The new 1099-K reporting requirements raise questions about how to input the data to ensure the income is included or excluded correctly. For excludable income, the first workaround I heard about was to use Schedule C to report the income and then use an expense line to ‘reimburse for personal use’ with the same amount. However, it turns out there is some IRS guidance available at https://www.irs.gov/businesses/understanding-your-form-1099-k that provides alternatives.
Adjustments to income may be more appropriate if the 1099-K does not relate to actual business transactions.
| Scenario | Action(s) to take |
| Personal items sold at a loss | If you receive a Form 1099-K for a personal item sold at a loss, report the information on Form 1040, Schedule 1, Additional Income and Adjustments to Income with offsetting transactions. For example, if you receive a Form 1099-K for selling your couch online for $700 you will report: Part I – Line 8z – Other Income – Form 1099-K Personal Item Sold at a Loss $700 Part II – Line 24z – Other Adjustments – Form 1099-K Personal Item Sold at a Loss $700 The net effect of these two adjustments on adjusted gross income would be $0. |
| Personal item sold at a gain | If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, etc., at a gain, your gain is taxable as a capital gain. Report your gain as explained in the Instructions for Schedule D (Form 1040).For personal items sold at a loss, follow the instructions for Personal items sold at a loss. |
| Mix of personal items sold – some at a gain and others with a loss | Your gains and losses are to be reported separately and gains for assets cannot be offset by losses from the sale of personal assets. If you sold an item you owned for personal use at a gain, see Personal items sold at a gain for information on how to report. For personal items sold at a loss, follow the instructions for Personal items sold at a loss for information on how to report. |
| Form 1099-K received in error | If you received a Form 1099-K by mistake or if the form you received has incorrect information, contact the issuer of the Form 1099-K immediately. The issuer’s name appears in the upper left corner on the form along with their phone number. If you can’t get a corrected Form 1099-K, report as follows: Same as personal assets sold at a loss except changing the description as follows: Part I – Line 8z – Other Income – Form 1099-K Received in Error Part II – Line 24z – Other Adjustments – Form 1099-K Received in Error |
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