Form 1099-K

[Christian]

A client has come in with a 1099-K for $1300 from Ebay. I thought the new rules stated that $5000+ was the amount needed to require the filing of this form. Soooooooooo what do we do just ignore it or what ?

[Terry D EA]

I don't know that I would Ignore it. Depending on what software you use, you may be able to breakdown the income in a statement. Drake allows this. In the input box for the gross income/receipts, I click on the box and it opens a statement. There I indicate the 1099K with EIN and amount so it is included in the gross income. There really is no other way to input any information from a 1099K that I know of.

[Lee B]

I agree with Terry,

Ignoring it might trigger a CP 2000 notice.

The IRS has good guidance on how to handle 1099 K:   https://www.irs.gov/businesses/what-to-do-with-form-1099-k

[BulldogTom]

25 minutes ago, Christian said:

A client has come in with a 1099-K for $1300 from Ebay. I thought the new rules stated that $5000+ was the amount needed to require the filing of this form. Soooooooooo what do we do just ignore it or what ?

If you are using ATX, you would enter the 1099K, assign it to other income, and at the top of Schedule 1 there is a box for amounts that are in error on the 1099K or for personal sales with losses.   At least I think that is the wording.   But in any case, enter the 1099K and then put the $1,300 in that box and it should go away.   I have not had to do this yet so please let me know if it works as advertised.

@jklcpa if this does work, you may want to pin the instructions for this year as it is new and I think we are going to see this question come up a lot during the tax season.   Your call, just a thought.

Tom
Longview, TX

[jklcpa]

32 minutes ago, Christian said:

A client has come in with a 1099-K for $1300 from Ebay. I thought the new rules stated that $5000+ was the amount needed to require the filing of this form. Soooooooooo what do we do just ignore it or what ?

My husband has a Sch C biz and was correctly issued one from Block (Square). I didn't keep the email because it didn't apply in his circumstance, but there were lower thresholds shown depending on the recipient's state that may be the reason your client received one from E-bay.

[BulldogTom]

19 minutes ago, jklcpa said:

My husband has a Sch C biz and was correctly issued one from Block (Square). I didn't keep the email because it didn't apply in his circumstance, but there were lower thresholds shown depending on the recipient's state that may be the reason your client received one from E-bay.

I got one as well from Block as expected and properly recording the CC sales.   ATX 1099K form entry and linked to my Sch. C.   Just like a 1099NEC, just a different form entry screen.

The trick this year is to know if it is legit reportable income or personal in nature (like paying friends for personal expenses or selling stuff on eBay for a personal loss).

Tom
Longview, TX

[Christian]

I think Bulldog's approach will work. It occurs to me I used a similar procedure last year. I simply do not understand if amounts below $5000 are not even supposed to be reported then $1300 should by their own rules not be reported. I will simply show her cost basis slightly over her sales receipts.

[Abby Normal]

1 hour ago, BulldogTom said:

I got one as well from Block as expected and properly recording the CC sales.   ATX 1099K form entry and linked to my Sch. C.   Just like a 1099NEC, just a different form entry screen.

The trick this year is to know if it is legit reportable income or personal in nature (like paying friends for personal expenses or selling stuff on eBay for a personal loss).

Tom
Longview, TX

I've never entered either of those forms. I just enter sales from my accounting software directly on Sch C. Less work.

[BulldogTom]

22 minutes ago, Abby Normal said:

I've never entered either of those forms. I just enter sales from my accounting software directly on Sch C. Less work.

I suffer from auditophobia (I just made that up).   I enter my sales from my accounting software and I enter the 1099s and I have a line item under my sales for "less 1099s received" as a negative number.   It is only a couple extra key strokes but I can show that I have included any 1099s in my tax return if I am ever audited.   

Hey, I never want to have to ask one of you to represent me at audit and then have you think I don't keep good books and records.

Tom
Longview, TX

[jklcpa]

Fwiw, Drake doesn't even have a place to enter 1099K data. For my husband's Sch C, I just entered the gross sales that includes the credit card payments. 

[Abby Normal]

Drake gets it.

[Slippery Pencil]

3 hours ago, Christian said:

if amounts below $5000 are not even supposed to be reported then $1300 should by their own rules not be reported.

That's not what the law says.  Amounts of $5000 and above are required to be reported.

[Lion EA]

You don't want to make the $1,300 go away, or zero it out, until you ask a lot of questions. How much of the $1,300 is taxable? Self-employment income? Personal sales of personal goods at a loss? Transfers from family/friends for personal activities?

As Slippery said, you don't get to not report $1,300 or any amount below $5,000 (or below $600 if receiving Form 1099-NEC, for example). You report worldwide income unless the law excludes it. So you have to ask your client to break out the $1,300 into the amounts from various income categories to determine if and how much you can exclude.

