posted on December 27, 2000 07:22:40 PM new
I think he's got that backwards. Its when you use the Schedule C that you have to complete the Schedule SE for Self-Employment taxes IF you made money.
posted on December 27, 2000 07:24:09 PM new
<<DMRick, when you said this, I got confused:. >>If you are using a Schedule C, you won't have to pay self employment tax on that $1..but if you don't use the C, and you claim under misc, you will<<
Do you mean that anytime you put income under misc, you have to pay self employment tax? In the past I have used misc for stuff like garage sales or a prize I won for an essay at school. Are you saying that if you do that you are supposed to also pay self employment tax? Or only under certain guidelines? >>
No, I'm sorry..you don't have to pay SE income on such a small income..I was responding to another post,.
If you claim even a $1 under misc, you will be paying income tax on that $1..unless you have no other income..under misc, that $1 will be added to your other income, immediately, so if you are in the 15% tax bracket (most Americans), you will owe 15%. Your income is figured differently under a sch C..you will have deductions to offset..and you don't owe SE tax (income tax is owed on your profit)on the first (I believe..not taking the time to look it up..sorry, tired) $600.
Because the tax laws are written by people who don't do their own taxes. Last I read, only one member of the House Ways & Means Committee actually prepared his own tax returns.
posted on December 28, 2000 04:56:59 AM new
Vargas -
"Last I read, only one member of the House Ways & Means Committee actually prepared his own tax returns."
would it be GREAT if all government officials had to do their OWN taxes, relying only on the IRS phone help and pamphlets? Especially if it were the IRS oficials.
I'd also like to see all agencies have to fill out the paperwork they inflict on their clients completely and correctly BEFORE they get every paycheck.
posted on January 4, 2001 05:33:33 AM new
I had asked this same question at the local IRS office. they told me it was not necessary to report this income. I don't think it would be an issue unless you were making much more money. At any rate without SS#, how can they track it.
posted on January 4, 2001 06:23:15 AM new
Taxes are "so hard" because every time a flat tax is proposed, half the nation goes into hysterics because they'll lose this credit, that writeoff, those deductions.
You want "easy," use 1040EZ. Of course, you won't be able to do anything but take the standard deduction. You want those deductions, you've got to do some math.
posted on January 4, 2001 07:19:04 AM new
<<had asked this same question at the local IRS office. they told me it was not necessary to report this income. I don't think it would be an issue unless you were making much more money. At any rate without SS#, how can they track it.>>
Oh, I'd get that person to put it in writting, and sign their full name with their badge number (not that it stops you from paying the tax eventually, but it might help stop serious charges). That is so untrue. The government wants everything you earn (with exceptions to very low income people who may not have to file) to show up in their office. The government loves taxes.
It's amazing how they find out what you have earned. We recently had a crack down in our area,. where people were "working under the table"..someone reported it and the IRS followed up. Our local paper often lists names of people who are getting social service payments, who do other small jobs, such as cleaning houses, and they get their names in the paper along with (sometimes) jailtime.
The government is much harder on people who actually commit fraud (in most cases they consider it fraud to purposely not report income), than they are on people who have made mistakes..and if they determine fraud, they can go wayyyy back on your income tax records, not just the normal 5-7 years.So is it worth not giving them what is, by law due them.I think not.
posted on January 4, 2001 12:56:21 PM new
DMRick that last sentence was very informative. My experience tells me the average ebayer starts this with no clue about how to start a business. They view it as a hobby or a means to get rid of stuff they don't want. It isn't until tax time that they realize that they might owe some taxes on the money.
Everyone ask yourself five questions the answers will tell you is ebay a business with verifiable records or is ebay a profitable hobby.
1. Do you have a Journal and Ledger to document your activity. yes/no
2. Do you have a journal to document your inventory and additions/deductions to the same. yes/no
3. Without going to ebay's database do you know from your own records what you paid in listing fees/fvf's. yes/no
4. When you say what your ebay income is do you give a number before or after expenses.
5. Do you know what an income statement and balance are? yes/no
If your answers to questions 1-3, and 5, are no. Your ebay activity might be a business but you can't prove it to the IRS. Without documents of proof you are a hobby. Saves a lot of aggravation. Deduct the cost of FVF and listing fees, the cost of basic supplies, take a guess at cost to procure what you sold. Subtract those and viola misc. income, in the case of the user who started this thread. I would take a stab and say after you apply the above you have about 900.00 in misc income. AT the 28% bracket you owe $252.00 in taxes on the $900.00. Now want to reduce that for 2002. Create a set of books for your business and run it like one. Then you get all the neat deductions and depreciation etc and so on.
Everything on a Schedule C comes from your journal/General Legder. Without those you can't possibly complete a schedule C with any degree of verifiable accuracy. And without those neither can an accountant. Now it might be worth it to take all those emails, postal receipts, etc and so on and have a accountant set up some books and give you the basics on how to keep records with them. What you give the IRS in 2001 you get back in 2002. And in 2002 everything said in this post will make sense to you. Keep those for two years straight and file two Schedule C's you can start using that income to obtain credit.
Keep those records and you will have a means to track what sales and when. You can also track and predict ebay slowdowns. Most importantly you will eventually find out if ebay is worth your time as a business for profit.
posted on January 4, 2001 01:07:04 PM new
Oh yeah, I'll share the best advice I ever read in the ebay Q and A. Here it is, "If ebay is really a serious endeavor to you for profit, call your local community college and take the two Basic Accounting classes. And then follow up with the Income Tax class at the college level. Practically everything you need to learn about a basic sole-propreitorship can be learned there and you get 9 hours of college credit. What's even better you get to deduct the classes as a Hope Education Credit on your taxes so the Government in effect helps you learn how to do this right."
I followed that advice and took additional classes in finance and management. I finished the accountanting sequence and next thing I knew I had a certificate in Accounting. In between ebaying for profit I have been in school and will finish my Associates Degree in Business Management this summer. And managed to accumulate 2 years of Entreprnuial Experience while getting educated on how to do it right.
