tax deduction for 1099k

[great-deals_0]

Hi everyone, I am a beginner seller and I recently started selling on eBay about two months ago, at the beginning it was household items but eventually I start to buy some shoes to flip on eBay. The total gross sales I had for the past two months have already exceeded the $600 threshold which I actually only got about half as the payout. Now eBay sent me a 1099k form in which I would have to pay taxes at the end of the year. I watched some videos saying that eBay will tax your total gross sales unless you fill them through Schedule C or something for deduction such as the shipping cost and the eBay transaction fee and the buyer tax. Those are the money that I have never laid my hands on but eBay will tax me on that unless I give the deduction. For example, if I sold a shoe for 70, the shipment is $10, the transaction fee is about $10, and the buy will pay $5 of sale tax, the buyer will pay $85 in total, and that's how much it will be added to my gross sale, but I only get $60. Say if I got the shoe for $40, if I pay 35% of $85, that's about $32 for tax, which  would lead me to $28 of profit after tax, which I would loss money.  I'm a bit concerned so I would just like to ask any ebay pro sellers on the general process of filling them through Schedule C at the end of the year. Basic where and when are you supposed to submit the Schedule C for all the deductions, I have also heard that the cost of goods could be deducted as well which I don't know how to submit them. If you could share any information it means a lot to me. Thanks 🙂

[r_lresale]

Ebay doesn't charge you tax on anything but does charge FVF on the total of your sales (Item price + shipping + tax + ad fee's if you had any +.40 fixed value fee).  When/if you receive a 1099, the sales taxyour buyers paid are not included on the form as you don't receive them.  You would claim any deductions on Schedule C when you file your taxes. IF you owe any federal/state tax it would be on your net income (gross sales - deductions). 

I would advise getting a CPA as they are knowledgeable and current on tax law and what you can or can't deduct. CPA's are well worth the money. 

[monroe67]

"I watched some videos saying that eBay will tax your total gross sales unless you fill them through Schedule C or something for deduction such as the shipping cost and the eBay transaction fee and the buyer tax. Those are the money that I have never laid my hands on but eBay will tax me on that unless I give the deduction."

There is quite a bit of misinformation in your post.  You say you are a beginner seller, so that's to be expected.   Also -- income taxation can be very, very complicated.  Your own financial situation could be very different from other eBay shoe sellers.  

First:  Taxation is a function of governments.  eBay is not a government; it is a corporation.  Therefore, eBay will not tax your gross sales.  The federal government taxes your income; eBay does not.  

The 1099-K form is the way that eBay notifies the IRS, and possibly your state (if your state requires it) of the gross amount of money eBay processes on your behalf as a seller.   Based on current laws and IRS regulations, eBay is required to send (to the IRS) a 1099-K report on every seller for whom eBay processes $600.00 in gross sales, in any number of transactions.   Of course, each seller receives a copy of their 1099-K.  

I say "based on current laws" because during the previous two years, the IRS announced revised  "regulations" (for lack of a better word) about 1099-K reports late in the year.  In 2023, the announcement came near the end of November.  In 2022 it came on December 23, with only eight days left in the year.  Both of those announcements essentially said the $600.00 reporting minimum would be "delayed", and payers (such as eBay) were allowed to report only those sellers for whom the payer processed $20,000.00 in a minimum of 200 transactions during the year.  

Whether you receive a 1099-K form or not, eBay sellers who are US taxpayers are still expected to include their eBay earnings on their own tax return forms, 1040 for federal taxes and whatever their own states might require.  

The Schedule C is an IRS form that you might be able to use depending on your own tax and financial situation.  Schedule C is an attachment to your tax return Form 1040.  (As an eBay seller, you do not give a copy of your Schedule C to eBay.)  

Schedule C helps you calculate the dollar amount of your income tax liability.  You are not automatically taxed (in income taxes) on the gross amount shown on your 1099-K.  Schedule C is where you can list your allowable deductions from that gross amount. 

These deductions include, as you state, your shipping costs and the eBay transaction fee(s).  On Schedule C, you would be able to deduct your "cost of goods sold".   You could also deduct supplies like bubble wrap, packaging tape, packages of blank mailing labels, possibly even some of the ink or toner for your printer, or even electricity.  IF you have enough inventory that you need to get a storage unit, you could deduct the rent for that space.  

The sales taxes that your eBay buyers pay are not included in the amount shown on your 1099-K.  

IF you sell enough that eBay is required to include you in their 1099-K reporting for 2024, you will receive the 1099-K by the end of January 2025.  

Today is only July 26, 2024.  As we get closer to the end of the year and into January of 2025, there will be a lot more discussion about income taxation and Form 1099-K  here in the eBay Community, both here in the Payments group and also in Selling.  Keep reading.  

[kalyoth]

ebay is required to provide you & the IRS with the form. ebay is not a taxing agent. The IRS & your place of residence are.

I would approach either the IRS help line, your state taxation office & your tax preparer with questions in regards to this & how you should proceed. Everything else would be second hand information.

In terms of filing - depends upon how you file & what you file. it is not the same for each filer. Items you will need - total cost (purchase price) of goods sold, total shipping cost, fees collected by marketplace (commissions). Depending on how you file, other things may also be needed.