Sold $20k worth of items purchased over 30 year period. Didn't make profit. IRS requirements?
Hello,
Many of these items were musical instruments that I bought long ago. I don't have receipts for most of it. There was just over $20k in gross sales, and a total of 214 transactions in 2022. But I know that there's no noteworthy profit. Does anyone have any experience with this type of situation? I know the sales are reported to the IRS ... but do they automatically assume it's all "profit"?
16 comments
stainlessenginecovers
·3 years agoBeing audited will NOT be a 'minuscule' chance if you attempt to report over $20k in sales and write off 100% of that to zero.
That's a surefire way to get audited.
Many items may have been purchased, for say $100 and are now worth $500- so you'll need some type of documentation. I would start creating 'books' to show the item sold price, the original price, shipping cost, fee costs (all at least); and use some 'research' etc. to get the 'original price.
lloydsteventaylor
·3 years agoGo to an accountant. They will be able to answer your questions and shield you from problems with the IRS before they become problems .
but a couple of things: you must include the 1099k amount on your tax return. if you dont, you will get a letter from the IRS. and what did you do on your 2021 and 2020 tax returns? the IRS will be looking at those years too. Ask your accountant about those years.
goodbrakes
·3 years agoWe also sell Vintage Auto Parts under a different User name on eBay. And we ran into the same problem for parts that we purchased way back that we now sell on eBay. We use an accountant and they said that not showing any kind of gain on an item sold as a bussiness would be a red flag to the IRS. So they used a 50% cost for every thing we sold. Then with all the other deductions it was not so bad at the bottom line. We know we make more on some items and less on other but this sure did save a hassle at tax time.
movieman630
·3 years agoMost people will tell you that as long as you have the original receipts you''re ok. Ebay isn't an online yard sale anymore. The IRS will know about every cent you make on here so it's up to you how you want to handle that situation.
I feel bad for people like you. Selling personal items on here is going to be a nightmare for people who want to avoid the income tax on those items. Your accountant will tell you it's not about what you say, it's about what you can prove on paper.
coolections
·3 years agoMy guess, but your idea of doing taxes showing you made no profit at all is going to raise tons of red flags. I am not an IRS agent, but I find it hard to believe looking at your store.
monica-sells
·3 years agoJust to lighten the mood a bit....
"...Many of these items were musical instruments that I bought long ago..."
As long as you are not trying to put over that 1959 Gibson Les Paul you stuck in your closet you can probably research prices around the time you purchased your instruments originally....it is not that hard to itemize a trombone or saxophone from the 70's
nobody*s_perfect
·3 years agoIf you fail to report your 1099-K income on your 1040 (in one way or another), then you can expect to get a letter from the IRS which basically says, Hey we noticed that you have unreported income so here's a bill at your marginal tax rate, plus interest and penalties, pay now.
luckythewinner
·3 years agoThe IRS will assume it is all profit unless you file a tax return showing that it is not all profit. Generally speaking, the IRS requires you to state your basis in the items and be able to back it up if you are audited.
If there is profit, there is profit. The fact that you choose to label that profit as "not noteworthy" means nothing to the IRS.
everyday-unusual-og
·3 years agoThe IRS requires fair and reasonable cost basis info …fair and reasonable would be researching what the items sold for or range when u acquired. Simply take sales-((cost basis)+expenses (travel to acquire items, storage cost pro rated , repairs, etc) ) = net gain or loss
mrace72
·3 years agoI am interested in this as well. I received a 1099k. It looks like I had just under 100 transactions this year with gross proceeds over the $20K mark. My costs were way higher but my question is whether I have to enter data on every single item sold (if I sold 100 items, do I need to enter 100 items separately) or can I aggregate either as one amount or monthly amounts? The 1099k shows monthly proceeds.
nobody*s_perfect
·3 years agoThe 1099-K breaks down income monthly so the IRS can tell whether you were supposed to have been filing quarterly reports; it has no bearing on your 1040. Take a look at Schedule C and its instructions. You don't enter any info on individual items, there is one line for total postage expenses, one line where you enter total fees, etc.
If you're a hobby seller, i.e., selling at a net loss, then you don't need to even figure this out; you just zero it out as described by the IRS on the page that I linked to above:
Report your proceeds (the Form 1099-K amount) on Part I – Line 8z – Other Income, using the description "Form 1099-K Personal Item Sold at a Loss."
Report your costs, up to but not more than the proceeds amount (the Form 1099-K amount), on Part II – Line 24z – Other Adjustments, using the description "Form 1099-K Personal Item Sold at a Loss."
heckofagame
·3 years agoTalk to a tax professional.
pburn
·3 years agoFrom this IRS FAQ document (which is a very informative, albeit dry, read, BTW), in part:
Frequently asked questions about Form 1099-K
Q6. During the year, I sold my personal guitar for $800 on a social media platform's marketplace and I received Form 1099-K. I purchased the guitar several years ago for $3,000. How do I prove how much I paid if requested by the IRS?
(added December 28, 2022)
A6. Generally, you should keep accurate records for personal items you may sell. If your records are lost, destroyed, or are not available due to circumstances beyond your control and your return is audited, examiners may allow you to present reconstructed records. Additionally, examiners may accept oral testimony when records do not exist.
robotron17
OP3 years agoThanks, I'll give that a read. I guess I'll just say the items cost $20k, and take the minuscule risk of being audited.
nobody*s_perfect
·3 years agoHere's another IRS document that you might find useful:
https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
zoda99
·3 years agoNo. You get to subtract deductions from your gross sales.