How to File eBay 1099-K on TurboTax

Received a Form 1099-K from eBay and feel a bit lost staring at the numbers in TurboTax? You're in the right place. That form doesn't represent your actual profit, and understanding how to report it correctly is the key to filing an accurate tax return. This guide will walk you through exactly how to report your eBay income and expenses using TurboTax, step-by-step, transforming a confusing form into a simple to-do list.

First Things First: What Exactly is Form 1099-K?

Before you jump into TurboTax, it’s important to understand what Form 1099-K, Payment Card and Third Party Network Transactions, actually shows. Think of it as an informational summary that payment processors, like eBay Managed Payments or PayPal, are required to send to both you and the IRS.

The number you see in Box 1a, "Gross amount of payment card/third party network transactions," represents the total unadjusted dollar amount of all sales transactions processed for you throughout the year. It reports your gross revenue, not your profit. This is the single most important thing to remember.

This gross figure does not account for:

• Your original cost for the items you sold (Cost of Goods Sold)
• Shipping costs you paid
• eBay fees, listing fees, or store subscription costs
• Refunds you issued to buyers
• Shipping paid by the buyer (this is included in the gross total but offset by your shipping expense)
• The cost of packing materials like boxes and tape
• Canceled orders

For years, a 1099-K was only issued if you had over $20,000 in gross payments and more than 200 transactions. A lower $600 threshold has been introduced by Congress, but the IRS has delayed its implementation. Regardless of the threshold, if you receive a 1099-K, you must report the income on your tax return. The IRS gets a copy, so ignoring it will eventually trigger a notice.

Gather Your Documents: The Prep Work That Saves Headaches

Prepping your information before you sit down with TurboTax will make the entire process smoother and more accurate. Think of it as organizing your file cabinet before you start sorting. Here’s a checklist of what you'll need alongside your 1099-K:

• Form 1099-K: This is your starting point. You can usually download it from your eBay Seller Hub.
• eBay Financial Reports: Log into your eBay account and download your financial statements or transaction reports. These detailed reports are your best friends. They help you break down the gross number on the 1099-K into sales, fees, shipping income, and refunds. This is how you'll prove the difference between what eBay reported and what your actual business income was.
• Records of Your Business Expenses: This is where you reduce your taxable income. Your goal is to gather every legitimate expense you incurred to run your eBay business. Be meticulous, because every dollar you document is a dollar less that you'll pay tax on. Common expenses include:
  • Cost of Goods Sold (COGS): What did you pay for the items you sold? This is your largest and most important deduction. Track this for every single item.
  • eBay Fees: Final value fees, insertion fees, promoted listing fees, and monthly store subscription fees.
  • Shipping Costs: The actual postage prices you paid, plus the cost of boxes, padded mailers, tape, labels, and bubble wrap.
  • Home Office Costs: If you use a specific area of your home exclusively for your eBay business (for storage, packing, and admin), you may be able to claim a home office deduction.
  • Office Supplies: Printer paper, ink, pens, and anything else used for administrative tasks.
  • Mileage: Miles driven to the post office, to source inventory from thrift stores, or to buy supplies. Keep a mileage log!
  • Software and Subscriptions: Costs for any inventory management software, accounting tools, or research services you use.
  • Phone and Internet: The percentage of your personal cell phone and home internet bill that can be attributed to your business use.

Reporting Your eBay Income in TurboTax: A Step-by-Step Walkthrough

With your documents organized, it's time to enter the information into TurboTax. For nearly all eBay sellers operating to make a profit, your eBay activity is considered a business, which means you'll report your income and expenses on a Schedule C, Profit or Loss From Business.

Step 1: Navigate to Self-Employment Income

Log in to your TurboTax account. Once you are in the "Income & Expenses" section, find the area for "Self-Employment income and expenses." When you start this section, TurboTax will ask you questions about your business, such as its name (you can use your own name) and the business address. You'll also be asked for a business code; a common choice for online sellers is 454110 (Electronic Shopping and Mail-Order Houses).

Step 2: Find and Enter Your Form 1099-K Details

Within the self-employment section, TurboTax will ask about your sources of business income. Look for an option to enter a Form 1099-K. The software has a dedicated workflow for this form.

From here, the process is simple. TurboTax presents a screen that looks like the real form. You will need to transcribe the payer's information (eBay's name, address, and TIN) and your information exactly as it appears on the form you received. The most important field is Box 1a, Gross Amount. Enter that number carefully.

