posted on January 7, 2002 04:09:19 AM new
If you are a business and have your Tin and paying sales tax have employees it is very nessary to keep good records YES.
If you are just a samll seller selling off a few itwms you no longer have need of and are not a business then no.
http://www.Dman-N-Company.com
Email [email protected]
[ edited by dman3 on Jan 7, 2002 04:10 AM ]
posted on January 7, 2002 04:16:29 AM new
As usual, more complex than you would think thanks to our gov. Several questions you must answer: What is your filing status? How much did you make on the internet? Is this a business or hobby? If hobby, the IRS writes: "Activity not for profit. You must include on your return income from an activity from which you do not expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Enter this income on line 21 of Form 1040. Deductions for expenses related to the activity are limited. They cannot total more than the income you report, and can be taken only if you itemize deductions on Schedule A (Form 1040). See Not-for-Profit Activities in chapter 1 of Publication 535, Business Expenses, for information on whether an activity is considered carried on for a profit." IF THIS IS A BUSINESS, then go to:www.irs.gov and there is a link for small business. You can order a free CD rom with all of the forms, etc that you will need. Sole proprietorships use form C. Uncle Sam will want his piece of all your sales less expenses. HOWEVER, the tax laws are different for sales tax (usually only on the items you sell in state) and state income or franchise tax. I imagine the majority of small sellers do not claim this income on their 1040s. Be sure you keep all reciepts related to selling, including postage, office supplies, and the cost of using paypal, billpoint, etc. GOOD LUCK!!!
posted on January 7, 2002 07:12:06 AM new
I was wondering if anyone would care to speculate... how long do you think it will take the IRS to get wise and force ebay to give over its records and come after all of the ebay sellers not paying income taxes?
posted on January 7, 2002 07:40:55 AM new
For most hobbiests, I would say you should probably declare your profits, and then itemize your expenses. I sell Olympic pins, I have to go to the olympics to get them, so my trip to the Olympics is deductable, as are all of my other trips... You deduct the cost of your items and the cost of your trips from the gross receipts of you sales. Usually, I am within $500 of breaking even... However, all those wonderful trips, tickets to events, so on are included. BTW, If you create a loss, you can roll that loss over to a profitable year. My advice would be to get professional help in doing your taxes, and pay the additional amount for insurance if you take the Home Office Deduction. This costs me about $350, and it has saved me thousands in deductions he has found for me. Finally, if you think the IRS is not talking to Ebay, you had better think again. I would say that if you have $10,000 in sales, you had better be very careful.
posted on January 7, 2002 07:42:01 AM new
an antique dealer with a brick and mortar store who also sells on ebay was audited.
it takes ebay months to produce his ebay records which was not much compared to his store sales.
but yes,IRS can ask ebay to produce your sales record and ebay has to comply
posted on January 7, 2002 08:57:42 AM new
I was actually thinking when the IRS will get ebay to hand over ALL sellers records, and then double check to see that ALL of the sellers are reporting the income. To do this easily, all they have to do is match up seller record with social security number. Sure, they can easily do it individually now, but I don't think it will take a genious to figure out how to match seller ID to SSN. How many people are filing at a specific address would probably match 95% of them all at once.
posted on January 7, 2002 09:05:38 AM new
it depends on what you are selling and how much you are makeing if you sold some items on ebay and you made less then $400 or $500 selling some collections of stuff you had around there is no real tax liablity here if you put this money in your saveings or interest bearing checking even the interest wouldn't amount to a taxable amount of $$.
On the other hand if your selling full time on Ebay or even part time and you are makeing a few thousand or 100 thousand its only good sense that you would keep good records even if there was little to no profit there is a great home business write off here for someone.
if you own a B&M and are offering your items on ebay it would be just wise and good business to report this income.
if your the average person who works full time and you listed a few thing you already owned didnt buy it for inventory there is no reason to treat this any different then you would if you had a garage sale in the summer or sold your bedroom set in the local news paper.
when we discussed this issue with the accountant who does our taxes we were told if ebay sales exceed $850 let them know and they will start adding a home business to our return.
as long as yearly sales stay in the $100 to $300 range according to the paper work I gave them and the costs involed there is a negitive return and it dont effect what we should pay or owe the goverment I spent $300 to sell items for $100 or $150.
another words our cost far exceed what we make to sell this make it a hobby you must have postive income 1 year in 4 years before its concidered a business and then if you go three year again with no postive income the goverment conciders it a hobby again.
and its still not concidered a business if all you sell is personal items you bought for your own use, another words you bought a DVD player and found you dont have time to use it so you sell the DVD player you bought it last year for say $200 and sold it today near new used once for $150 you actually took a loss there is no profit in fact if you have enough of this over the year it makes a great write off on personal taxes.
