1099-K from PayPal (tax form)

You guys pay so little personal income tax that your ever-more-European states are going to have to pull in every dollar they can from every other source. Over here in the UK I pay 25% tax on the first half of my income and 40% on the second half, about 12% on a the whole lot for mandatory National Insurance. Any active audiophile over here would set up a limited company (£80 one-off fee, done online in 20 minutes), but and sell all their kit in the company name and pay 20% tax on any profits (which will be £0.00), and charge the company loads of expenses just to make doubly sure it makes a good loss every year.  My 17 year old son has a small studio in a shed in our garden and he has his own Limited Company for this very reason. 

Even if you set up a company for the transactions from your hobby it seems to me you would have to depreciate items over a certain dollar amount. I have to do this with certain items I use in my businesse. I have no idea how this would work if you owned the stuff for several years and never depreciated them. 

I finally did my taxes. TurboTax Premier did not guide me through what do about Form 1099-K. I searched TurboTax Help, and it returned this:

How do I report a 1099-K if I don't own a business?

TurboTax says to manually add the amount in Miscellaneous Income as hobby income, but don't declare expenses there. Then go into Other Miscellaneous Income and enter your expense (e.g. original purchase price) as negative income (up to the amount in the 1099-K). The result is that you only pay income taxes on the net gain (if any) when purchasing and then reselling an item.

My conclusion is that there is no specific place to enter 1099-K amounts on the tax form. However they must be accounted for as part of the total income, so manually enter it as miscellaneous income. Separately, subtract expenses by declaring  negative income items. A bit convoluted, but it makes some sense. It would help a lot if TurboTax integrated this into their guided steps.

BTW, if you are a business, TurboTax basically says to ignore 1099-K. It is part of business income that should have been entered somewhere else on the tax form.