Monthly Chat - February 8th at 1:00 pm PST

[devon@ebay]

Come chat with the TaxAct team to discuss how the IRS’ recent 1099-K Decision Impacts eBay Sellers this Tax Season. Get all of your questions ready for the team, so we can make the most out of this month's chat on February 8th at 1:00 pm PT!

Thanks for joining us for the Monthly Chat with eBay Staff and the TaxAct Team.

The chat thread will remain open until 2 PM PT at which point we'll close it from additional responses. After that time, we'll continue to work on responding to any queries that might still be unanswered.

To post your question, click Reply in the lower right corner of this post, type your question, and hit submit between 1-2 PM Pacific Time. The format of our chat mirrors the format of our Community Discussion Boards, where each post will appear in the thread chronologically. The taxAct and Community Team will review each question as it comes in, and will quote the original question in our reply. This quote and the reply will appear later in the thread, so just keep scrolling down to see our answers.

As a reminder, we want TaxAct to be able to get to as many members as possible during the allotted hour, so we have a few things to ask of you:

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Missed the chat? Send your questions to the podcast by calling 888-723-4630 or email us at podcast@ebay.com and maybe your questions will make it on the air! Or listen to past episodes while you wait for next month!”

[smartworkin]

I don't even understand why I got a 1099-K. Sold $4,500. but all was personal property at a loss. Never got a form before. I thought IRS wasn't going to do this until 2023 tax season.

[shipscript]

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@tax_act wrote:

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@mam98031 wrote:

A question I see more times than I can count in the Community is in regards to sellers that sell their personal stuff.  The big question is how do they value that item if they did not keep the receipt?  Do they need to depreciate the item if they do have proof of the original cost?

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Hi @mam98031 - Thank you for your question.  This can be difficult to determine.  If you are able to find past bank/credit card transactions for this purpose, talk to the store from which you originally purchased the product or some other honest faith estimate to arrive at the purchase price, then you should be good in the eyes of the IRS.

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@tax_act 

I think the underlying follow-on question here, and regarding the couch scenario, was whether the old item would be treated as a depreciated capital asset when selling it; but I suspect the answer is that if the seller was not taking a depreciation expense all along, the the depreciated value is of no consequence (no recapture). Could you elaborate?

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Edit: A reply can be found here.

[valueaddedresource]

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@wooden_flower wrote:

devon@ebay 

Easy one for you - can you pass the word to customer service that they should not tell members to ignore an unexpected 1099k? Thanks!

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Good call @wooden_flower 

Along those lines - what should someone do if they receive a 1099-K from eBay but they never knowingly created an account on the site?

What will eBay do to help victims of identity theft who are on the hook for tax documents filed for sales made using their name, address or social security number fraudulently?

Will eBay issue corrected 1099-Ks in this case showing 0 sales for that person or some kind of documentation to confirm that money was never paid to the individual whose name and social security number was used to create the account?

@tax_act - any tips for how to handle filing when a fraudulent 1099-K has been issued and sent to the IRS?

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Edit: A reply to your question can be found here.

[tax_act]

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@mam98031 wrote:

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@tax_act wrote:

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@packrat2k wrote:

Followup on your statement about deducting capital losses -- what I'm selling are garage sale type items: books, collectibles, old computer parts -- so would these be classified as personal-use items and so not deductible?

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Hello @packrat2k - Based on the question, it sounds like personal property vs capital assets.  Losses from the sale of personal property do not need to be reported unless you received a Form 1099-K.  Personal property gains will be reported on Schedule 1.

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IMHO @packrat2k was a bit vague on what they were asking.  There are lots of sellers that visit garage sales, estate sales, etc.  to purchase stuff to resale.  Just because an item is used doesn't mean it is someone's personal item they are selling here.

It is my understanding if you purchase an item for the purpose of reselling it, whether it was purchased at a garage sale, Estate sale, etc, it is NOT handled like selling personal property?  

Do I have this wrong?  If so, why?

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Hi @mam98031 - No, you would not have this wrong.  It comes down to the ‘purpose’ of what you are doing and whether you are in fact operating a business with an intent to make a profit or simply do this more as a hobby.  It will be important to understand this in order to determine how any income is taxed.  Please see this IRS article for more information - https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business

[mam98031]

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@smartworkin wrote:

I don't even understand why I got a 1099-K. Sold $4,500. but all was personal property at a loss. Never got a form before. I thought IRS wasn't going to do this until 2023 tax season.

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@smartworkin

You got one because your State requires a 1099K if you sell $2500 or more.  Ebay doesn't have the information to decide if anyone is selling their personal property.  It is simply info they don't have nor would they be able to verify it.

[tax_act]

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@mam98031 wrote:

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@tax_act wrote:

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@shipscript wrote:

Mark, many sellers on eBay are simply liquidating closets and garages to make ends meet. They are not operating like a business and are very unfamiliar with the kind of expense accounting required by sellers making a profit. What advice can we give them? If they are filing their own returns, can they use the 1040 EZ or are they now required to file the full form and schedules?

