1099-k are you a hobby or a business when selling personal items?

[4k1_98]

I sell personal items on ebay that i bought new 1,2 years ago and usually get about half of what i paid for it. I sell enough to make $2000 a year with some years being higher and lower.

I think the 1099-k from paypal is counting sales tax and money i received for shipping as income. My accountant is telling me that it is just a hobby and i can not make a Deduction when it is seen as a hobby.

I live in a state with the $600 limit and i work a regular job for a company.

I am wondering what others are doing that sell personal items on ebay?

[rebell45]

If you have proof of what you paid for them 1 to 2 years ago, and that you sold them for less, you'd have no taxable income from your hobby, at least in my state.  But what does your accountant say?

[coastaltechsolution]

If I make $100.00 on eBay I report it on my income with deductions from supplies etc.

You need to talk with your tax preparer as I'm not a CPA  

[slippinjimmy]

If these are items you originally bought to use yourself and not with the intent to resell then you COULD have a capital gain. If you sold them for less than what you paid for you would have a capital loss.

You accountant is (sort of) correct, you can't deduct business expenses from personal Capital Gains but since you likely have a capital loss is doesn't matter.

FYI - Unfortunately you can't use this personal capital gains loss against other income.

[gtgeveryday]

You may need to consult a different accountant. Ebay income is taxable as self-employment income and you can typically deduct expenses if you have receipts for them. 

[nobody*s_perfect]

I agree, the accountant seems to be off here.   You can deduct expenses such as shipping and fees from hobby income; just not in excess of that income (i.e., to declare a net loss in order to reduce your other tax liabilities).

https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide

[kathieskorner]

I thought paypal only provided 1099Ks to those with gross sales of over $20,000 shipping included.   Are there really accountants that would say gross sales of $20,000 is a hobby??  

[slippinjimmy]

Quite a few States now have a $600 or $1000 threshold

[coastaltechsolution]

Those thresholds do not mean you are not obligated to report to the IRS  

[luckythewinner]

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I think the 1099-k from paypal is counting sales tax and money i received for shipping as income.

A 1099K does not report "income". It reports the total dollar amount that was received by a taxpayer. You are the one who indicates how much of it is income when you account for the 1099K on your tax return. 

My accountant is telling me that it is just a hobby and i can not make a Deduction when it is seen as a hobby.

You cannot take a deduction for a LOSS if you sell your items for less than you paid for them. But I believe you can report the original cost as an expense that would result in you having no taxable income from those sales. 

[mam98031]

People often confuse what Hobby income is and what a Business income is.

With Hobbies, it is exactly as it sounds.  A hobby like crocheting, knitting, sewing, painting etc.  A creative sometime that you make and sell.

A Business income is NOT just for those that set up a legal business entity.  It is much broader than that.  Most sellers probably operate as a sole proprietorship without ever even getting an IRS number for their little business.  But it is still a business reported under their SSN.

Every transaction done on Ebay is a business transaction as there are no personal transactions here.

Your accountant you talked with is incorrect and you might consider getting one that is a little more familiar with online selling.

I'm not trying to overwhelm you with all the info I'm providing to you but I know that may happen.  Just take your time with it and see what helps.

https://www.1040.com/blog/2019/7/12/selling-stuff-online-taxes-for-etsy-ebay-letgo-and-more/

Here is a link to an IRS publication that can help you determine if your income should be declared on your Federal tax return.  

https://www.irs.gov/pub/irs-pdf/p525.pdf

This can be helpful too.  The form is pretty easy to follow and is likely to give you great ideas of what costs can be deducted from your Gross Receipts [which is what the 1099 reports] as this is a number BEFORE you deduct any expenses or refunds to then arrive at your Adjusted Gross income / sales.

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

[lamber9347]

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@4k1_98 wrote:

I sell personal items on ebay that i bought new 1,2 years ago and usually get about half of what i paid for it. I sell enough to make $2000 a year with some years being higher and lower.

I think the 1099-k from paypal is counting sales tax and money i received for shipping as income. My accountant is telling me that it is just a hobby and i can not make a Deduction when it is seen as a hobby.

I live in a state with the $600 limit and i work a regular job for a company.

I am wondering what others are doing that sell personal items on ebay?

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Your accountant is incorrect in that you most certainly can deduct expenses related to your hobby. I've been doing it for years and I have actually been audited once. Your amounts are very small so that's what is throwing him off. You will most likely be able to cover more than half that amount with expenses, which will bring you closer to the $600 minimum. That will not be impactful to your earnings. You will see you have really nothing to be concerned over. You just need records of your expenses including shipping charges, fees, packaging supplies, etc. Best of luck to you....

[slippinjimmy]

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@mam98031 wrote:

I'm not trying to overwhelm you with all the info I'm providing to you but I know that may happen.  Just take your time with it and see what helps.

https://www.1040.com/blog/2019/7/12/selling-stuff-online-taxes-for-etsy-ebay-letgo-and-more/

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Best link of the bunch!

[evry1nositswindy]

I get a privacy error when trying to follow the best link of the bunch.  Says attackers may be trying to steal my information.

[4k1_98]

I even signed up with turbo tax to ask them.

Most of the time, personally-owned stuff like cars, appliances, clothing, furniture, and other household items decrease in value after the initial purchase. If you later sell them, it's almost always for less than what you paid, so there's no gain to report. There's also no loss. The IRS won't let you deduct losses on personal items.

To give you guys more info i have $2,524 on my 1099-k, i sold 12 personal items.

The total cost of the items i bought where $5,254.00 they went down in value as they should. (PS4,XBOX, iPads, iPhones etc) most all of these items have the receipt.

I paid $250 in shipping fees and $180 tax this is included on the 1099-k i have.

And of course there are the paypal fees and ebay fees.

I made a excel sheet to see the cost. I will call around and find another tax guy.