1099K and Ebay ugh

[YankeeGirl]

My client got hit bad with Ebay. She got a 1099K for $42,749 for selling things from her closet as well as 

her friends, not knowing that this would be reported. I read somewhere is the beginning of this Ebay reporting mess, that if the items were bought at a higher price than what they were sold at, that she could claim at them at a loss. would that be at the reconciliation line 2 Less: adjustments: ?

Some of these items were years old, and she does not have receipts. They were older exercise equipment, maternity clothes, etc. 

Any help is greatly appreciated. I do really thank you all for being patient with me

[dascpa]

That's a lot of stuff from her closet.

(1) She is not in the business of selling and (2) you cannot claim a loss on the sale of personal property. So report the sale and the exact sale amount as a cost of sale reflecting a -0- net profit.

[BobKamman · Accepted solution]

Upon a closer reading, you may find that she is in the business of selling consignment items from her friends (Schedule C) as well as her own personal items for FMV that is less than original cost.  One can either panic in these circumstances, running around like Chicken Little and screaming "the cloud is falling," or instead realize that IRS doesn't have the staff to open last month's mail, much less pester small-time online yard sales.  

The 1099-K is one big bluff to make people think IRS cares enough to deal with the nuisance.  But let's say she made $3,000 selling $30,000 for others, and the rest is just static.  Those who play "Trick the Computer" will probably report all sales as gross receipts, for the sake of matching the 1099-K, and then subtract out the personal stuff as inventory valued at date of conversion from personal use.  This is neither truthful nor accurate, but these days who cares?

[garman22]

$42 from her closet? Minks? Gucci?

[YankeeGirl]

what she most likely did was sell her parents and in-laws things. she was their caregiver and unfortunately, they all (4) passed the year before from covid. so when she decided to sell some things, others asked "well... since you are doing this anyway, can you put this on for me?" So, it is a little of everything combined. 

[qbteachmt]

"that if the items were bought at a higher price than what they were sold at, that she could claim at them at a loss."

We went through this on another topic; these are Used. There is no Higher Price. At this point, they are not worth more than they sell for. In fact, for business purposes, you can research FMV used, from Goodwill and it's Deductible.

You don't get to use original cost for used items as COGS.

I agree that some of this is consignment. If you pay your friends everything you sold it for, that is $0 profit. If you paid your friends minus some amount for your time and effort, that is Business profit.

I'll try to find that other topic for you, but that's the gist of it.

[BobKamman]

So that explains the eBay seller name I noticed, "TheCovidCloset" .  Upon further reflection, my guess was what she does is buy $500 outfits at consignment stores or high-end thrift shops for $50, wears them a few times and then sells them online for $100.  Don't be afraid to ask her for details of what she's doing.  The more reluctant she is to give up information, the more suspicious you should become. 

And the stuff she has owned for years and no longer wants -- wouldn't those go on Schedule D, like selling a used car?  (And people have been doing that for a profit lately.)  There's a box to check somewhere to show if a loss is personal and not deductible.  And the 1099-K will match the Schedule C and Schedule D proceeds.  

[qbteachmt]

Here's that other topic I referenced:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/nondeductible-loss-on-s...

[YankeeGirl]

That's funny, because that is not her user name, so i guess there are a lot of people doing the same thing. hank you for all your help. She is going to consignments and reselling, but also reselling personal things. 

[qbteachmt]

"She is going to consignments and reselling, but also reselling personal things."

Then your client is doing partly what that reference's client is doing, and partly not. Your client seems to have three activities:

Selling personal goods, so FMV is whatever it sold for, or use the web-based Used Goods references. That determines COGS. The activity would show net $0.

Selling friends' goods on their behalf = intent to make a profit (commission) on it = consignment business.

Buying on the open, used goods, market = now you have an actual COGS to the timely sale, unless there is personal use in between. As long as this is "bought to sell it," this would be a business operation.