Originally Posted by BobC
Not so sure you want to do that.
Say you get a 1099-K for $2,000, and the items you sold cost you $1,000. That means you profited and should be paying income tax on just $1,000. But if you include nothing in your return, the IRS automatically assumes the entire $2,000 reported to them is ALL taxable profit, refigures your taxes with this added income, and bills you for the difference that you didn't pay them when you originally filed your tax return. And of course they will also tack on interest and penalty charges to your tax bill as well.
And since the 1099-K is mainly for reporting transactions from the sales of goods and services, I can also see the IRS assuming this unreported income as coming from a business you run. In which case the IRS may simply assume you are self-employed, and charge you self-employment tax (social security and Medicare tax) on top of the delinquent income taxes as well. And the IRS pretty much shares info with all the states that have income taxes, so depending on where you live, you may end up hearing from your home state as well. And in some locations there can even be city income taxes involved. So there can end up being more than one letter. Lots of fun.
Depending on your situation, you could decide to report such 1099-K activity as a business, and include the reported sales on a Schedule C business reporting form in your tax return. But if you don't want to report your sales as a business, you would probably need to report each individual sale included on the 1099-K you get as a separate item sold on the appropriate Form 8949, that then ties back to Schedule D, and all gets included in your tax return as a type of capital gain or loss then. It may be more work having to list each individual sale as a capital gain/loss through Schedule D, but at least it will keep you from having to also pay self-employment tax on the income you would have otherwise reported as business income on Schedule C.
Bottom line is, you're probably better off reporting the 1099-K activity as you want it treated on your tax return up front, rather than ignoring the 1099-K and maybe having to spend even more time, effort, and money straightening things out withe IRS (and possibly others) later on.
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