Schedule C Question for Selling Personal Items Online After Previous Business

Wait, so if I sell a bunch of my old clothes online and make like $500, I don't need to report that? What about if the platform sends me a 1099-K? Does that change things?

If you're selling old clothes for less than what you originally paid for them, then you don't need to report that income - even if you receive a 1099-K. The 1099-K just reports the gross amount processed through the payment platform, but doesn't automatically make it taxable income. If you receive a 1099-K, you should still address it on your tax return to avoid matching notices. You can report the gross amount on Schedule 1 as "Other Income" and then subtract the cost basis of your items with a description like "personal items sold at a loss" resulting in zero taxable income. This way the IRS can match the 1099-K they received with your return.

How exactly does this taxr.ai thing work? Do you just upload documents and it figures everything out? Sounds too good to be true honestly.

Does it work with stuff beyond just the selling online situations? I have some retirement account questions that are driving me crazy this year.

It's pretty straightforward - you upload your documents (like 1099s, W2s, or even just screenshots of confusing tax situations) and their system analyzes them and gives you specific guidance for your situation. They even point out which forms and which lines on the forms you need to fill out. Yes, it definitely handles retirement account questions too! I actually used it again this year when I had a question about a 401k rollover that my tax software couldn't figure out. They explained exactly how to report it correctly and saved me from a major headache.

How does this actually work though? I thought the whole problem was that the IRS phone system is completely overloaded?

Sounds sketchy. Why would this work when calling directly doesn't? The IRS phone lines are what they are, no service is going to magically get you through faster.

It works by using their system that continuously redials the IRS using optimal calling patterns until they get through, then they immediately connect you once they have an agent on the line. You don't have to sit there hitting redial yourself for hours. The service absolutely does work. I was skeptical too, but the IRS phone system has predictable patterns and busy times. This service knows when and how to call to maximize chances of getting through. I was connected to a real IRS agent in 17 minutes after spending entire afternoons previously trying to get through myself. It's not magic - it's just using technology to solve a frustrating problem.

This is super helpful! What happens if you get a 1099-K but sold different kinds of items - some personal stuff like I mentioned, but also a few things that might count as business inventory? Do I need to split those up somehow?

Yes, you would need to separate the two types of transactions. The items that were business inventory would go on Schedule C as part of your business reporting. The personal items sold would be handled as personal property sales (no reporting if sold at a loss, or capital gains if sold at a profit). I recommend creating a simple spreadsheet that lists each item sold, whether it was personal or business, approximate original cost, and selling price. This documentation is crucial if you're ever questioned about the mixed transactions on your 1099-K. Keep your business and personal selling activities clearly delineated - this will save you tremendous headaches if you face an audit.

What ended up happening? Did you have to pay penalties or anything? This is literally my situation right now and im freaking out!