How to report 1099k income if items are personal items sold at a loss?

[elise_grimwald]

Hi,

I received a 1099k, and the items I sold were literally all personal items I owned and sold. Overall, they would be considered a loss when added up and shipping is accounted for.

I am not a business, as I didn't buy these items to sell this year, and I just want these items out of the house. I really couldn't take many off, as I sold old items I had, or items I didn't want any more. I know Schedule C would make me claim all my personal items as income (which is crap, as they didn't earn money), and I'd have to unfairly pay on 1k of 'income' that isn't profitable. (I did the math already). And Hobby is worse, as I'd have to claim everything, even though most is at a loss, and when added up the total is a loss.

I know I can also do a schedule D/form 8949, but I can't claim losses on most items there either (unless I'm wrong, and I can?). And again, when added up, everything is a loss. So if I were to itemize everything, it'd show as a profit, even though overall the items were a loss.

So I was wondering how I would report the 1099k. Do I just put down the items on the 8949 that made money (I say 8949 because I'm not doing a C when I'd owe on 1k I didn't really make because the items left weren't profitable but were old and can't be deducted, which kills my refund), or do I have to include ALL the items I sold, even if they didn't make any money? 

And if I do have to include all items, how do I show the ones that didnt make money as a nondeductable loss if that's how it's done (I can't figure out how to do this tbh)? Would I just list them at the same price they sold for and 0 them out that way? 

Alternatively, is there a way to show that the items all added together weren't profitable? That's actually ideal (it ends up being the toyal of all sold items was a $3 loss or something like that), but I don't think I can do that. 

Also, as I did do this as a business last year (I stopped because it was too much for me and not profitable), do I have to report it any special way that I stopped, or can I just submit my income as it really is now without anything? I never actually paid self employment tax because I never had to (I didn't make anything), so that isn't an issue, and I didn't have anything besides a PayPal business account I closed early last year because it was just hurting me. I was just concerned because I did a C last year and won't this year because it no longer applies.

Thanks in advance. 

[714ricki]

I would consult your CPA. However, I would report everything. For your personal items, try to calculate the fair market value of the item as your cost of goods. Its better to pay the taxes than to neglect what you need to report to the IRS.  regardless, contact your CPA to make a decision about your own scenario!

Good luck!

[chapeau-noir]

Start here: General online sales

Search on:  Filing with Schedule D

[kensgiftshop]

@elise_grimwald 

How did you do it last year and before that?

It shouldn't be any different.

Report the income and deduct the expenses.

[chapeau-noir]

@kensgiftshop   She used schedule C but apparently closed her business.

TBH, I would just file schedule C again and claim loss in inventory using fair market value, but then I would still have business inventory lagging from the previous year, anyway, so it would be a mixed picture with the majority being business related.

OP needs to talk to a tax specialist (doesn't need to be a CPA) or do some research on her own, particularly on 1040 dot com.

[monica-sells]

@chapeau-noir 

You always give sound advice.....I just want to point out one of the reasons a lot of people get confused....this snippet is from one of the links you provided to 1040.com 

"Okay, but hold up—you’re selling stuff, so do you have to pay sales tax?

Usually, the selling platform you use will collect sales tax and show you a report at the end of the year. The sales tax goes to the state that you run your business from; since you’re operating on the internet, sales tax will go to the state where you live."

We all know this is not true....so, although there is some good advice regarding cost of sales, someone will read this part and get more confused about sales tax collection...Just an FYI

[chapeau-noir]

@monica-sells   I actually wrote them about that - the rest of their actual 1040 info is helpful but that sticks out like a sore thumb.

[elise_grimwald]

The problem is, most of what I sold isn't from last year (I was clearing out a lot of old stuff I had bought myself, and sold most of it for less than I paid by far), and H and R block told me that I can only deduct what I bought last year for a Schedule C. Even with shipping and fees it would show I earned $1k, which is not true. 

My lagging inventory was like maybe $10 at the most (I sold most stuff, but at a loss), and that barely helps. :(.

Were they wrong, and would I actually be able to claim those items I sold that are old at their market value? That would be great, as then it'd reduce that amount quite a bit. I'm not trying to avoid anything at all (if I owe I owe), but I don't want to pay on items I don't owe taxes on, and the C done with just 2021 items would definitely make me pay on items I don't owe taxes on, which honestly isn't right. I'm not supposed to owe taxes on those. I haven't just went back to H and R Block in fear they'd just do the same thing again (they did last year, and the situation was similar. But last year, I did indeed buy a lot to sell, so it was a business. But some was personal, and they wouldn't let me deduct those or exclude them, even if they didn't make money). 

I did read the 1040 site,and honestly, the D still doesn't make a ton of sense because of the other form. This is all confusing to me. I'll check the C again on 1040 again and see if I missed something, because it honestly doesn't seem right to make me pay for personal items sold at a loss. The C would be ideal, as it's WAY easier than the other form. I hate itemizing, but not if I'll have to pay on what I don't owe. 

Edit: I read 1040 again for C, and it doesn't say I had to buy it last year. Weird. I could have gotten a lot more back last year, then, if that's the case. 

[coolections]

I am thinking you are assuming too much. An item you list that is used needs to have depreciation accounted for. You are talking as if everything you sell here on Ebay is at a loss and I doubt that very much. Doing it your way will most likely result in a tax audit.

[elise_grimwald]

There were like 3 items that actually made money last year. The others were at a loss, as they were items I had that I didn't want anymore and didn't raise in value that I had for years. Basically, garage sale stuff. The garage sale stuff combined with the profit items do lose money, because the profit wasn't that high verses the losses. 