Anyone going out to flea markets and so on getting items to sell on Ebay are buying inventory this is a business that should be claim but the same rules will apply if there is negitive profit for 4 year the goverment says you must file this business as a hobby..
posted on January 7, 2002 09:23:24 AM new
petertdavis
For the most part as long as hugh chunks of money don't show up in your saveings or checking account that one hasn't accounted for there would Be no reason for the IRS to look into anyones ebays sales.
there are many people even running business with loads and loads of cash transaction going on even B&M business there is no way to trace or prove.
local garage who fixes cars will From time to time take on a few auto repairs on a credit bases they will fix the car replace a motor or what ever pay the guy like $50 or $60 weekly till the job is paid off the owner takes this puts the cash in there pocket no record of the income..
in fact if the IRS started knocking on every door for ever under the couter deal made it would absolutely kill the US economy dead.
in fact since there is a pretty good push on now to help people understand that income tax is not a law its done volentarily there is no law that states you must pay income tax at all there are many big companies that dont take income tax from pay checks at all these days employees must volenteer to pay them.
In fact I think you will find in the near future taxes as we know them will be far difernet I see a flat tax comeing that will cover every thing from fedral taxes to local school and land and no paper work to file yearly at all.
Actually Under the federal tax system if you could make your Ebay buying look like a gambleing loss you could use all your buying as a big ole gambleing loss write off.
posted on January 7, 2002 10:09:47 AM new
I'm sure the IRS code says one only has to pay taxes on real money received, which eliminates any U.S. citizen from paying taxes on the counterfeit stuff they produce. If you can go back one year on AW and pull up old threads you can find the full details and laws that apply in which I provided in detail.
But one can't teach an old dog new tricks...
There are other loopholes which in recent years the IRS closed because some taxpayers were getting too smart and getting off the hook.
You won't get a straight response from the IRS, a tax accountant or anyone on this board because they are either scared or are in the business, and with people posting such tax question issues with only one post under their belt one has to wonder if you're from the IRS. We know the Federal government monitors chat sites for leaks, and I wouldn't be surprised if you're with the IRS.
There is a minimum in which a person would have to pay taxes on self employment profits, not on revenue, but on profits. I believe it is $300-700, it'll say in your tax booklet.
posted on January 7, 2002 10:12:35 AM new
dman3, much of what you wrote just shows that you have serious misconceptions about tax law and the IRS. I hope you never have to deal with them. What the IRS CAN do is get your ebay sales records and declare ALL of it as income, tax you on it AND tack on stiff penalties for not declaring it in the first place. Then, it would be up to you to hire a lawyer to defend yourself against them. IMHO, the IRS are the real terrorists we should be worried about. I do my taxes as honestly as I know how, and still pray that I never get 'noticed' by them.
posted on January 7, 2002 10:22:29 AM new
oh yea, dman brought up the other point, tax paying is voluntary. A tax payer is supposed to receive a tax bill before having to pay taxes (although they closed one loophole if you are a wage earner). The IRS laughs at the word voluntary though, they just use the word to trick taxpayers into not paying so they can scam you and bill you for late fees and fines. It works great because the Tax court system is corrupt and the judges ignore laws and common sense in order to protect their hefty pensions.
Tax payers are in between a rock and hard place. But, of course the IRS has no recourse like dman said unless you did voluntare your earnings to the IRS in which case they won't audit you because they have no idea if you earned anything in the first place.
posted on January 7, 2002 10:34:00 AM new
peterdavis, I understand your fright of the Government mob, but what you read in papers is a annual scare tactic which holds very little weight in real life. The IRS mainly goes after tax evaders: those who go to great lengths to hide income i.e. secret bank accounts. Tax evaders receive jail time if caught.
On other other hand are the millions of Americans who can't understand the thousands of pages of tax code, most of which can't be understood even by the IRS themselves, or as my Congressman said to me, he can't neither. So the IRS looks for mistakes on your tax return and only corrects those mistakes or cheats to come up with deficiencies. However, contrary to what you believe, the IRS does not dig into records at ebay etc unless they suspect tax evasion. Their object as to process as many caseloads as possible and don't have the time looking for problems they don't know exists.
posted on January 7, 2002 10:43:23 AM new
I have been audited before and believe me I have claimed every penny I took in on eBay. I was audited years ago and the IRS found all kinds of income I did not claim. I can imagine how easy it would be for them to find how much money you have taken in on eBay.
I just pulled up my my eBay billing list to get the amounts from this year. All of my billing records are there since day one. That is 4 years of records that I can access in a couple of minuts. The IRS can probably get it faster than I can.
posted on January 7, 2002 10:52:24 AM new
I don't do my own taxes I pay someone to do my taxes if there is any question about my return They would have to answer questions about it all I do is supply all the numbers and papers need to make the taxes out.