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@shipscript - Thank you for your question and Yes, this can be difficult to understand and report on your tax return.  This type of property being sold would be considered personal property.  If you sold personal property at a loss and did not receive a Form 1099-K, you do not need to work about reporting this on your tax return.  For instance, you bought a couch for $1,500 5 years ago and sold it for $1,000 in 2022.  You have a personal property loss of $500 that is not deductible on your tax return.  If you did receive a Form 1099-K for this transaction, you must enter the income on Schedule 1 and the same exact amount as a deduction on Schedule 1.  This will show the amounts properly to the IRS when they receive a Form 1099-K.  Unfortunately, Form 1040-EZ no longer exists and a Form 1040 must be filed in this situation.

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So there is no consideration to the diminished value of the couch that was used for 5 years before selling it?

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Hi @mam98031 - Unfortunately, No.  Depreciation does not factor in for items that are personal property.  For tax purposes, you simply look at what you purchased the good for vs what you sold the good for.

[tax_act]

Hello @clarkphilatelics - If you purchase the stamps in a group and sell in a group, then you would be okay reporting them on your taxes together.  If you purchase and sell them individually, it would be recommended to report them the same way on your taxes.

[tax_act]

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@mam98031 wrote:

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@tax_act wrote:

---

@mam98031 wrote:

A question I see more times than I can count in the Community is in regards to sellers that sell their personal stuff.  The big question is how do they value that item if they did not keep the receipt?  Do they need to depreciate the item if they do have proof of the original cost?

---

Hi @mam98031 - Thank you for your question.  This can be difficult to determine.  If you are able to find past bank/credit card transactions for this purpose, talk to the store from which you originally purchased the product or some other honest faith estimate to arrive at the purchase price, then you should be good in the eyes of the IRS.

---

There are so many sellers, especially during the last few years, that were selling off whatever they could just so they could pay the rent or put food on the table.  Some of that stuff was purchased quite a few years ago and going back to the retailer you purchased from simply isn't an option, much less remembering when they actually purchased the item.  What about those sellers?

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Hi @mam98031 - Unfortunately, there really is no easy answer to determining the value of that good.  You will need to find a ‘reasonable method’ to determine that value of that good at time of purchase and go with a calculation that can be used consistently across all personal goods.

[devon@ebay]

Thanks for joining the chat this month! It's closed from further replies but we'll keep working through to make sure that questions are addressed.

[tax_act]

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@clarkphilatelics wrote:

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@packrat2k wrote:

Followup on your statement about deducting capital losses -- what I'm selling are garage sale type items: books, collectibles, old computer parts -- so would these be classified as personal-use items and so not deductible?

---

I sell collectibles as a business. It is my understanding that losses on sale of collectibles by hobbyists are not deductible. Will some eBay sellers operating as business be regarded as hobbyists by the IRS? When is filing Schedule C not enough? What is the role of profitability?

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Hi @clarkphilatelics - 

Hobbyists can deduct their cost of goods sold (COGS) from the income they report on Schedule 1. So the case could be made that if you buy and sell collectibles those transactions would factor into your beginning and ending inventory. This would factor into your COGS amount that reduces your hobby income. You would aggregate all of your hobby related income and reduce it by COGS but not less than $0. 

If you operate as a business per the IRS, you would reduce your business income by your COGS. 

If you buy collectible more as an investment item then you report that on Schedule D/Form 8949. 

IRS How to tell the difference between hobby and business income

[tax_act]

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@shipscript wrote:

---

@tax_act wrote:

---

@mam98031 wrote:

A question I see more times than I can count in the Community is in regards to sellers that sell their personal stuff.  The big question is how do they value that item if they did not keep the receipt?  Do they need to depreciate the item if they do have proof of the original cost?

---

Hi @mam98031 - Thank you for your question.  This can be difficult to determine.  If you are able to find past bank/credit card transactions for this purpose, talk to the store from which you originally purchased the product or some other honest faith estimate to arrive at the purchase price, then you should be good in the eyes of the IRS.

---

@tax_act 

I think the underlying follow-on question here, and regarding the couch scenario, was whether the old item would be treated as a depreciated capital asset when selling it; but I suspect the answer is that if the seller was not taking a depreciation expense all along, the the depreciated value is of no consequence (no recapture). Could you elaborate?

---

@shipscript - That is correct.  If the good/asset was not used for business purposes, there would be no recapture as you did not have a tax benefit for this good/asset.  It will simply be a calculation of purchase price vs sales price (generally speaking) to determine gain or loss.

[tax_act]

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@valueaddedresource wrote:

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@wooden_flower wrote:

devon@ebay 

Easy one for you - can you pass the word to customer service that they should not tell members to ignore an unexpected 1099k? Thanks!

---

Good call @wooden_flower 

Along those lines - what should someone do if they receive a 1099-K from eBay but they never knowingly created an account on the site?

What will eBay do to help victims of identity theft who are on the hook for tax documents filed for sales made using their name, address or social security number fraudulently?

Will eBay issue corrected 1099-Ks in this case showing 0 sales for that person or some kind of documentation to confirm that money was never paid to the individual whose name and social security number was used to create the account?

@tax_act - any tips for how to handle filing when a fraudulent 1099-K has been issued and sent to the IRS?

---

Hi @valueaddedresource - If you received a Form 1099-K that was incorrect. The IRS first would like to reach out to the issuer of the Form 1099-K to address the incorrect Form 1099-K. If you cannot get a correct Form 1099-K then you would report the incorrect income on Schedule 1 (line 8z) and enter an adjustment for the same amount on Schedule 1 (line 24z) removing the income from your return.