I ask clients but generally recommend we Other Income in/out with a description (similar to the IRS "action to take" site).  I also tell them we can leave it off entirely and reply to the notice if one gets sent, if they want to go this route I suggest we include a note filed with the return saying why we're not reporting the 1099-K (not that those actually get read, but a boy can dream, right?)

I've been doing the same as SJR (with finger's crossed).  We've had the $600 threshold in VA for a couple years now.  I put a good description in (but I'm not convinced that anyone at the IRS actually reads it).  There are some folks on other lists who are adamant about washing this through a Schedule C, I'm fairly strongly opposed to that here in VA where that will get you a nastigram from the local tax office asking for their gross receipts/business license tax money.

I've always just backed it out as a negative in Other Income (FKA Line 21), I might consider making the subtraction an adjustment for 2022 returns per the link that QBTeach sent.  

I agree that the technically correct method is Sch D personal loss limited to $0 (mostly what I've seen are ebay garage sales, selling toys or clothes the kids outgrew).  Not sure why the IRS left hand wants this reported as Other Income and the IRS right hand wants this not reported at all. <shrug>

The general consensus across various tax lists that I'm on is that the IRS computers will be wanting to match this to Sch C and send a letter if it's not there.  Maybe they'll get smarter next year?!?  Or maybe they're relying on 87,000 new employees to open the replies to all of the notices.

I completely agree with TGB, if clients get notices, I'm going to recommend they contact their Reps in Congress.  I may even draft a form letter for them to use.  IMO the $600 threshold that's never been indexed for inflation is pretty ridiculous.  Going from $20K/200 to $600/1 is a swing from one extreme to the other.  I don't know where the right answer is but to me it's clearly between the two.  $5K/50?

Rick