I received a 1099-K form from Paypal. I purchased some furniture and returned it. 1099-K stating I made money, which I did not. How is this reported

Yes, you will need to enter the 1099-K as the IRS will  be expecting it as part of your income.  However, after you enter the 1099-K, you will just back the income out since you did not actually make any money.

To enter the 1099-K and then back it the amount (all of it) that was not income, here are the steps in TurboTax Online:

1. Within your tax return, navigate to Federal > Wages & Income > Other Common Income > Form 1099-K
2. Choose Add a 1099-K
3. Enter the information from the 1099-K
4. Check the box that says, This amount in box 1a is too high or includes some personal transactions
5. Enter the amount that should not be included.