Received 1099 form from eBay - need to file taxes if I sold items at a loss?

Yes, you should file a tax return even if you sold the items at a loss. The 1099 form means eBay reported that income to the IRS, so the IRS is expecting to see it on your return. Not filing could trigger a notice from them. You'll report this on Schedule C as self-employment income. The good news is you can deduct your original cost of the items as "cost of goods sold." You don't necessarily need the original receipts, but you should have some reasonable documentation of your costs - bank statements, credit card statements, or even a spreadsheet tracking your purchases and sales can help if you're ever questioned. If you truly sold everything at a loss, you might not owe any tax, but you still need to file to show this. The IRS only sees the gross sales amount from eBay, not your costs. For affordable filing options, look at the IRS Free File program or software like FreeTaxUSA or Cash App Taxes (formerly Credit Karma Tax). They have free or very low-cost options for filing with Schedule C.

I was in almost the exact same situation last year! After months of trying to figure out the confusing eBay 1099 mess, I found this service called taxr.ai (https://taxr.ai) that saved me so much stress. I uploaded my 1099 from eBay and my selling history, and it automatically identified which items were personal items sold at a loss vs actual profit items. The thing that really helped me was that it created a detailed report showing my cost basis for everything, which is exactly what the IRS wants to see. My situation was complicated because I was mostly selling my old collection but had a few things I'd bought specifically to flip.

I wanted to update after trying taxr.ai - I was skeptical at first but it actually worked great for my eBay 1099 situation! I uploaded my sales history and it separated my personal items sold at a loss from the few profitable sales. The report it generated showed I actually had a net loss of $840 across all sales, even though my 1099 showed over $5k in gross sales. I used the report with FreeTaxUSA like someone suggested above, and it made filling out Schedule C super simple. The detailed breakdown would definitely satisfy the IRS if I ever got audited. I'm relieved I didn't just ignore the 1099 like I was tempted to do. Definitely worth checking out if you're in a similar situation with eBay sales!

If you've been trying to contact the IRS for guidance on your eBay 1099 situation, good luck! I spent WEEKS trying to get through to someone at the IRS about a similar issue. After 15+ attempts and hours on hold, I finally used Claimyr (https://claimyr.com) and got through to an IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that casual sellers who are just selling personal items at a loss don't owe taxes, but you MUST still file a Schedule C to show this. The agent also explained that without filing, the IRS computers will automatically assume the full 1099 amount is taxable profit. Getting this confirmation directly from the IRS saved me from making a costly mistake.

Ok I need to eat some crow here. After my skeptical comment, I decided to try Claimyr anyway since I was desperate for answers about my eBay 1099 situation. Not only did I get through to the IRS, but the agent I spoke with was super helpful and confirmed exactly what I needed to know about reporting my sales of personal items at a loss. The whole process took maybe 25 minutes total (instead of the 2+ hours I wasted last week trying to call myself). Just wanted to share that it actually does work as advertised. The IRS agent even helped me understand exactly which forms I'll need based on my specific situation. Definitely worth it if you need actual clarification from the IRS!

Don't forget that even if you sell personal items at a loss, you can't actually claim those losses on your taxes! This is a common misconception. You can only deduct losses from business inventory that you bought specifically to resell. Personal items are considered capital assets and losses from selling personal items aren't deductible. What you CAN do is report the cost and selling price to show you don't have taxable profit. But don't try to deduct those personal item losses against other income - that's a quick way to trigger an audit.

Has anyone used TurboTax for filing when they have an eBay 1099? I'm in the same boat and wondering if the free version can handle this or if I need to upgrade to the self-employed version?

I went through this exact situation last year and wanted to share what I learned! You absolutely need to file even if you sold everything at a loss - the IRS will assume that entire $6,800 is profit if you don't report it properly. Here's what worked for me: I created a simple spreadsheet listing each item I sold, what I originally paid for it, and what I sold it for. Even without receipts, you can use reasonable estimates based on what you remember paying or what similar items cost when you bought them. Bank statements, credit card records, or even photos with timestamps can help support your estimates. The key is reporting this on Schedule C to show your cost of goods sold. If you truly sold everything at a loss, you'll end up with zero taxable income from eBay, but you still need to file to prove this to the IRS. For software, I used FreeTaxUSA's Deluxe version (around $15) and it walked me through everything step by step. Much cheaper than TurboTax's self-employed version and just as good for this type of situation. The software will ask you simple questions about your eBay sales and generate the right forms automatically. Don't stress too much - this is actually pretty common now with the new 1099 reporting requirements. Just make sure you file something to avoid getting a scary notice from the IRS later!