I'm not sure how to account for depreciation, tbh. I just priced items based on the value at the time. Sadly, most of the time, they just went down in value. I'm not trying to do anything to trigger an audit at all, and I'm not trying to hide anything either. I just don't know how to file the stuff I did sell at all other than the itemized 8949 or C, and C would make me pay on 1k of sales, which isn't the case, because I'd be forced to count all those old items as pure profit when they aren't because I can't use the base price AFAIK for old items. I just want to pay on what I actually made, not on stuff that isn't even taxable. I think the total is like 200 at the most. It may be less than that. 

[monica-sells]

Somewhere I made a post outlining a couple different scenarios as outlined by my CPA

I can add this though.....-

There is no depreciation involved with "personal" items that you resell...

example: I bought a Spiderman Collectors Edition DVD for 49.00 in 2000 for personal use.

Opened it, viewed it, and put away.

Sold it used on eBay for 25.00 last week....My cost basis is 49.00 (original purchase price)

There is no depreciation involved with a "personal" item as far as 'cost basis'.....what you paid for it is your cost you deduct from the sale price...in this example it would be 25.00 (income) you subtract 49.00 (original cost) and get a NET 0.00 TAXABLE Income (or profit)

For simplicity sakes I am only showing a simple loss..this does not include what are classified as "expenses" (such as ebay fee's....shipping...etc....)

(I am only conveying what was explained to me by a CPA...draw your own conclusions or get your own advice)

[coolections]

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@elise_grimwald wrote:

they were items I had that I didn't want anymore and didn't raise in value that I had for years. Basically, garage sale stuff.

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This is why so many items sit on Ebay for years and never sell. An example is an old toaster originally purchased for $39.99. It is now older and used and the depreciation for that toaster makes it worth around $18.00. Unless you sell it for less than $18 it is not at a loss.

[elise_grimwald]

Every form I saw even says you're supposed to go off what was paid, or market value. 

I went off of what the items are worth, and they all (aside from 3 items) depreciated pretty bad. This counts depreciation already. 

I'm not sure why we aren't allowed to just sell items at a loss without dealing with this crap. I just want to claim what I actually made, and don't want to pay stuff that according to the IRS is nontaxable aka items sold at a loss. They were mostly sold for way less than I paid, and always at least a few under market price.  It's technically counted for. 

[chapeau-noir]

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@elise_grimwald wrote:

The problem is, most of what I sold isn't from last year (I was clearing out a lot of old stuff I had bought myself, and sold most of it for less than I paid by far), and H and R block told me that I can only deduct what I bought last year for a Schedule C. Even with shipping and fees it would show I earned $1k, which is not true. 

My lagging inventory was like maybe $10 at the most (I sold most stuff, but at a loss), and that barely helps. :(.

Were they wrong, and would I actually be able to claim those items I sold that are old at their market value? That would be great, as then it'd reduce that amount quite a bit. I'm not trying to avoid anything at all (if I owe I owe), but I don't want to pay on items I don't owe taxes on, and the C done with just 2021 items would definitely make me pay on items I don't owe taxes on, which honestly isn't right. I'm not supposed to owe taxes on those. I haven't just went back to H and R Block in fear they'd just do the same thing again (they did last year, and the situation was similar. But last year, I did indeed buy a lot to sell, so it was a business. But some was personal, and they wouldn't let me deduct those or exclude them, even if they didn't make money). 

I did read the 1040 site,and honestly, the D still doesn't make a ton of sense because of the other form. This is all confusing to me. I'll check the C again on 1040 again and see if I missed something, because it honestly doesn't seem right to make me pay for personal items sold at a loss. The C would be ideal, as it's WAY easier than the other form. I hate itemizing, but not if I'll have to pay on what I don't owe. 

Edit: I read 1040 again for C, and it doesn't say I had to buy it last year. Weird. I could have gotten a lot more back last year, then, if that's the case. 

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Depends on how you account for inventory.  You can use periodic or perpetual system to maintain your records.  I use the perpetual system, i.e., my inventory numbers roll from year to year - it means you have to keep very good sales records, but that's easy in this case.  Periodic means you just do annual inventory.  Which ever way you start is the way you must continue, though (no mixing the two systems) - you many have been on the annual.

When we had the hobby deduction this was a lot easier, but that's gone in favour of the recent increase in standard deduction which would cancel out the small tax burden from any hobby sales.

Of course, you can just cut to the chase, report these earnings on 1040 schedule A - AFAIK, you can't claim losses, but you can claim expenses (shipping, fees, etc.) to lower your tax bill - you'll need to check that out, though.  ETA:  If you an indeed deduct expenses, that's the way I would go - increased standard deduction and claiming expenses would make it a lot easier all round for these small sales.  I'd check it out, though.  I'm mostly familiar with this doing my own business taxes and of course they differ with each person's situation.

[monica-sells]

so no one is confused...

What can I depreciate for my taxes?
The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles, and furniture. You can't claim depreciation on property used for personal purposes. Dated: Jan 26, 2022

If you can't determine a "current" cost for an obsolete, somewhat rare item, THEN you can use "current market values, (such as comparables for real estate to determine the "value" of your home or recent sales of similar items if available) to try and determine the item's "worth" if original receipts are not available. Many times you can find older items in catalogs, flyers, old checks you have saved (I still have checks from 1995 in a box). You would be surprised how many ways you can find your original costs.

I suspect your mean to say "devaluation" and not depreciation in the literal accounting sense of the word.....