Each software will have different ways to enter. You know what to do with biz income. The new instructions for Schedule 1 explain about Other Income and income that can be excluded.

[Christian]

I did one of these last year in which the client had sold over $11,000 in personal items. My Kiplinger Tax Letter had advised that for 2024 the service had set $5000 as the amount necessary for a 1099-K to be issued. This client simply sold personal items on Ebay some 24 or so. I was surprised that Ebay even issued the form as $1,300 is a far cry from $5,000. The client advises she took a small loss on the sale of the items sold and I am going to report them as I did last year. I am always peeved when the IRS issues clear guidance on an issue and an outfit does not seemingly comply. On the other hand it is very much par for the course.   

[jklcpa]

39 minutes ago, Christian said:

My Kiplinger Tax Letter had advised that for 2024 the service had set $5000 as the amount necessary for a 1099-K to be issued. This client simply sold personal items on Ebay some 24 or so. I was surprised that Ebay even issued the form as $1,300 is a far cry from $5,000. The client advises she took a small loss on the sale of the items sold and I am going to report them as I did last year. I am always peeved when the IRS issues clear guidance on an issue and an outfit does not seemingly comply. On the other hand it is very much par for the course.   

Finally found what I mentioned earlier about residents of some states receiving the 1099-K because of lower reporting thresholds. The statement below is from PayPal, but I remember the same statement in the email from Square.

Quote

If you live in the following US states, you’re subject to a lower reporting threshold:

• Vermont, Massachusetts, Virginia, Maryland: $600 USD in gross payment volume from sales of goods or services in a single calendar year, regardless of the number of transactions.
• Illinois: over $1,000 USD in gross payment volume from sales of goods or services in a single calendar year and four or more separate transactions.

The Form is based on your primary address on the last day of the previous tax year. If you changed your primary address to one of these states after that date, your account activity would be captured in Form 1099-K reporting for the following tax year.

 

Edited February 4 by jklcpa
shortened the quotes

[jklcpa]

Here's PayPal's page where I got that information:

https://www.paypal.com/us/cshelp/article/current-form-1099-k-reporting-thresholds-2024-update-help1131

[Slippery Pencil]

5 hours ago, Christian said:

I am always peeved when the IRS issues clear guidance on an issue and an outfit does not seemingly comply.

"Clear" is a far cry from how the irs has gone about issuing and changing guidance on this issue.  But the guidance currently states:

Quote

For calendar year 2024, a TPSO is not required to report payments in settlement of third party network transactions with respect to a participating payee unless the gross amount of aggregate payments to be reported exceeds $5,000, regardless of the number of such transactions. The IRS will not assert penalties under section 6721 or section 6722 for a TPSO for failing to file or failing to furnish Forms 1099-K with respect to a payee unless the gross amount of aggregate payments to be reported exceeds $5,000, regardless of the number of such transactions.

Nowhere in the guidance does it state a company is not to file 1099Ks for amounts under $5000.  There's also the fact that the irs guidance doesn't change the law, which says the threshold is $600.

 

[Lion EA]

And, it certainly does NOT change what our clients have to report on their tax returns -- worldwide income.

[Christian]

My client advises that Ebay notified her that they were not going to send her a 1099-K form unless she sold more than $5,000 in goods but then sent her the one she subsequently received.This is evidently to comply with Virginia law which has the lower $600 threshold. I've been at this for forty two years and have never before seen the State of Virginia require such a form but I suppose they see an opportunity to guig the taxpayers a new way sooooooooooooooo.

[Lee B]

On 2/2/2025 at 8:12 AM, Lion EA said:

You don't want to make the $1,300 go away, or zero it out, until you ask a lot of questions. How much of the $1,300 is taxable? Self-employment income? Personal sales of personal goods at a loss? Transfers from family/friends for personal activities?

As Slippery said, you don't get to not report $1,300 or any amount below $5,000 (or below $600 if receiving Form 1099-NEC, for example). You report worldwide income unless the law excludes it. So you have to ask your client to break out the $1,300 into the amounts from various income categories to determine if and how much you can exclude.

Each software will have different ways to enter. You know what to do with biz income. The new instructions for Schedule 1 explain about Other Income and income that can be excluded.

 

On 2/4/2025 at 9:57 PM, Lion EA said:

And, it certainly does NOT change what our clients have to report on their tax returns -- worldwide income.

Christian, as Lion has pointed out several times all Income is taxable unless specifically exempted by law.

The $ amount of the reporting threshold whether it's $20,000, $5,000 or $600 does not determine the taxability of of your client's $1,300.