Question about 1099 taxes owed from eBay selling - over or under reporting threshold?

Wait, so the threshold is only $600 now? I thought it was higher. Does this mean I have to file a Schedule C even if I only sold a few personal items and didn't make a profit?

The $600 threshold applies to payment processors like eBay, PayPal, etc., who are required to issue a 1099-K when your gross sales exceed that amount. This doesn't automatically mean you're running a business though. If you're just occasionally selling personal items for less than you paid for them (like cleaning out your closet), that's generally not considered a business and those transactions usually aren't taxable income. However, you should still report the 1099-K on your return and explain the situation to avoid a mismatch with IRS records.

How accurate was it compared to other tax software? I've got about 230 eBay transactions this year and tracking all the expenses manually is driving me crazy.

Does it help figure out if you're actually running a business vs just selling personal stuff? That's where I'm stuck - I sold some collectibles I've had for years but also flipped some items I bought specifically to resell.

It was way more accurate than the regular tax software I tried first because it's specifically designed for situations like online selling. The regular software kept asking generic questions that didn't apply to my eBay situation. The tool has a specific module that helps determine if your selling activity constitutes a business. It asks about your intent (selling personal items vs. buying to resell), frequency of sales, and other factors the IRS looks at. It then guides you through how to report each type correctly, which was super helpful for my mixed situation of selling both personal items and things I bought to flip.

How does this service actually work? Do they somehow have a special line to the IRS or something? Sounds too good to be true.

Yeah right. If it was that easy to get through to the IRS everyone would be doing it. I've been trying for weeks to get someone on the phone about my tax issues. No way this actually works as advertised.

No special line - they use an automated system that keeps dialing and navigating through all the IRS prompts. It basically does what you'd do manually, but their system can stay on hold for hours while you go about your day. I was super skeptical at first too. I tried calling the IRS myself 6 times and never got through - kept getting disconnected after waiting 40+ minutes. With Claimyr, I got a call back in about 2 hours with an actual IRS agent on the line. Honestly, I was surprised it worked, but it saved me from wasting an entire afternoon on hold.

So for the Cost of Goods Sold, how do I prove what I originally paid if I don't have receipts for everything? Some of these items I've had for years.

For items without receipts, you need to make a "good faith estimate" of what you paid. Look up similar items online to establish a reasonable original value. Take screenshots of comparable items and save them as documentation. For collectibles or unique items, check completed listings of similar items on eBay from around the time you purchased them. The key is showing you made a reasonable effort to determine the original cost. Going forward, keep all receipts for anything you buy with the intention to resell - digital copies work fine.

I used TurboTax last year for my eBay stuff and it was ok but not great. It asks all the right questions but doesn't really explain the eBay-specific stuff well. Had to do a lot of Googling to figure out where to put all the fees and shipping costs.

This is really helpful, thank you! I'm still trying to figure out if my selling counts as a "business" or not. I started by selling some old video games and electronics I had lying around, but then I began buying items specifically to flip when I saw I could make some money. Does the IRS have clear guidelines on when casual selling becomes a business? I'm worried about reporting it wrong and getting in trouble later.

Great question! The IRS doesn't have a bright-line test, but they look at several factors to determine if your activity is a business or hobby. Key factors include: frequency and regularity of sales, intent to make a profit, time and effort spent, dependence on income from the activity, and whether you maintain business-like records. Since you started with personal items but then began buying specifically to resell, you likely have a mixed situation. You can actually report these differently - personal item sales (sold for less than you paid) typically aren't taxable, while your intentional flipping activity would go on Schedule C as business income. The good news is being honest about your situation and showing you made reasonable efforts to comply usually protects you from penalties, even if you make minor reporting errors. Document your intent for each type of sale and keep good records going forward.