This person also gaurentees to pay any taxes and penalties there might be due to there errors as long as I provide all the facts the error would be theres.
I have no misconceptions about taxes at all I ask question I get answers.
If I spend $300 in listing fees FVF packageing fees for hosting pictures fees paid to billpoint and paypal and the rest and I had got $150 in winning bids I don't have any income to claim on my taxes in fact I have a deductable.
If I Sell Personel items On Ebay thing I own myself and I make $2000 or more on them after costs I dont have a profit to claim on my taxes I have a capital gain not profit from a business home or other wise.
How ever if I purchase Inventory to see day after day Now I can claim this as a business For Three years how ever if this business can show no profit for three year the goverment say I must start fileing this business as a hobby.
I am allowed to make up to $4600 per year as I remember before I would need to pay on self employment..
Your right taxes laws do change but the more things change the more they stay the same..
We are not talking about corporate tax here we are talking personal tax and home businesses micro business were 90% of the time there is a negtive income year after year net lose not net profit..
inorder for the goverment to concider anyones home hobby to be a business of anytype it must make a profit once in four years if it fails to do so you can no longer take business deductions.
How many people here have auction sales with Profits or gains every year after there third year ???
I personally can not show that even adding my income from my wifes full time job with any out side money with a family of 6 according to the tax tables we still make minus dollars between -$1000 and -$3000 after decutable just for dependents forget any interest paid and so on.
So There is Nothing What are they going to Get how can they require payment of taxes on money I Dont make...
maybe a smaller family or a single person working full time and selling on ebay or selling full time on ebay would come out on the positive side and need to file as a business.
But WHy would someone not backwords with the IRS go out and make there tax life more confuseing then it need be ?????
posted on January 7, 2002 11:02:08 AM new
I think maybe that some people have had it so good over the late 10 years that they forget that there is families still out here who do have to manage on many time under $25,000 a year.
I dont happen to be one of them people who got a bonus check from the IRS last year there reason in the letter to us there records show we have not paid any taxes so were not intitled.
in fact we happen to be one of the many who actually get a larger refund then paid in over the year because the income we did make wasn't enoughto support a family of 6 on.
posted on January 7, 2002 11:29:38 AM new
I never said the IRS does look through ebay records. I'm speculating that they may in the future find an easy way to compare ebay sales with your tax return form to flag individual returns for audit. I don't think they would need much of a technological leap to have the ability to do it, nor do I think they lack the desire to do it, it's probably more of a question of resources and whether it has occurred to them yet.
OR, they could just make ebay start filing 1099 forms for everyone.
posted on January 7, 2002 11:35:14 AM new
Hey dman3- any taxes or penalties your tax preparer pays on your behalf is also considered taxable income to you.
Regarding who answers questions about your returns, ultimately YOU are responsible for the returns no matter who prepares them. My brother-in-law thought that because he had a "professional" tax preparer do his business and personal taxes, the tax preparer was responsible for any mistakes or taxes and penalties owed due to the preparers "mistakes". Boy did he get a rude awakening.
Unless the preparer is intentionally trying to defraud the tax payer or the IRS, the IRS doesn't give a sh*t who filled out the forms, it is the taxpayer that pays the piper.
posted on January 7, 2002 12:28:39 PM new
dman asks the question, "How many people here have auction sales with Profits or gains every year after there third year ???"
If you don't make a profit on ebay by the second week you are doing something terribly wrong.
posted on January 7, 2002 12:51:47 PM new
Well you are responcable for the papers you have to show to prove different items but the preparer is there to explain how the tax was perpard and how it was allowable and so on.
They are responcable for there errors and pay any fines and so on.
For most people in my position the tax filled out is so straight forword with no extras no itemizeing other then on state tax there is little to nothing to question there is 2 income with the staments to go with them Filed not much to question.
for fedral take we could even fill out an EZ form but because we itimize as a home owner on state taxes we use a perparer.
we have no investments to speak of and live paycheck to paycheck no real saveing inless you count haveing mony in your checking account on pay day saveing and investment.
We dont even have a single credit card pay cash for every thing but the house and the card.
if we buy a scratch off lottery ticket and win $10 in the year it means we can eat hamburger helper one more time in the month with the beef in it.
WE are told by the perparer that the $10 winning is not enough to claim not to worry just save the losers if they total a certin amout they are deductable as gambleing losses.
Been Buying sell and tradeing records tapes and music collectables for over 30 years I been sellin on ebay and yahoo for 3 years Have take all the fact figure and number with us when all was added usually it turns out I lose Between $150 to $200 in my hobby no profit or gains not claimable in anyway cant even take deductables as a home business because I can not once in 30 Year show a profit from the hobby.
