How is everyone handling 1099-K forms on taxes?

[milkyway10024]

Hi: I hope this question is allowed. I'm doing my taxes myself and trying to figure out where to report the money I earned from eBay last year on the tax forms. I made roughly $4,000, give or take, but that's gross. It looks like IRS Schedule C but that's asking about business name and several other questions that don't apply. I don't have a business per se -- I just sell books and a few other things.  I also don't see a line on Schedule C for subtracting the cut that eBay takes. Thank you! Is there a simpler still-legal way to report it?  

[worldcoinauctions]

Simple method since I have yet to get a 1099. All my payouts from all digital sales go into 1 account which is only used for that purpose. What I got from ebay is my net sales. Easy Peasy  and no need to get into expenses. If I had a 1099 my number from those forms - my net sales = my expenses for selling/shipping on the platform. I give all that to the accountant who does my taxes.

[monroe67]

Re the OP's question about deductions to take when completing IRS Schedule C to Form 1040:

"Easy.

Schedule C on your tax return.  Put the $4000 you made as top income money.

Under that number, on the schedule, it will ask for deductions.

Subtract

The Cost of Inventory ................................................. $2000

Shipping and handling  ................................................   900

Utilities and rent .............................................................  1200

Repairs and maintenance ofc equipment    .............  150

Advertising and platform expense (Ebay fees) ......  750

Subtract all that from your 'income' and pay that huge tax bill of $0"

That's an excellent breakdown of the way it should work.  

Last Thursday, March 7, 2024, eBay presented their 2024 Spring Seller Check-In.  One of the breakout sessions was about Federal Income Tax, presented by Andrew Oswalt, a CPA with TaxAct.  That company has worked with eBay for years, presenting factual info from the IRS and how it might affect a generic eBay seller.  

One of the things he emphasized was that Ordinary and Necessary Expenses can be listed as deductions.  In the unlikely case of an audit, you might need to (try to) validate the ordinary-ness and/or necessity of any expenses you might list.  

Of course, some expenses do have limits.  For example, mileage:  The IRS has set a maximum dollar (cents) limit per mile that you are legally allowed to deduct.   If you drive around on Saturdays to visit yard sales, and drive to and from Staples or Walmart for more bubble wrap, and drive to and from the post office, you may be eligible to deduct all that mileage at the IRS per-mile limit.  You might use a mileage-calculating app to keep track of those miles, or even just keep a notepad in your purse or glove compartment, and write down the starting and ending mileage.  

Again, the keys to validly tax-deductible expenses, per the guy from TaxAct, are Ordinary and Necessary.  Example:  the cost of fancy leather driving gloves that you use for all that driving related to your eBay "business" might possibly not be an allowable deduction.  

As always, though, your best bet would be to consult with a tax professional, so you can sit and discuss your own situation privately.  I have had good results working with H&R Block.  AARP also offers free tax preparation help in offices or public library conference rooms, although you probably won't have as much privacy as with a tax prep company.   (BTW, you don't have to be a senior citizen to ask for that service.)

[milkyway10024]

Thank you Asset Liquidators. 

Yikes. I have heard of horror stories too -- never knew if it was common to get audited or not -- so I am going to make every effort to do it right and get as close as possible.  

[mam98031]

https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-10...

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.irs.gov/businesses/gig-economy-tax-center

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html

https://www.irs.gov/pub/taxpros/fs-2022-41.pdf

[luckythewinner]

The IRS has a guide explaining how to account for 1099-K forms on your taxes: 

https://www.irs.gov/businesses/what-to-do-with-form-1099-k

[mam98031]

If you actually are working from numbers on a 1099K for 2023, then you had to of had a minimum of $20,000 in sales and 200 transactions.  Anything lower than that is not getting a 1099K for 2023 UNLESS your state has a requirement for one at a lower level and several states do have such a requirement.

You need to keep in mind that the amount reported on the 1099K is your Gross Receipts which is NOT the same as Gross Income.  1099Ks report the TOTAL amount of money that came INTO your Managed Payment account.

From those totals you need to subtract any refunds you issued buyers during the year. Then you move on to your COGS [cost of goods sold].  Selling fees, shipping, shipping supplies, costs of purchasing inventory, etc.

[mam98031]

@monroe67 

That $4000 that is being used here for a number that appears on the 1099K is NOT the seller's gross income as I explained in my previous post.  It does NOT take into consideration any refunds issued to buyers.  As well as normal deductions as have been outlined on this thread.

[milkyway10024]

"If you actually are working from numbers on a 1099K for 2023, then you had to of had a minimum of $20,000 in sales and 200 transactions." 

Thank you for the info. I must be in one of those states (Massachusetts) as I had just 128 sales and a lot less than $20,000 in sales. 

[milkyway10024]

Thanks World coin auctions. That's a good system. Yea, I need an accountant. But more for everything else, not so much this. 

[milkyway10024]

Thanks for all that Monroe67.  It's true, once you add up all the driving around and tissue paper and purchases and everything else I'm probably legit at a really low number. 

[mam98031]

@milkyway10024 

Your state has a requirement for a 1099K to be issued if there was more than $600.  Which is why you got one.

Still keep in mind that is Gross Receipts, NOT your Gross income.  Don't forget to reduce it by any money you refunded to any buyer during the period.

[nobody*s_perfect]

Massachusetts and Vermont were the first states to set up thresholds that were lower than the federal level.  They have had a $600 threshold since 2018.

[milkyway10024]

Thanks for that link Lucky the winner!

[milkyway10024]

Thanks for all those links Mam98031. I will check them out. 

[shipscript]

@milkyway10024 

As you can see from your 1099-K, eBay is required to issue that report because they are a payment processor. Thus, this is all about the payments that eBay receives for your benefit. With that in mind, also be aware that if a sale occurred at the end of December, and the buyer paid in January, eBay will include that transaction in that new year (this is not the same as the Payout date, which has no relevance here) . The same holds true for the other end of the calendar. This slight shift can make it a little difficult to reconcile your own accounting with eBay's 1099-K.