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- Feb 27, 2005
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Wanted to share a little guidance for people looking to file their taxes. I just filed mine through TurboTax with live tax assistance, which I wanted for this first year with the new 1099-K reporting.
For the current year, if you had more than $5,000 in G&S transactions, you will receive a 1099-K. In some states this threshold is lower.
The 1099-K will include your gross third-party network transactions (payments received via Goods and Services) broken down by month (box 5a-5l) and with a reported number of transactions (box 3). I entered this in TurboTax as having been received for sale of personal property. Only personal property sold for a gain is reportable, so you will need to subtract the proceeds for all sales you made where you had a net loss, even if the sale and purchase price were identical, e.g. I bought a knife for $585 and sold it for $585, but incurred $38 in G&S fees and shipping costs, so I had a net loss.
You will need to report this income on Form 1040 Schedule D (Capital Gains and Losses) and Form 8949 (Capital Gains and Losses).
Form 8949 has you itemize your profitable sales. The total of the itemized sales should add up to your gross third-party network transactions from your 1099-K less the proceeds from sales you made for a loss.
The data you need is:
Box 1a - Description of property sold
Box 1b - Date acquired
Box 1c - Date sold
Box 1d - Proceeds (sale price received, do not subtract G&S transaction fee from the amount, that is entered in box 1g)
Box1e - Cost or other basis (This is the amount you paid, inclusive of taxes and shipping. Note that you can use a reasonable market cost basis if you did not purchase the knife retail, i.e. if you won it in a raffle, the market cost basis would be the table or retail price of the knife, not the cost of your raffle tickets.)
Box 1f - Code(s) from instructions (This was autofilled by Turbotax as "E" for me.)
Box 1g - Amount of adjustment (This is where you put the aggregate selling cost not reported on the 1099-K, including shipping costs, costs of shipping materials, and goods and services transaction fees, e.g. add your total shipping and transaction costs and put it as a single number in this box for each sale reported.)
On Schedule D, you are aggregating your purchases into short- (owned <1 year) and long-term (owned >1 year) capital gains and losses. So add up the total for your proceeds, cost basis, and adjustments to gain or loss where there is <365 days between purchase and disposition of the knife and put these numbers in box 1d, 1e, and 1g of Part 1 of Schedule D for short-term gains and losses, and in box 1d, 1e, and 1g of Part II of Schedule D for long-term gains and losses.
My goal has been to break even on average for knives I sell, or to be a little ahead but not by so much that the additional taxable income sinks my refund. This year, I had $13,208 in G&S sales via PayPal, of which $5,482 was proceeds from knives sold at a loss. My cost basis for the knives I sold and made a gain on was $6,565, and after $541 in adjustments for PayPal fees and shipping, I had a net gain of $620 for the year, which increased my taxes and decreased my refund by about $200, well within my total refund.
Note: I am not a tax professional, this information is what I was advised to do by Turbotax's tax professionals.
Hopefully this is helpful. I have a knife collection inventory spreadsheet I also use to track sales, and I have reformatted it to readily calculate the information needed for taxes now. I'd advise everyone using G&S to track all your purchases and sales in the same way so that your reported additional income gets appropriately offset by your cost basis.
For the current year, if you had more than $5,000 in G&S transactions, you will receive a 1099-K. In some states this threshold is lower.
The 1099-K will include your gross third-party network transactions (payments received via Goods and Services) broken down by month (box 5a-5l) and with a reported number of transactions (box 3). I entered this in TurboTax as having been received for sale of personal property. Only personal property sold for a gain is reportable, so you will need to subtract the proceeds for all sales you made where you had a net loss, even if the sale and purchase price were identical, e.g. I bought a knife for $585 and sold it for $585, but incurred $38 in G&S fees and shipping costs, so I had a net loss.
You will need to report this income on Form 1040 Schedule D (Capital Gains and Losses) and Form 8949 (Capital Gains and Losses).
Form 8949 has you itemize your profitable sales. The total of the itemized sales should add up to your gross third-party network transactions from your 1099-K less the proceeds from sales you made for a loss.
The data you need is:
Box 1a - Description of property sold
Box 1b - Date acquired
Box 1c - Date sold
Box 1d - Proceeds (sale price received, do not subtract G&S transaction fee from the amount, that is entered in box 1g)
Box1e - Cost or other basis (This is the amount you paid, inclusive of taxes and shipping. Note that you can use a reasonable market cost basis if you did not purchase the knife retail, i.e. if you won it in a raffle, the market cost basis would be the table or retail price of the knife, not the cost of your raffle tickets.)
Box 1f - Code(s) from instructions (This was autofilled by Turbotax as "E" for me.)
Box 1g - Amount of adjustment (This is where you put the aggregate selling cost not reported on the 1099-K, including shipping costs, costs of shipping materials, and goods and services transaction fees, e.g. add your total shipping and transaction costs and put it as a single number in this box for each sale reported.)
On Schedule D, you are aggregating your purchases into short- (owned <1 year) and long-term (owned >1 year) capital gains and losses. So add up the total for your proceeds, cost basis, and adjustments to gain or loss where there is <365 days between purchase and disposition of the knife and put these numbers in box 1d, 1e, and 1g of Part 1 of Schedule D for short-term gains and losses, and in box 1d, 1e, and 1g of Part II of Schedule D for long-term gains and losses.
My goal has been to break even on average for knives I sell, or to be a little ahead but not by so much that the additional taxable income sinks my refund. This year, I had $13,208 in G&S sales via PayPal, of which $5,482 was proceeds from knives sold at a loss. My cost basis for the knives I sold and made a gain on was $6,565, and after $541 in adjustments for PayPal fees and shipping, I had a net gain of $620 for the year, which increased my taxes and decreased my refund by about $200, well within my total refund.
Note: I am not a tax professional, this information is what I was advised to do by Turbotax's tax professionals.
Hopefully this is helpful. I have a knife collection inventory spreadsheet I also use to track sales, and I have reformatted it to readily calculate the information needed for taxes now. I'd advise everyone using G&S to track all your purchases and sales in the same way so that your reported additional income gets appropriately offset by your cost basis.