Offset 1099K Income

[stephenmorgan]

To account for selling my Collectables, I have been reporting the sales on IRS Form 8949 with the gains carried over to Schedule D (Form 1040).  This was easy enough.

I now have a 1099K income that has to be entered and I am still required to report the sales of Collectables on the Form 8949.

I am reporting the income twice.

Is there a way to offset the 1099K income from the 8949 income?  I've read about offsetting a Loss, but I don't have a Loss.  I have not read how not to report the income twice.

[rfmtm]

You have gains then report it on both Schedule D and 8949.  See IRS:

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

[luckythewinner]

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@stephenmorgan wrote:

Is there a way to offset the 1099K income from the 8949 income?  I've read about offsetting a Loss, but I don't have a Loss.  I have not read how not to report the income twice.

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I am not familiar with 8949, but this page seems to explain how to reconcile a 1099-K with 8949:

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

[monica-sells]

i think you are overthinking this...

what is the difference between

"...report the sales of Collectables...:

and the amount of the 1099-K

what differentiates those numbers?

Is the 1099-K not the amount of the "sale of collectables?"

[stephenmorgan]

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@monica-sells wrote:

i think you are overthinking this...

what is the difference between

"...report the sales of Collectables...:

and the amount of the 1099-K

what differentiates those numbers?

Is the 1099-K not the amount of the "sale of collectables?"

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I enter the 1099K income by completing a questioner just like any other 1099 entries.  The “Amount of tax you owe” goes up to account for this 1099K income that was entered, just like any other 1099 entry.

Next, I fill out the IRS Form 8949 to account for the Capital Asset (Collectables) I sold.  The “Amount of tax you owe” goes up again, based on the calculations of the Gain within the Form 8949 entries.

With the input of $xxx.xx from the 1099K the “tax due” goes up $xxx.xx

With all the entries of the Form 8949 a gain of $xxx.xx is shown and the “tax due” amount goes up an additional $xxx.xx based in the amount of the gain.

Since I do not see how to offset the 1099K entry I am assessed tax on this value and then I am being assessed tax on the Form 8949 gains.

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

Personal items sold at a gain

If you made a profit or gain on the sale of a personal item, your profit is taxable. The profit is the difference between the amount you received for selling the item and the amount you originally paid for the item.

If you receive a Form 1099-K for a personal item sold at a gain, figure and report the gain on both:

• Form 8949, Sales and other Dispositions of Capital Assets 
• Schedule D (Form 1040), Capital Gains and Losses

[rfmtm]

If the 1099K amount is included in the amounts reported on form 8949, you do not enter it again on Schedule D, as it will be automatically carried over to that form by your tax software.

From the IRS:

Use Schedule D (Form 1040) to report the following:

• The sale or exchange of a capital asset not reported on another form or schedule.
• https://www.irs.gov/forms-pubs/about-schedule-d-form-1040
•  

[sewrecycle]

The treatment of 1099K income from EBay can be either Business, Hobby, or Collectible (Sched D) income.

And the sale of a collectible can be any of the above, dependent upon how often you sell, the hours you spend selling, and whether you owned the collectible at any time for personal use.

The difference of which could be very impactful on your return, especially if you are generating a loss.

Highly recommend a 1 hour consultation with CPA specializing in on line auction sales - it will pay for itself.

[mr_lincoln]

Hi @stephenmorgan 

I have always used the IRS Schedule C form.

The eBay 1099K is often just one source of potential reportable income from selling on various venues.  I am able to take advantage of the tax deductions that are possible and explained in the Schedule C Instructions.

[lacemaker3]

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@stephenmorgan wrote:

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I enter the 1099K income by completing a questioner just like any other 1099 entries.  The “Amount of tax you owe” goes up to account for this 1099K income that was entered, just like any other 1099 entry.

...

It sounds like you are using tax software, like TurboTax, is that right? or an online tax app? If so, you need to look at the details/form info and see where the software is entering the info.

Where does the income go when you answer the questionnaire ... it sounds like it is putting the 1099-K amount onto your Form 1040, Schedule 1, Part 1, line 8z: Other income. (Along with any other 1099 income as you said.) That's the correct place to enter the other 1099 income, but ...

You don't want to enter the 1099-K income there unless you sold all the items at a loss, and you're just going to zero it out (without using form 8949 and Schedule D). The IRS recommends doing this only if all the items were sold at a loss:

"If you sold personal items at a loss, you have 2 options to report the loss:
"Report on Schedule 1 (Form 1040) ..."

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

Then, when you go to fill out the Form 8949, that is a duplication. You are not supposed to enter the 1099-K income in both places, just one or the other.

The 2nd option on that IRS page is to just enter the 1099-K income on Form 8949 and Schedule D. This is recommended if some of the items were sold at a gain, so you don't end up paying tax on the entire amount (if you don't need to).

Don't enter the 1099-K income twice. As long as the amount you show as income on 8949 and schedule D includes the 1099-K income, there won't be any issue. You will have reported it correctly.

By doing the form 8949 and Schedule D, you will be able to use the items that were sold at a loss to offset any items that were sold at a gain. You can deduct the losses, only up to the amount of the gains that are reported on 8949. In some cases, you can also deduct losses up to $1500 more than the gains (if filing single) or up to $3000 more than the gains (if filing married). This additional deduction may be limited based on how long you owned the items before they were sold. This deduction is done on 8949/Schedule D, and you don't need to itemize deductions to do this.

[stephenmorgan]

Wow, you all provided very good explanations!

I have been completing the Form 8949 for the past three years without a 1099K.  Not a big deal on that form.  It just a pain because if it is collectables you are not allowed to "Bunch" everything into one entry.  Each individual collectable has to be a separate entry.  But this is no big deal. 

I am just selling my Diecast collectables that I collected from 1978 to 2002.  I rarely loose money on any of them, and the Form 8949 keeps the loss to just the Basis (cost) with no further offset.  

So basically I will document the income using Form 8949 and I do not enter the 1099K information into the Tax Forms.

I am using H&R Block software.  They are like many other large organizations.  You can ask three people the same question and get three different answers.  

I did speak in person with a H&R Block Agent but she did not seem overly confident in her answer and was trying to find out for sure by researching Turbo Tax online.  She also said do not to enter the 1099K into the tax documents (software).

Where I was lacking the understanding is every 1099 I have ever received is recorded in the Tax Filings so why would the 1099K not be entered?

Anyway, I will delete the 1099K's and just continue with the 8949 entries only.