1099-K comingles revenue from my business and my household incidentals - AUDIT FEAR

[swbca]

My business records used to complete my 1040 do not include the occasional sale of incidental personal items on ebay.

My main business generates 1099 income as a consultant, but I have a $40,000 side business selling product that shows up on the PayPal 1099-k.  I also occassionally sell some household item that gets added to the 1099-K.   

How do I report the incidentals to avoid audit risk ?    When I sold my 25 year old SLR camera for $100, this doen't show up in my business record so that adds to the 1099-K discrepensy.   What if I sell a personal vehicle on ebay motors for $5000 and paid through PayPal.   I doubt if I can show this a loss since my cost was 12,000.

How do I avoid audit risk with PayPal revenue that's not in anyway "profit" if cost basis was considered ?.   

[DPCreations]

There probably isn't a way to reduce risk of audits and penaltiies.

You will need to be consistent with your IRS Schedule C revenu and all reported revenue for that business.  It starts with how your PayPal account is defined.  Is is linked to yoru SS number or a Federal ID number?  All funds received into the PayPal and reported on the 1099K WILL be reported to the IRS as that value;  you can's separate the origins after the fact.

Even though you don't report the specific 1099K value on your schedule C, the IRS will have it for reference.  If your total reported revenue on your Schedule C is LESS than the value reported to the IRS on the 1099K, there will be a serious descepancy.  I think you'll be OK AS LONG AS your total revenue reported on Schedule C is higher than the revenue reported on the 1099K.  In future, I hink you'll need to find a way to separate the funds on PayPal or make sure they are all your private sales are reported on your Schedule C.  For now the best solution may be report ALL of your private sales as business revenue rather than "off the table" revenue.

As for the vehicle, you can't use your original cost as the basis for sale; you would need to determine the depeciated value at the time you sold it.  However, since it wasn't purchased as a business item, I don't think that would be a good way as it may create more scrutiny.

Perhaps you should consult a busienss tax specialist for the best solution.

[swbca]

When I downloaded the PayPal 1099-K,   it only showed the last 4 digits of my SS.  Also my name on the form was a Nick Name I use rather than my legal name, such as Tom instead of Thomas.

Is the 1099-K.  pdf document I downloaded the same one they send to the IRS, because it does not really identify me. 

Thank You for your reply.

[DPCreations]

I suspect that the reason the pdf file only shows the last for digits of the SS is for security puposes; if you provided you full SS number when registering on PayPa, that's the number that PayPall would use when submitting to the IRS in the required IRS format.  The real name should be used for PayPal records rather than a nick name since registering on PayPal is an official financial registration.  In the end, the SS number is what matters most and the 1099K total needs to be included in your total business revenue.

[swbca]

I don't want to pay income tax on the sale of personal property that I sold for less than the original purchase price paid several years earlier.   How do offset the 1099-k reporting of the sale price of old personal property when filing my taxes.

[DPCreations]

I don't think you can do any offsets.  You could record those sales as business sales, but I don't think that is realistic.  If it's on a 1099K it will need to be included and/or explained on IRS forms

Even if all of the 1099K revenue was for personal items, it would still need explaining and justification as non-reportable income.

The best way to keep personal moneh separate is to not allow it on an account which becomes reportable--CASH.

A tax accountant is probably your best source of advice and may be worth the price.