Ebay 1099-K Weird Situation

Forum|Forum|4 years ago
February 23, 2022
6 replies
23 views

So here goes. New client lives with her ex. Both people file as single. Both have income through Ebay. New client had her Ebay account closed several years ago for some issue. New client sells through her ex's Ebay account (both use same account under ex's name). How do I remedy this so new client has income and expenses through a SCH C, and ex doesn't have to claim income that's not hers?

ProSeries Professional

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T

TaxGuyBill

@Opfor77 wrote:

How do I remedy this so new client has income and expenses through a SCH C,

and ex doesn't have to claim income that's not hers?

Report the income and expenses on Schedule C. There is no need for a 1099-K, 1099-NEC, or 1099-MISC to report income.

The ex can just not report the income, and if she gets an IRS notice, respond to it explaining the situation. Or possibly report the income, then send your client a 1099 as a "nominee" to back out that income.

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Frustrated-in-IL

Level 8

I would have the ex report the income on Schedule C. Then on Part V of Schedule C I would enter that same amount with the description "Amount Properly Reportable by Taxpayer A, SSN xxx-xx-xxxx. I would also attach a Word document to the return to more fully explain what happened.

If you strongly believe that a Schedule C shouldn't be used because the ex does not have a business, then the alternative would be reporting it as other income and then subtracting the same amount on the other income line with the same description, again attaching a Word document to fully explain what happened.

The point is regardless whether you put it on Schedule C or on the other income line, the ex must report this to avoid IRS correspondence later on. I used to not get too worked up about the possibility of IRS correspondence but given it can take a year or more to resolve an issue these days, if there is the slightest thought in my mind that IRS can question something remotely unusual, I attach detailed explanations.

O

Opfor77Author

Level 5

Thank you for your input. Yes, the ex has a sch c as well. So for the new client, just input the amount under gross receipts as...Ebay income from ex, ss#...?

BobKamman

Level 15

Difficult to answer without seeing the full picture -- like, are we talking annual sales of $5,000, or $100,000? High profit margin, or low? And just because they don't want to call it a partnership, doesn't mean that you don't have one.

At any rate, you have a conflict of interest if you start giving advice to the ex. That marital partnership has already dissolved. You don't want to be subpoenaed when the fight over trying to fool eBay starts.

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