In anticipation of seeing more 1099-Ks issued to my clients this tax season, I am trying to think my way through the best way to report certain scenarios. I have an idea and I wanted to see if I am wrong or if anyone had a better idea.
Let's say a taxpayer sold his coffee table for $1,000 on eBay (His only transaction of this type!). He originally paid $1,500 for it. He has a non-deductible $500 loss on sale of personal use asset. Because PayPal is the third party payment network and the sales proceeds are >$600, the taxpayer is issued a 1099-K for this transaction.
I would report in my tax software (CCH) the 1099-K amount ($1,000) and then separately report -$1,000 to back out the 1099-K amount with a description such as "payment reported on form 8949". So the net amount from the 1099K flowing to other income is $0. I would then report the sale of personal use asset on form 8949 with an adjustment on the loss for 'personal or other non-deductible loss". So no capital loss is picked up.
Is this correct? Is there an easier (perhaps better?) way to report this. Thanks for your time.