The receipt of a 1099 does not make the transaction taxable or even reportable. It would be considered a "hobby loss" if you sold it for less than you paid for it and "hobby losses" can only be used to offset "hobby gains". So you don't have a taxable gain or loss assuming you have no other "hobby" transactions. Without doing research I can't say for sure if you even have to report the transaction on your Form 1040 but I can't imagine that you would. As far as the documentation/Venmo, you should not have a problem as long as you are able to document the transaction. Electronic documents are fine.

When the transaction came through on Paypal they sent me an email requesting tax info.

Starting 2022, if you receive $600 or more in payments for goods and services in a year, we and other payment services companies are required by the IRS to report your earnings and send you a 1099-K form.
Provide your tax info now to make sure your forms ready in time.

What they requested should have been your taxpayer identification number via a Form W-9 or a similar substitute form. My original reply was basically how this would impact your personal income tax liability. Which it will not. So I will now give you the canned response of "consult your tax advisor".

PayPal is going to report to the IRS that you received income.

"From what I can tell, I shouldn't be taxed on personal items sold at loss:"

This is correct.


"Paypal reduced it's threshold this year from $20k to $600 dollars on sales you must include in your income tax reports."

This is not quite correct. Paypal is going to report to the IRS any transfers they made to you in excess of $600 (cumulative for the year). However, you don't need to include this in your income tax return unless you had taxable income. If you took a loss on the bike, there is no taxable income, and you don't report it on your tax return. If you (hypothetically) purchased a fancy bike at a yard sale for $100 and sold it on ebay for $2000, you would need to report the profit as income and pay capital gains tax on it.

However, it is in your best interest to document the selling price of the bike and the purchase price. In the unlikely event you are audited, your Venmo receipt would probably be adequate to demonstrate that you took a loss on the sale of the bike.

if a 1099 is issued, the IRS will be looking for it on your return. It's one of those easy automated notices that get kicked out without human intervention.

I would put it on a sch D or C (depending on making a case for an investment) as income and an equal amount as cost basis/expense therefore no taxable income (or loss) but the 1099 gets reported.

MtnBikerChk, CPA.

Thank you for clarifying that - I'd been told that if there was no taxable income it didn't need to be on the 1040. Apparently that was incorrect.

- eb (not a CPA)