1099-K is a Tattle Tale of Personal Income

April 6, 2023

There’s big news on the IRS front on the form 1099-K. If you recall, this form is issued from people like eBay, PayPal, all of those kinds of companies. If you receive more than $600, the controversy came in with that magical $600 number.

But these forms come out to you whether you are a business or an individual. So they have some weird tax consequences that have not really been clarified until now.

The IRS put out a fact piece on their website and will include the link down below on March 23rd of 2023 that talked about some examples and how they want you to treat these things.

In their examples

They say, if you bought a refrigerator for a thousand dollars and you sold it on lovely Facebook marketplace for $600, you have a loss of $400.

Now you’ll get a 1099-k theoretically for the $600 that you received, unless it was in the form of cash or a check from one of the companies like a Venmo ,or an eBay, or PayPal.

What do you do with that? Well, since you have a loss, that’s not deductible, so you don’t need to do anything.

But let’s flip this around

Let’s say you had some sporting event tickets or concert tickets, and in their example, you bought the tickets for $500, you sold them for $900. Now you have a profit or a gain of $400.

Well, even if it was a personal sale, they’re saying you need to report that. So you need to report it on your Schedule D, Form 8949 is the detail of the sales that goes along with that and let that flow through. So it could be short or long-term depending on when you bought those tickets and resold them.

So if it was over a year, that would be long-term capital gains on the sale of concert tickets, how exciting! And the gain on the sale of a personal item is taxable.

Now for years, this has just kind of gone under the table. Nobody’s really talked about it. We all know everybody sells things. You know, your proceeds from the yard sale, are those taxable? Well, they could be if you put them on a 1099-K because you took electronic payments.

Now on the opposite side

Although they want the tax on the gain, the loss is not deductible. So you don’t get to deduct that at all.

So if you receive that, you need to report it as well. So they don’t think that the proceeds were a gain. So you would report those proceeds as taxable even though you didn’t get any profit.

So you’re gonna report those on line 8, other income listed as 1099-k personal items sold at a loss per their instructions. So you can report up to your cost, but not more than the proceeds so at worst case, you go to zero.

Again, going back to that thousand dollars refrigerator that you sold for $600, you’re gonna report the $600 as incoming income, but show that you had $600 worth of an expense so you don’t have to pay taxes on those proceeds.

So, new info! Another new thing to worry about for your taxes.

Do keep an eye out if you receive a strange form: a 1099-K for your personal. Don’t just toss that aside, include that with your tax information, and we’ll have to get those reported along with your tax returns.

Hope that helps you avoid having an issue later on with the IRS.

For additional read: About Form 1099-K

1099 K Is A Tattle Tale Blog Cm
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Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA, as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.