Dr. Friday, president of Dr. Friday’s Tax and Financial Firm, warns that selling personal items at a gain can trigger a 1099-K from the IRS. To properly report these sales, taxpayers must use either Form 8949 or Schedule D. The challenge lies in providing proof of the original cost of the item sold, as the IRS requires this information during audits. Without a receipt or other evidence of the purchase price, the cost basis will be considered zero, potentially leading to a higher tax liability on the sale.
Transcript
G’day, I’m Dr. Friday, president of Dr. Friday’s Tax and Financial Firm. To get more info, go to www.drfriday.com. This is a one minute moment.
The IRS says selling personal items at a gain can cause a 1099-K for personal items sold. There is a form, actually two forms. You can form an 8949 for sale and other disposition of capital assets, or the Schedule D when selling those. The hard part of all this is if you’re selling personal items, you need to be saving the receipt of the original cost. If you don’t have it, you don’t have a deduction. If you can’t prove how much money you paid for something that you’re selling 10, 15 years later, the cost factor is zero unless you can prove otherwise. That’s what the IRS is saying when they review audits.
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