This is really reassuring to hear from someone who's been through it! I'm definitely in a mixed situation like you described - some items were just old personal stuff I was clearing out, but others I specifically bought to flip. How did you handle separating those two types of sales on your tax return? Did you have to file separate forms or can you report them differently on the same Schedule C? I'm worried about making it too complicated but I also want to make sure I'm not overpaying on the personal items I sold at a loss. Also, did you run into any issues with the IRS questioning the difference between your 1099-K amount and what you actually reported as taxable income?

Great questions! For the mixed situation, I actually handled it by listing all my eBay sales on Schedule C but then separating them in the expense section. For personal items sold at a loss, I recorded the full sale amount as income but then deducted the original cost as "Cost of Goods Sold" - this effectively made those sales break-even or show a loss, which is correct since you're not supposed to be taxed on selling personal items for less than you paid. For the items I bought specifically to flip, I treated those as regular business transactions with the purchase price as COGS and all the associated fees as business expenses. As for the IRS questioning the difference - I haven't had any issues, but I made sure to attach a statement explaining that the 1099-K shows gross proceeds before expenses and included a detailed breakdown of my expenses. The key is being transparent and showing your math. The IRS gets thousands of these situations now with the lower 1099-K threshold, so they're pretty familiar with it. Keep good records of everything and don't stress too much - you're clearly trying to do this right, which is what matters most!

Great question about depreciation! For personal items that you're selling (like your camera example), you generally use the lower of your original cost basis or the current fair market value as your cost of goods sold. Since you bought the camera for $800 and sold it for $400, you'd use $400 as your COGS, which means you'd have no taxable gain from that sale - it's essentially a personal loss. The key distinction is whether the item was personal property or business property. If it was a personal camera you owned for 5 years and then decided to sell, depreciation doesn't really apply in the business sense - you just use the lower amount. But if you had been using that camera for business purposes and claiming depreciation deductions over the years, then it gets more complicated. For most eBay sellers dealing with personal items they're clearing out, you don't need to worry about formal depreciation calculations. Just document what you originally paid and what you sold it for. If you sold it for less than you paid, there's typically no taxable income from that transaction.

This is exactly the kind of comprehensive breakdown I needed to see! I've been tracking some of this stuff but definitely missing things like the mileage to the post office and internet costs. One thing I'm curious about - you mentioned listing upgrade fees as a deduction. I've been paying for "promoted listings" on eBay to boost visibility. Are those advertising costs that I can deduct too? I probably spent around $200 this year on various eBay promotional tools but wasn't sure if those counted as legitimate business expenses. Also, thanks for the spreadsheet suggestion. I've been keeping receipts in a shoebox like it's 1995 - definitely time to get organized digitally!

Yes, absolutely! Promoted listings and other eBay advertising costs are definitely legitimate business expenses that you can deduct. That $200 you spent on promotional tools should definitely be included in your deductions - it's considered advertising expense, which is a standard business deduction. Other eBay promotional costs you can deduct include: listing upgrades (bold titles, gallery plus, etc.), store subscription fees if you have an eBay store, and any other marketing tools you use to promote your listings. Keep track of all these fees - they add up quickly and can make a real difference in your tax liability. And yes, definitely time to ditch the shoebox method! A simple Excel or Google Sheets spreadsheet will save you so much headache next year. You can even download your eBay transaction history and PayPal/payment history to help populate the data. Most sellers I know wish they had started tracking everything digitally from day one - it makes tax time so much less stressful.

This is such great advice about treating it as a business from the start! I wish I had known about setting up a separate checking account earlier - I've been mixing everything with my personal expenses and it's making tracking a nightmare. Quick question about the storage costs you mentioned - I've been using part of my garage to store inventory. Can I actually deduct a portion of my rent/mortgage for that space? And if so, how do you calculate what percentage is reasonable? I probably have about 100 square feet dedicated to eBay stuff out of my total living space. Also, the cell phone deduction is interesting - I definitely use my phone constantly for eBay messaging, taking photos of items, and managing listings. Do you just estimate a percentage or is there a more formal way to calculate that?