Don’t be concerned if your total income skyrockets after this step. This is supposed to happen. Right now, you’ve only told TurboTax about your gross receipts. The next steps will reduce that number with your legitimate business deductions.

The Most Important Part: Reconciling Gross Income and Claiming Your Expenses

This is where you show the difference between your gross revenue and your actual, taxable profit. Your eBay reports are the key, because they contain the proof for all your adjustments and expenses.

Why Your 1099-K Doesn't Match Your Bank Deposits

Many sellers are confused because the 1099-K amount is far higher than what they actually received in their bank account. This is normal. The 1099-K is a simple, gross total. It includes money that was never yours to keep, such as sales tax eBay collected and remitted, as well as refunded amounts. You will account for these items in the expenses.

Entering Your Business Expenses in TurboTax

After you input your 1099-K income, TurboTax will guide you through entering your business expenses category by category. Here's how to map your eBay costs to TurboTax's categories:

• Cost of Goods Sold (COGS): For most resellers, this is the biggest expense. The COGS section in TurboTax will ask for your starting inventory value (if any), amount spent on purchases/inventory during the year, and your ending inventory value. The formula it uses is Starting Inventory + Purchases - Ending Inventory = COGS. Be honest and accurate with your ending inventory count; it's a critical part of the calculation.
• Commissions and Fees: This is the perfect place for your eBay fees. Tally up your final value fees, insertion fees, and store subscription costs from your eBay reports and enter the total here.
• Supplies: Enter the total you spent on shipping supplies like boxes, tape, labels, and bubble wrap.
• Shipping Costs/Postage: If you don't find a dedicated "Postage" category, you can include shipping costs with "Supplies." The critical part is to just include it somewhere. The amount buyers paid you for shipping is part of the 1099-K gross, and the actual postage costs you incurred are the offsetting expense.
• Other Common Business Expenses: This is a broad category where you can deduct many of your other costs. TurboTax allows you to create your own descriptions. Here you would list things like:
  • Mileage (make sure you use the standard mileage rate for the tax year).
  • The business-use percentage of your internet and cell phone bills.
  • Parking and tolls related to sourcing inventory.
  • Educational expenses related to your business.

Handling Special Cases: Personal Items, Hobbies, and Mistakes

Not every 1099-K fits the standard business model. Here are two frequent scenarios and how to manage them.

What If I Only Sold Personal Items at a Loss?

This is an extremely common situation, especially for people cleaning out their closets or homes. If you received a 1099-K from selling used personal belongings—like old clothes, books, or furniture—for less than you originally paid, you do not have a taxable gain. However, you can't simply ignore the 1099-K.

Because you can't deduct a loss from selling personal property, you can't use a Schedule C. The correct way to report this is on Schedule 1 (Form 1040), Additional Income and Adjustments to Income.

1. Report the 1099-K amount as "Other Income" on Schedule 1.
2. Enter a corresponding negative amount as an "Other Adjustment" on Schedule 1 with a description like “Form 1099-K Personal Items Sold at a Loss.”

This results in a net-zero effect on your taxable income, correctly reporting the transaction to the IRS without costing you any tax. Remember to keep records of your original purchase price to justify the loss if ever questioned.

Is My Selling a Hobby or a Business?

If you're selling on eBay to make a profit and are working at it with some regularity, the IRS will almost certainly consider it a business. A business can report a net loss and is liable for self-employment taxes on its net profit.

If your activity is truly a hobby (something you do mainly for pleasure, without genuine profit intent), the rules are different. You must report all income, but you can only deduct expenses up to the amount of your hobby income—you can never claim a loss. Given that you received a 1099-K, treating your activity as a business is usually the most straightforward path unless you are confident it qualifies as a hobby under the IRS's nine-factor test.

Final Thoughts

Reporting your eBay 1099-K in TurboTax is straightforward once you understand its purpose. By treating the form as your starting point for gross income and then meticulously deducting your legitimate costs like inventory, fees, and shipping, you can accurately report your net business profit and file with confidence.

Sorting out every deduction and knowing how to document unique scenarios shouldn't require spending hours searching through forums and old blog posts. We built our product for this very reason, providing accountants and tax pros with immediate, citation-backed answers on things like inventory valuation or the substantiation rules for business mileage. With Feather AI, finding authoritative guidance for complex client questions becomes as simple as asking a question.