Understanding eBay Income Tax Reporting Requirements - Do I Need to Report $1k in Sales?

Wait, I thought you only had to report if you made over $12,000 in sales? I've been selling random stuff from my house too and made like $800. Do I seriously need to file a whole separate form for that? Also, if they were gifts originally and I don't know what they cost, what do I do?

The $12,000 threshold you're thinking of was the old reporting threshold, but it changed. Starting in tax year 2022, payment processors like eBay and PayPal must issue a 1099-K when you exceed $600 in sales. For items that were gifts, you should make a reasonable estimate of their fair market value at the time you received them. This becomes your "basis" in the item. If you sell personal items for less than what you paid (or their basis value), it's generally considered a personal loss which isn't deductible or reportable for tax purposes.

Does this work with other platforms too? I sell on Mercari and Facebook Marketplace, not just eBay. Also, how does it handle situations where you don't have the original receipt anymore?

Sounds interesting but kinda suspicious. How does it know what you originally paid if you don't have receipts? Like I bought some collectibles years ago and have no idea what I paid but definitely sold them for more on eBay.

Yes, it works with all the major selling platforms! I actually had some Mercari sales too. You can import transaction data from multiple sources or just upload the 1099-K forms if you received them. For items without receipts, the system helps you make reasonable estimates based on historical pricing data for similar items. You can enter when you purchased the item (even approximately) and what condition it was in, and it suggests a likely purchase price range. It's way better than just guessing randomly, which is what I was doing before.

How long did you actually wait though? I heard the IRS hold times are like 2-3 hours minimum. Does this service actually get you through faster or just saves you from being on hold?

This sounds like BS honestly. The IRS doesn't have some special line for people using third-party services. They probably just automate the hold process which you could do yourself with an auto-dialer. Waste of money if you ask me.

I waited about 90 minutes total, but the difference is I wasn't actively sitting on hold that whole time. Their system held my place in line and called me when an agent was about to pick up. So I could actually go about my day instead of being stuck listening to hold music for hours. It doesn't get you through faster than others - you're still in the same IRS queue as everyone else. The benefit is that you don't have to actively wait on the phone. They just maintain your spot in line and connect you when it's your turn. For me, that was absolutely worth it since I'd already wasted hours trying to get through on my own.

This is actually a really important distinction. How do you prove it's a hobby though? Like what if I sometimes buy things at thrift stores to resell but also sell my own stuff too?

The IRS looks at several factors to determine if an activity is a hobby or a business, including whether you depend on the income, how much time you spend on it, if you operate in a businesslike manner, and if you're trying to make a profit. If you're mixing personal items with items bought specifically to resell, it gets more complicated. In that case, you should keep very detailed records separating your personal items from your "inventory" items. For the items you buy with intent to resell, those would be treated as business income on Schedule C, while your personal items might still qualify for hobby treatment.

I used FreeTaxUSA last year for my eBay income and it worked great! They have a section for self-employment income where you can report your sales. The federal filing is completely free and state is like $15. Way cheaper than TurboTax which wanted to upsell me to their $120 version just because I had some eBay sales.

Thanks for the suggestion! I'll check out FreeTaxUSA. $15 for state filing is way better than what TurboTax was trying to charge me. Did they walk you through how to determine what was actually taxable from your eBay sales?

This is super helpful, thanks Aidan! I'm in a similar boat as Jacob - first time filer and really nervous about messing something up. Quick question though - how do you handle items where you legitimately can't remember what you paid? Like I sold some old textbooks and random electronics but have no idea what they originally cost. Is it okay to make reasonable estimates, or do I need exact receipts for everything? Also, you mentioned talking to a tax preparer - was that worth the cost for a relatively simple situation like this? I've been going back and forth on whether to just use tax software or actually pay someone to help me through my first filing.

@Lim Wong Great question! For items where you don t'have receipts, the IRS allows you to make reasonable "estimates based" on what similar items would have cost when you bought them. I kept a simple spreadsheet with the item, approximate purchase date, estimated original cost, and sale price. For textbooks, you can often look up what they retailed for when they were new. Electronics are trickier, but you can research what similar models sold for around the time you bought them. As for the tax preparer - honestly, for a situation like yours and Jacob s,'it s'probably not worth the $200-300 cost unless you re'really anxious about it. I ended up using FreeTaxUSA like (Hannah mentioned and) it walked me through everything step by step. The key is just being conservative with your estimates and keeping good records in case you ever get audited. The most important thing I learned is that the IRS isn t'trying to nail college students selling old textbooks - they re'more concerned with people running actual businesses and not reporting income properly. As long as you re'making a good faith effort to report legitimate profits, you ll'be fine!

This is really reassuring to hear! I'm also a first-time filer and was getting super anxious about whether I needed to track down receipts from years ago for random stuff I sold. The depreciation point is really helpful - I never thought about how my old gaming equipment and clothes would obviously be worth less now than when I bought them originally. Quick follow-up question though - when you say "reasonable estimates" for original purchase prices, how specific do you need to be? Like if I sold an old jacket for $30 but can't remember if I paid $40 or $60 for it originally, does that level of uncertainty matter? Or is it more about being in the right ballpark? Also appreciate the software recommendation - I was definitely leaning toward the free options rather than paying hundreds for a tax preparer when my situation seems pretty straightforward.

@Luca Esposito For reasonable estimates, you definitely don t'need to be exact to the dollar - being in the right ballpark is totally fine! The IRS understands that most people don t'keep receipts for every piece of clothing or old electronics they eventually sell years later. For your jacket example, whether you originally paid $40 or $60 doesn t'really matter much since you sold it for $30 either way - you d'have a loss in both scenarios, which means no taxable income to report. The IRS is much more concerned about people who are clearly underreporting significant profits than they are about someone estimating whether an old jacket cost $40 vs $60. The key is just being reasonable and honest. If you sold a designer jacket for $30, don t'claim you originally paid $200 for it. But if you genuinely think it was somewhere in the $40-60 range, just pick a number in that range and move on. Keep a simple spreadsheet with your estimates in case you ever need to reference them later, but don t'stress about being perfectly precise. You re'absolutely right about the software approach too - for situations like yours and Jacob s,'the free or low-cost options are definitely the way to go!

@Freya Ross This is exactly what I needed to hear! I ve'been losing sleep over this for weeks thinking I was going to owe a ton of money or get in trouble with the IRS. The depreciation concept makes so much sense - like my old iPhone that I sold for $150 probably cost me $800 when it was new three years ago, so there s'definitely no profit there. I think my biggest worry was just not understanding the difference between gross sales and actual taxable profit. It s'really reassuring to know that the IRS distinguishes between people running businesses versus someone like me just clearing out old stuff. I was starting to think I accidentally turned myself into a business owner by selling on eBay! One quick question though - when you mention using tax software to walk through this, do most of the free versions handle this type of income reporting? I don t'want to start filling everything out only to find out I need to upgrade to a paid version just to report my eBay sales. Thanks so much for taking the time to explain this - you ve'definitely helped calm my nerves about the whole situation!