1099K for selling clothes

[Possi]

My client just handed me a 1099K for selling her clothes, and her children's clothes, second hand, online. 

She certainly received much less than she paid for them. 

She's not "in business" but indeed sold over $12k worth. 

I think with everybody staying home, we will see a lot of this. It's not a gain, so how do I report this? 

I'm at a loss on this one. 

[Gail in Virginia]

I think that I would put it on a schedule C and make COGS equal to the amount received.  Not accurate, but this is a personal loss not a deductible one, and will at least hopefully stop the IRS from sending a letter

[Possi]

2 minutes ago, Gail in Virginia said:

I think that I would put it on a schedule C and make COGS equal to the amount received.  Not accurate, but this is a personal loss not a deductible one, and will at least hopefully stop the IRS from sending a letter

That's exactly what I was thinking. 

Thanks, I appreciate the affirmation.

[ILLMAS]

How about using thrift-value, there has to has to be some profit in what they are doing.

[Pacun]

The cost will be actual cost or FMV at the time of changing from personal use to merchandise (whichever is lower). In this case the change of usage and the sale take place at the same time so 0 profit or loss. 

How about the internet connection to sell the stuff? How about how much more will H and R block charge them for including a 0 Schedule C?

Remember that FMV is what a willing seller will sell for and a willing buyer will pay. 

 

[Lion EA]

Is it a business or a sale of personal property? Schedule 8949 with no loss allowed for personal property?

Anything that doesn't have extra "business" fees won't be a deduction on Schedule C, things like internet that's the same cost with or without biz use.

What's the From 1099-K threshold now? I guess if she made 200 sales or sold $20,000 or whatever, she might be in business!

[Abby Normal]

I doubt the IRS even matches 1099-K's. File without it and let us know what happens.

[Lynn EA USTCP in Louisiana]

IRS does match 1099-K, or at least the ones issued for $368,000

[Lee B]

2 hours ago, Possi said:

My client just handed me a 1099K for selling her clothes, and her children's clothes, second hand, online. 

She certainly received much less than she paid for them. 

She's not "in business" but indeed sold over $12k worth. 

 

I guess I have a different take on this. The amount of clothing you would have to sell at second hand prices to total over $ 12k  is mind boggling,

probably at least $ 40 k at retail. I think additional inquires need to be made !

[Catherine]

Some of the states (like MA) will inquire, even if the feds don't.  I've seen this.  Selling personal property at a loss is not a taxable event.  (If they sold at a gain, that's different.)

What I have done is put it on the "other income" screen (I use Drake) description "1099-K" with a second line description "sale of personal property, no gain" with a negative number $1 LESS than the 1099-K amount.  Why less?  Because the detail screens don't transmit unless there is a net amount.  And $1 additional income won't break anyone's tax bank.

[Possi]

15 hours ago, Catherine said:

Some of the states (like MA) will inquire, even if the feds don't.  I've seen this.  Selling personal property at a loss is not a taxable event.  (If they sold at a gain, that's different.)

What I have done is put it on the "other income" screen (I use Drake) description "1099-K" with a second line description "sale of personal property, no gain" with a negative number $1 LESS than the 1099-K amount.  Why less?  Because the detail screens don't transmit unless there is a net amount.  And $1 additional income won't break anyone's tax bank.

This is a good way, too. Thanks. 

My only concern with the Sch C is that the state of VA watches these Sch C's very closely because they will demand a business license and personal property tax on anything they can think of. 

So, this is looking like a better option. I use TaxWise and can easily note the detail.

Thanks!

edit: I am confident this was personal property sales of clothing and other things. Sold at a personal loss, I'm sure. There are so many websites these days where you can easily list your "junk" and make some money that otherwise you would have lost. 

[Medlin Software, Dennis]

Without the third party sending the K, you may not have heard of this amount.  The seller likely has expenses/fees which were kept by the third party, at least for the charge card aspect.  There is also the possibility sales tax was withheld/paid, which the third party handled.  Some third parties also charge listing/selling fees.  As others suggested, there will or should be fees for license(s), shipping, tax prep, etc.  For the product described, seems like there are more than enough expenses that there should be a loss, unless the product is valued below selling price.  If a short term process, not ongoing, I really like the $1 "profit" idea so it can be done with on one return.

(My DW sells or gives away our random no longer needed items online, at least the items we cannot find a good home for via donation.)

[Catherine]

3 hours ago, Medlin Software said:

If a short term process, not ongoing, I really like the $1 "profit" idea so it can be done with on one return.

Bingo.  There's a huge difference between someone clearing the good-but-don't-fit items out of their closet and selling them on ebay or etsy and likely making nearly nothing after shipping costs and fees (and certainly not profit compared to what they paid in stores), and someone who makes a living cruising yard sales and picking up the "good stuff" to sell for profit.