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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10099
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I sold stuff on eBay last year to try to pay off my credit

Customer Question

I sold stuff on eBay last year to try to pay off my credit card. Paypal says I made almost $28,000. It is not so, I have my statements and they total less than $17,000. They told me I have to prove it and they won't accept their own statements as proof ....and they have reported these high gross earnings to the IRS on a 1099K. Should I pay an accountant to figure this out? I am on VA disability and have no taxable income except for the eBay income. Also, what percentage does the IRS want? I have heard it is 20%.
I'm very frightened. Please advise.
Cindi xxxxx
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Hi Cindy,

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I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial & tax advice since 1986. - I can help here

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You MIGHT want to use a tax preparer BUT likely the answer here is that the 1099-K only reports INFLOWS. WHen you report this to IRS you'll use a schedule C (business income or loss) to report that GROSS income BUT will deduct the cost of the tems you sold, AND any other of the ordinary business expenses (such as computer and ISP costs, maybe a home office, etc.)

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You are taxed on PROFIT ... not that Gross income that the 1099-K reports

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The PROFIT (or loss) from the schedule C flows to line 12 of your 1040 (personal tax return) and adds to (or in the case of a loss reduces) any other taxable income that you might have.

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If you use TurboTax, or any of the other packages, and answer that you have a side business the program will ask you about all of those other expenses and generate that schedule C (ans transfer the income of loss to your 1040) for you.

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Hope this has helped … let me know if you have questions

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If this HAS helped, (and you don’t have additional questions on this), I'd really appreciate your positive rating … (by using the stars or rating request on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

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Thank you,

Lane