The Original question here was are ebay sales taxable the Answer is no an ebay sale is not taxable profits made selling on ebay if they are over a certin amount in the year can be taxable but even that is after all valid deductables..
you can claim ebay sales as a business for three year tax laws say if there is no profit from this business after three years this must be claimed as a hobby and you can no longer have business deduction.
You must make at least $4600 before you have to even file a tax return self employed or other ways because less then this amount you become a claim on someone elses taxes usually as a dependent
SOme people who post about taxes on these boards either make far more per year then I have seen in my 40 some odd years life time or make tax paying more complcated for them selves then nessary.
IF a person is a full time seller week after week selling item you have bought wholesale sell Retail or just under retail, you go out and find inventory for a nickle and sell it for $100 and havent made a profit on ebay after two weeks you are doing something wrong.
But if you are the average seller on ebay like me for instants and you went out last year and say paid $20 for a CD or video and now are tired of it and sell this CD or video you own for $5 or $7 you have not made a profit you infact have a loss of $13 or $15 + the cost of selling the item and packageing it time and everything else it takes to make the deal.
if you happen to sell that $20 video or CD for $30 even then you only have a capital gain of $10 not a profit from a online business.
MY yearly auction sales dont even cover my online services for the year even at over $500 per year for cable access.
there is no profit at all untill you buy inventory for the purpose of resale and there is still no profit untill after you cover the costs of makeing them sales.
posted on January 7, 2002 01:48:10 PM new
dman3- "They are responcable for there errors and pay any fines and so on".
No, the taxpayer is responsible, no matter who filled out the forms. Any tax bill or penalties from the IRS will have the taxpayer's name on it, and the IRS will come after the taxpayer for payment, not the tax preparer. If you can get the tax preparer to reimburse you, well good luck.
I hope you don't have to find out the hard way who is responsible for your tax libilities.
posted on January 7, 2002 02:46:51 PM new
Yes, you are personally responsible if your tax preparer makes an error. He or she may offer to pay the fees/fines/penalties, but you still are ultimately responsible if the preparer doesn't come through. Furthermore, a preparer can be fined or penalized separately for malfeasance or gross negligence. In some cases licensed practitioners such as EAs and CPAs have lost their licenses for massive errors or outright fraud. But that's a separate issue.
Yes, of course eBay will cooperate with an official IRS investigation...as will any other company. It's highly unlikely that the run-of-the-mill eBayer has to worry much about this, but it can and does happen.
If your lifestyle doesn't match your income (i.e., you've bought a new Mercedes and a $500,000 home, yet supposedly have $20,000 a year in income), you'll be getting an inquiry from the IRS eventually.
Legitimate errors and omissions are almost never penalized. You will simply have to pay the additional taxes plus any late fees. A legitimate error might be taking a deduction to which you believe you are entitled, but you aren't, taking medical mileage at the same rate as business mileage, etc. Deliberately lying or hiding income is a different matter entirely and leaves you open to charges of fraud and tax evasion. This can involve serious financial penalties as well as possible jail time.
Are there such things as "red flags" for an audit? Of course, but that shouldn't prevent you from taking these deductions IF they are legitimate and you have the paperwork to back them up.
My husband and I are both self-employed and we take TWO in-home office deductions (both backed up with the necessary evidence). We also have very high medical expenses (also covered by the necessary paperwork). While I can't say that I would enjoy an audit, I really don't think I'm going to stay awake nights worrying about one. My deductions are proper, accurate, and backed up with proof. And if perchance one was disallowed, well, I can manage to pay the additional tax and a late fee and it wouldn't kill me.
I understand that auditors are expected to complete a standard audit meeting in 45 minutes. Unless they've uncovered something substantial at that point, they need to move on to the next case. Consequently, if you have good records (and bring ONLY those records called for in the audit notice) and don't open up other areas of inquiry by offering unasked-for information, you're pretty certain to be in and out with no substantial change in your taxes.
Another tidbit of interest...the IRS maintains a "special concentration" on certain occupational niches where it is known or strongly suspected that there are major tax leaks. Usually they pick one or two each year. Recent targets have included barbers and hairdresses, and architects. You can find out what occupations are up for this special treatment and if you're involved in one of them, take appropriate measures to back up your deductions and earnings.
To sum up, most of us are small potatoes, even if we are officially "in business." We just aren't worth the time and effort that would have to be expended to garner an additional $200 in taxes. However, if you keep poor records, take unreasonable deductions, show an impossibly low income, or in some other way come to the attention of the IRS, you will become a big enough potato to make them want to look further. So just do it right the first time, then stop worrying.
I'n neither a CPA nor an EA, but I editied one of the nation's most comprehensive tax preparation manuals for about seven years, and I work alongside an EA during tax season. Smart folks will verify anything they read on a message board with their own professional tax person, so I know you'll check this out.
