1099-K report

[gardener112]

Regarding the new 1099-K report that e-Bay is going to fill for the IRS. On the items listed as "free shipping", the shipping cost is on the seller. Is e-Bay going to subtract our shipping cost from the amount of listing price? If not, how we report the shipping cost that definitely is not part of our profit?

[mega-ma-roo]

The 1099-K will show the total amount of payments into your account by eBay. 
See here:  Form 1099-K | eBay

Also see here: Ultimate Tax Resource for eBay Sellers | TaxAct Blog
And here:  eBay Seller FAQs and Unique Scenarios Explained | TaxAct

[gardener112]

Thank you  for the reply, but e-bay will report the gross amount of reportable payment transactions. For "free shipping" items, the shipping cost has to come from the gross listing price, so that is the amount should be subtract from the gross. The question is how to do the subtraction.

[mega-ma-roo]

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@gardener112 wrote:

For "free shipping" items, the shipping cost has to come from the gross listing price, so that is the amount should be subtract from the gross. The question is how to do the subtraction.

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That depends on how you report your income on your tax return. If you are reporting your income as being from a business, shipping costs are subtracted on Schedule C. If you are reporting your income as a capital gain or as hobby income, you cannot subtract the shipping costs. The links I suggested you read answer these and many other questions. It is always advisable to consult with a professional tax advisor if you have any questions.

[gardener112]

This is so unfair for non-business sellers.  The shipping costs sometimes are more than my net gain. If they told me this new regulation at the beginning of the year, I would cancel all my sells. This makes selling on e-bay totally worthless.

[mega-ma-roo]

If you are selling with the intention of making a profit, even if you don't make a profit this year, you can file as a business and deduct the selling costs. IRS understands that sellers may not be profitable every year, especially in the early years. I wouldn't claim a loss more than a year or two because then the IRS could decide you really are not a business and retroactively deny your earlier claims for deductions.

As for "new regulation", the only thing new this year is the lower reporting amount for 1099-K submittals to the IRS. The rules for business vs capital gains vs hobby income have not changed substantially for several years (the rules for hobby deductions changed in 2018).

[janet9988]

Ebay does not know how much shipping costs you. How would ebay know the cost of packaging and supplies? Sellers can buy shipping services anywhere. How do you expect ebay to keep track of that if you purchased directly from the post office?

You are the seller You keep track of that cost of doing business and deduct those costs.

Ebay is a selling venue. Not your accountant.

[gardener112]

I have been paying e-bay for all my shipping. They have the record on how much are the shipping and how much net gain I got because they are the one deposit the money in my bank account. 

[kensgiftshop]

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@gardener112 wrote:

Thank you  for the reply, but e-bay will report the gross amount of reportable payment transactions. For "free shipping" items, the shipping cost has to come from the gross listing price, so that is the amount should be subtract from the gross. The question is how to do the subtraction.

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They'll report all the income, but sales tax.

You deduct the shipping when you file your taxes.

[kensgiftshop]

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@gardener112 wrote:

This is so unfair for non-business sellers.  The shipping costs sometimes are more than my net gain. If they told me this new regulation at the beginning of the year, I would cancel all my sells. This makes selling on e-bay totally worthless.

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How is it any different then years before?

You've always been required to report your income.

[kensgiftshop · Accepted solution]

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@gardener112 wrote:

I have been paying e-bay for all my shipping. They have the record on how much are the shipping and how much net gain I got because they are the one deposit the money in my bank account. 

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Yes, they know what you paid for shipping, but they don't deduct it from your income.

[janet9988]

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@gardener112 wrote:

I have been paying e-bay for all my shipping. They have the record on how much are the shipping and how much net gain I got because they are the one deposit the money in my bank account. 

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Not all sellers use the ebay shipping portal to buy a shipping service. Plus sellers pay for packaging supplies etc that is not part of every sellers handling costs.

Shipping is an expense that you keep track of.

[gardener112]

Yes, I have kept the shipping record, but according to the other member here, unless you have a business, you can't deduct those shipping charge, and you have to pay tax on those charge, which I think is really unfair.