THE IRS HAS TAKEN MY TRANSACTIONS VIA PAYPAL AND IDENTIFIED THEM AS TAXABLE INCOME

Its a scam no need to declare. The Russians have infiltrated the IRS.

You probably will pay more tax on your audio sales than Bezos pays in a year!
Someone posted that same thing recently.  I can't believe the irs is hunting down private sales on used items that were already taxed once. 

Only country in the world that taxes its citizens when you live and work in another country ,

If you sold the items at a loss then there is no tax due. If it is a hobby loss then it cant be deducted but as stated you sold at a loss there is no tax due if that makes sense. If this is a business for you then the loss would be deductible. Either way you would just have to report the transactions since paypal has reported and filed the 1099. I am a cpa and would be happy to take a look at the letter and give you some advice free of charge. pm me