carrying on the activity.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

If you declare your income as a hobby, no deductions are allowed as were allowed prior to 2018 (former President Trump). Prior to '18 you were allowed to write off expenses to the extent of income as a miscellaneous deduction. That's what I was referring to re: the former president. 

Once you declare said income on a Schedule C, you are "effectively" claiming yourself in it for profit (business), you are then subject to self-employment tax and regular federal/state taxes. As opposed to hobby income which is taxed at the federal/state levels only. 

I only question the first link as taxpayers need to be careful in how they classify what it is they are doing. 

[mam98031]

@coron_3381 

I provided links for the subject.  YOu are simply welcome to use it or toss it out.  

[popblox]

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@mam98031 wrote:

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@popblox wrote:

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@jscar59 wrote:

I have bought most of my collection at train shows......Who gives receipts at train shows?.lol

this is getting to be a joke.

---

You’re not required to have to have receipts showing how much you spent on your inventory, the IRS accepts the fair market value to price your items.

---

Keep in mind that this applies to sellers that are just selling off their own personal stuff.  Not sellers that purchase this stuff with the intent to resell.  The two aren't treated the same.

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Please provide the link with supporting documentation that specifies the distinction.

[stmpmn2]

I sell over 200 items and sell over $20,000 worth and it is considered a hobby because I spend a lot more than I sell.  If it was a business I would be claiming a loss every year and you know that won't fly with the IRS for very long so my CPA says it's a hobby and I claim nothing.  I of course have receipts for everything. You might ask....why do I continue to lose money every year.....well that's we we call a hobby.

[mam98031]

I already have on this thread.