eBay 1099-K and the Schedule 1 tax form

[tommyr333]

Getting my first 1099-K

Question: I'm not using eBay as a business so I don't want to get involved with a Business Schedule C.

I won't be doing any expense deductions etc.

Can I just take the total dollar amount of the 1099-K and let the Schedule 1  tax form take care of it as a hobby

income and add that dollar amount to my regular 1040 form as extra income.

[downunder-61]

I have a headache just from reading these, man the IRS sounds way more confusing than our ATO, so very pleased to be Australian 

[tommyr333]

Thank you very good info.

Q:  On the 1099-K   the dollar amount is that Total Sales [ incl. taxes and shipping etc. ]

or it it the total dollar amount that went to my bank for the year?

[lacemaker3]

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@nobody*s_perfect wrote:

" I am completely baffled as to why you would want to do that, because the tax treatment for this income is brutal."

One possibility is that the taxpayer's taxable income (including the income from eBay) is lower than the standard deduction. This would likely be true for many folks who are supplementing their Social Security or other fixed income such as disability or child support.  And reporting it on Schedule 1 rather than on Schedule C means you don't have to fill out Schedule SE and pay that tax on it.

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There's no need to fill out Schedule SE or pay Self Employment tax when the income is reported as Capital Gains or Losses as I suggested.

OP said that they did not want to file as a business, and I suspect there's a good chance they would not qualify for that.

[lacemaker3]

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@tommyr333 wrote:

Thank you very good info.

Q:  On the 1099-K   the dollar amount is that Total Sales [ incl. taxes and shipping etc. ]

or it it the total dollar amount that went to my bank for the year?

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@tommyr333 

The amount on your 1099-K is the total (gross) amount of all payments you received from your buyers, including purchase price plus shipping, but not including the sales tax that eBay collected and remitted to the buyers' states.

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794#section2

It doesn't include "any adjustments, for example, credits, discounts, fees, refunds, or any other adjustable amounts." So your fees and refunds, if any, as well as your costs for purchasing shipping labels and packaging materials, would be expenses that you can deduct from the income reported on your 1099-K. There are places on the IRS schedules and forms to fill all that in, if you are filing as Capital Gains and Losses, or on a Schedule C for business. Hobby sellers can't deduct expenses, so it's better to file one of the first two ways.

[lacemaker3]

Too late to add:

With Capital Gains and Losses, the expenses you had both when you bought the items and sold them (like sales tax, shipping, buyer's premiums if you bought them at auction, eBay fees, shipping to the buyer) are included when you calculate the cost basis of the items. The cost basis is basically how much you have invested in the items. That is deducted from the income you received when they were sold. So if you sold the items for less than you paid for them, there is no additional tax liability once you have filled out the forms.

[luckythewinner]

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@lacemaker3 wrote:
OP said that they did not want to file as a business, and I suspect there's a good chance they would not qualify for that.

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If you are retired and on Social Security, reporting business income before your full retirement age may reduce your Social Security benefits if you exceed the income limit.

Reporting Capital Gains does not reduce your Social Security benefits. 

[butterfly-closet]

What about the taxes eBay collects and sends to the states and your eBay fees, those are both included on the 1099K. You have to account for that also

[nobody*s_perfect]

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@butterfly-closet wrote:

What about the taxes eBay collects and sends to the states and your eBay fees, those are both included on the 1099K. You have to account for that also

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The eBay Help page that lacemaker linked to above says "Additionally, Form 1099-K does not include the sales tax when it is automatically collected and remitted by eBay."

eBay fees and other expenses are not deducted from the total reported by eBay on your 1099-K.

[lacemaker3]

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@butterfly-closet wrote:

What about the taxes eBay collects and sends to the states and your eBay fees, those are both included on the 1099K. You have to account for that also

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The sales tax that eBay collects is deducted from the 1099-K, as I had said before. eBay fees, refunds, credits, and so on are not adjusted on the 1099-K.

[rfmtm]

Yes, the capital gains method is the technically more correct way to report this, and certainly should be used for larger amounts.  Otherwise it is more complicated for most, and for smaller more simple sales, the IRS is allowing the simple Other Income method.

Generally when selling garage sale personal items, they are selling for far less then they where purchased for.  So while you can't report a loss, the sale is still a wash with no profit, which is reported as an adjustment to Other Income using a negative entry.  This results in a zero total, so no additional taxes are due.