1099-K Summary Statement
Hello, I sell personal items online and have gotten a 1099k this year. Most of my items are at a loss, but a few were sold for a gain. I am inputing my gains under the investments sections as instructed. I tried to input the sales as a summary and now it's asking me for a summary statement. I obviously was not issued any statement as these are personal items. Many are years old and I do not have an acquisition date. I have been keeping track of my sales, fees, cost basis, etc.
If I enter these transactions 1 by 1 am I just suppose to guess an acquisition date? Is there anyway I can report a summary of sales without listing each transaction 1 by 1? This seems like a huge waste of time to report a few hundred dollars in income.
Answers
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Hello,
Online sales can be treated in multiple ways if there is taxable income, and it depends on how you are pursuing online sales as a money making activity. Here are the options:
- Form 8949 and Schedule D: This is a suggested method from the IRS for taxpayers who received a Form 1099-K with online sales. The summary method would still work for you. Assuming you are tracking the basis on something like an excel spreadsheet, you can save a copy of the spread sheet as a PDF document and attach that. Further, you can still e-file without an attachment, but you would need to be prepared to send a document listing all the transactions if the IRS requests it at a later date.
- Schedule C: If the ebay activity is something you are doing with a profit motive (you are working on ebay in a regular, consistent, and business-like manner) you can report the income on Schedule C. If this is your situation, you will also be able to deduct your expenses. This includes the cost of goods sold, expenses for running the business, and any expenses with shipping the items that you sell.
- Form 1040, line 8: This is where you report sales of personal items if the sales activity is done more as a hobby. For example, if your are selling some home made items that enjoy making, but not necessarily with a profit motive.
- The garage sale rule: If your online sales are infrequent and for less than what you paid for the items you are selling, you generally are not required to report the sales on your tax return.
If you choose to report the sales in the investment sales section, you can use the summary method. Ideally, you would be able to attach a PDF document that shows your cost basis and holding periods for the item. However, you can ignore the alerts for this item and you can still e-file your return, but you would need to be prepared to mail the information upon request to the IRS later on.
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Thank you! this helps a lot. I felt like it was odd that I could report the sales on schedule C or D and if one way was preferred or not.
Can you elaborate what happens if I report on Schedule C and most years don't make a profit? I read something about only 3 years being negative and then can no longer "run a business".
Also, if I report on Schedule D, and I don't have an acquisition date or cost basis (some of my items are things from when I was a kid) what would I put? This is just a side gig for me to declutter my house and I am not a business. I would rather report my gains on D than C if I can do it simply with a summary. The summary statement is somewhat offputting however.
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Hi,
I apologize for not getting back with you sooner.
It definitely sounds like Schedule C would not be the right option for you. However, in answering the first question, there is a profit motive rule that states the IRS may recharacterize losses from a Schedule C as hobby income and expenses if there are more than 2 loss years in 5 consecutive years. In other words, there needs to be 3 years of profit out of the 5 years to steer clear of having hobby losses.
For the Schedule D approach, you can use various for acquisition dates. On the cost basis, if you do not have cost basis documentation, claiming zero cost basis may be the safest option unless there are items that ended up being inherited recently. Inherited items can use fair market value on the date of death (or the date inherited property is appraised) as the stepped up cost basis. I think you would be okay using the summary.
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