Trying to understand the $600 threshold for eBay sales tax reporting

So if I bought a gaming console for $500 three years ago and sell it for $350 on eBay, I don't need to pay taxes on that $350 because I actually lost money on the item? Even if eBay sends me a 1099-K?

That's correct. If you're selling personal items at a loss (like your gaming console example), that's not considered taxable income. The $350 you received isn't profit - it's just partial recovery of your original investment. When you receive a 1099-K, you'll still need to account for it on your tax return to match what the IRS received, but you can offset the reported income with your cost basis (what you originally paid). For personal items sold at a loss, you can't claim the loss as a deduction, but you also don't pay tax on the proceeds.

Does this tool connect to your eBay account directly or do you have to manually enter all your sales? I sold like 60+ items last year and don't want to input everything by hand.

I'm skeptical. Couldn't you just track this in a spreadsheet yourself? Why pay for a service when you could just note which items were personal vs business?

It doesn't connect directly to eBay, but you can upload your eBay sales report and it automatically categorizes everything. You just review and make adjustments. Way faster than entering 60+ items manually. For spreadsheet tracking, I tried that first but kept making mistakes on what was deductible. The service costs less than what I saved in taxes by properly documenting everything. Plus it generates all the supporting documentation if you ever get questioned by the IRS.

How does this even work? The IRS phone system is notoriously bad, so I don't get how some service can magically get you through faster?

Sounds like BS to me. Nobody can "skip the line" with the IRS. They probably just keep redialing for you which you could do yourself for free.

It's not magic - they use an automated system that navigates the IRS phone tree and holds your place in line. When they're about to connect with an agent, you get a call. It's basically the same as if you called and waited yourself, except you don't have to sit with a phone to your ear for hours. And it's definitely not BS. I was skeptical too, but after trying to get through myself multiple times and failing, this actually worked. They don't skip any lines - they just handle the waiting part for you. Totally worth it for the time saved and stress avoided.

So how do we actually report this on tax forms? If I get a 1099-K for $900 but I sold personal items at a loss, where do I put that on my return?

If you receive a 1099-K, you'll need to report it on Schedule 1 as "Other Income" and then offset it with your cost basis (what you paid for the items). You can add a note that these were personal items sold at no gain. Some tax software has a specific section for 1099-K from casual sales. Look for options like "Sale of personal items" or similar when you enter your 1099-K. The important thing is making sure the total on your return matches what the IRS received on the 1099-K, even if your actual taxable amount is zero.

It depends on whether your selling activity is considered a business or hobby. If you're regularly buying items to resell for profit, that's a business and subject to self-employment tax. If you're just occasionally selling your personal stuff, that's not subject to self-employment tax.

This is really helpful advice! I'm new to selling online and had no idea about the difference between the reporting threshold and actual taxable income. The spreadsheet idea is brilliant - I wish I had started tracking that from the beginning. Quick question: if I can't find receipts for some older items I'm selling (like collectibles I bought years ago), is there any other way to prove what I originally paid? Or should I just be conservative and assume I might owe taxes on those sales?

@Bethany Groves Great question! If you can t'find original receipts for older items, there are a few approaches you can take: 1. Check your credit card or bank statements from around the time you think you bought the items - these can serve as proof of purchase 2. Look for any email confirmations from online retailers Amazon, (eBay, etc. in) your email history 3. For collectibles, you can research what similar items were selling for during the time period when you likely purchased them - this can help establish a reasonable cost basis 4. If it s'something like a gaming console or electronics, you can look up the original retail price when it was released The IRS understands that people don t'always keep receipts for personal items they bought years ago. As long as you make a good faith effort to estimate what you paid based on available evidence, that s'generally acceptable. Just document your reasoning like (PlayStation "4 purchased around 2015, retail price was $399 .")Being conservative isn t'necessarily bad, but you shouldn t'overpay taxes on personal property sales either. The key is being reasonable and having some basis for your cost estimates.

This is exactly what I needed to hear! I've been losing sleep over this whole eBay tax situation, but reading everyone's experiences here has been so reassuring. I had no idea about websites like PriceCharting - that's going to be a lifesaver for figuring out what I originally paid for some of my old gaming stuff. The distinction between personal property sales and business activity makes so much more sense now. I was worried that just because I sold $780 worth of stuff, I'd owe taxes on all of it. But since these were all items I bought for myself years ago and am selling for less than I paid, it sounds like I'm in good shape. I'm definitely going to start that spreadsheet tracking system right away for any future sales. Better to be organized from the start! Thanks everyone for sharing your knowledge and experiences - this community is amazing for helping newcomers navigate these confusing tax situations.

This is such a great point about tracking expenses! I wish I had known this when I first started selling on eBay. I was so focused on whether my sales were taxable that I completely overlooked the fact that selling expenses can reduce any taxable profit. Those eBay and PayPal fees really add up, especially on smaller items. And you're right about shipping materials - I never thought to save receipts for bubble mailers and boxes, but that could definitely make a difference for someone who's selling regularly. Do you know if there's a minimum threshold for deducting these expenses, or can you claim them even for just a few occasional sales? Also, what about things like gas to drive to the post office - is that deductible too, or only direct selling costs?

This is exactly the kind of clear, comprehensive advice I was hoping to find! As someone who's completely new to selling online, the whole tax situation seemed really overwhelming at first. I was worried I'd end up owing money I didn't expect to owe. Your point about the $600 being a reporting threshold rather than a tax threshold is so important - I think a lot of people get confused about that distinction. And the spreadsheet approach makes total sense for staying organized from the start. I'm curious though - if I do end up getting a 1099-K even though my sales were at a loss, do I need to do anything special when filing my taxes to show that these were personal items? Or is it enough to just keep the documentation in case I ever get audited? Also, thanks for mentioning the credit card statement idea for older purchases - I never would have thought to look there for proof of what I originally paid for things!

@Adrian Hughes Great questions! If you receive a 1099-K but your sales were actually at a loss, you ll'typically need to report it on your tax return to match what the IRS received, then offset it with your cost basis what (you originally paid .)Most tax software has sections specifically for this - look for 1099-K "from payment processors or" casual "sales of personal items. You" don t'necessarily need to attach all your documentation to your return, but definitely keep it organized in case of questions. The IRS might want to see proof that these were personal items sold at a loss rather than business income. For the credit card statements - they re'actually one of the best forms of documentation since they re'official bank records with dates and amounts. Even if the merchant name isn t'super specific, combined with the date and amount, it usually provides enough evidence to support your cost basis. The key is being able to tell a coherent story: I "bought this gaming console on X date for Y amount here (s'my credit card statement ,)and sold it Z years later for less than I paid here (s'the eBay sale record .)That" s'exactly the kind of documentation that shows these were legitimate personal property sales.

I'm so glad this thread has been helpful for you too! It's reassuring to know there are others in similar situations trying to navigate this for the first time. The board games and comic books angle is interesting - those are exactly the types of collectibles where you might have old purchase records if you bought them online originally. Your point about starting the record-keeping system now while you only have 20 sales is really smart. I made the mistake of waiting until I had dozens of transactions to sort through, and it was much more overwhelming. Getting organized early definitely pays off! The email confirmation trick has been a lifesaver for me too. It's amazing how far back those purchase records go in your email - I found confirmations for items I completely forgot I had bought years ago. Amazon, eBay, GameStop, comic book stores - they all leave digital trails that can save you when tax time comes around. One thing I'd add is don't forget to check any loyalty program accounts you might have (like GameStop PowerUp Rewards or comic shop memberships). Sometimes those track your purchase history too and can provide additional documentation for items you're selling.