posted on January 3, 2003 04:24:14 PM new
I've looked at various websites online about reporting income earned from selling on ebay. All the information is vague or differs greatly. I buy at garage sales and thrift stores or use items from my own home and resell on ebay. Is there a certain amount I need to make as profit before reporting it as income? Or is every single dollar considered taxable income? Do I need to have a business license if I have to show proof of income?
posted on January 3, 2003 10:51:32 PM new
A business license is only needed in some localities. All income from whatever source is reportable to the IRS.
There is no minimum amount of income from your business to report. You can also deduct all reasonable and necessary expences from the income as a business.
If you are only a hobby, all profits are reportable, but you can only deduct the actual costs of the items sold.
posted on January 3, 2003 11:15:35 PM new
At some point, you will start to generate enough income, and incur enough expenses that you will have to make a decision as to whether you want to do this as a hobby or as a business. You may have difficulty determining when you have reached that point, but your accountant will recognize it instantly.
The light at the end of the tunnel will turn out to be an oncoming train.
posted on January 4, 2003 06:40:50 AM new
Any of you sellers use Turbo Tax? I have an accountant, but before ebay used to do all my taxes with Turbo Tax. I was debating going back to my accountant or getting the Turbo Tax home business version.
posted on January 4, 2003 06:55:46 AM new
Yes, we use TurboTax (formerly MacInTax). Helped find a number of deductions last year.
Everyone's situation is different, but if you're not treating your eBaying as a business, you're probably cheating yourself. Done correctly, your Sch C should show a significant loss that will offset taxable income.
Get a good book to help you; it's tax-deductible, too. I always recommend Bernie Kamaroff's _Small Time Operator_ but he's written some other books on often-overlooked deductions too.
posted on January 4, 2003 07:48:12 AM new
JoJos, you should contact a certified business accountant in your area. They will only charge a small amount for your initial consultation, to get you set up legitimately. They can answer all of your questions ACCURATELY and will save you alot of headache down the line.
They tell you what kind of records you'll need to keep and how to keep them in order.
I love my accountant, I have used the same accountant for 10 years...she used to work as an auditor for the IRS , so she is aware of any "red flags" the IRS is looking for. She has provided me with peace of mind and many good nights sleep!
Good Luck!
posted on January 5, 2003 12:24:32 PM new
I live in Ohio, and I purchased a Vendor's
License (transient, since I sell at some
reseller stores in other counties as well
as on eBay). This was $25.00, and for sales
I make on-line I am required to collect
7% sales tax from Ohio residents. I just
paid it out of my own pocket this last year,
but this year I've added the notice to my
auctions. The reseller stores I also sell
at collect the tax automatically. Wholesalers
and some retailers will sell you items
tax free for resale this way (ask). You can
check with your own state, as they may have
a similar system. Good luck!
---
"Cannot say. Saying, I would know. Do not
know, so cannot say". -- Zathras (Babylon 5)
An eBay seller needs to be concerned with two types of taxes, and it looks like they're about to be confused.
1) If you are a sole proprietor (and most of you eBayers are) you must report to the IRS and to your state income taxing authority (assuming you pay state income tax). In California that is the Franchise Tax Board
2) If you do business in a state that imposes sales taxes (don't laugh, Oregon doesn't), then you must concern yourself with remitting collected sales tax to the appropriate state authority. In California it is the State Board of Equalization.
posted on January 5, 2003 05:30:00 PM new
One more thing, if you are making nice profits all year and not incurring constant losses like fluffy, you are supposed to be paying estimated quarterly taxes to IRS and to your state if your state has an income tax.
If you were supposed to have paid quarterly taxes and did not, you will get a nasty penalty due and payable immediately. In other words, if you take your 2002 financial records to an accountant and you are determined to have made profits after all possible expenses are deducted, that means you were supposed to have paid estimated quarterly taxes during 2002. IRS will exact a penalty against you for not paying quarterly.
And the quarterly taxes are due at odd times, before the quarter is over, except for the 4th quarter.
Your CPA will give you estimated taxes for the year 2003 at the time he/she prepares your statements for the year 2002.
posted on January 5, 2003 05:32:26 PM new
One more thing, if you are making nice profits all year and not incurring constant losses like fluffy, you are supposed to be paying estimated quarterly taxes to IRS and to your state if your state has an income tax.
If you were supposed to have paid quarterly taxes and did not, you will get a nasty penalty due and payable immediately. In other words, if you take your 2002 financial records to an accountant and you are determined to have made profits after all possible expenses are deducted, that means you were supposed to have paid estimated quarterly taxes during 2002. IRS will exact a penalty against you for not paying quarterly.
And the quarterly taxes are due at odd times, before the quarter is over, except for the 4th quarter.
Your CPA will give you estimated taxes for the year 2003 at the time he/she prepares your statements for the year 2002.
posted on January 5, 2003 08:55:43 PM new
The "penalty" isn't really a penalty; it's just interest on the late payments. With rates so low, this might not be a lot. If you pay AFTER April 15 (even if you file an extension), that's when you can get real penalties.
posted on January 5, 2003 11:45:02 PM new
I have one question--must you pay taxes on income from a garage sale?
When you initially bought whatever items you have laying around the house, it was purchased with after-tax money, thus you already paid taxes on the money used to buy personal items.
This is the only hang up I have as I sell a lot of used clothing that was bought and worn personally.
To simplify: Do you have to pay taxes on items bought with after tax money?
posted on January 6, 2003 12:06:57 AM new
wendywins said:
I have one question--must you pay taxes on income from a garage sale? Do you have to pay taxes on items bought with after tax money?
The money is not relevant. If you resell to make a profit, then you are a business.
If you have a few garage sales a year to get rid of surplus household goods, IRS won't press you on it.
However, if you have garage sales for the specific purpose of generating an income, you need to report the sales. For example, the little town outside of which I live, one thing the police department does is watch the homes which have continual garage sales. They are looking at those who are fencing stolen property. They are looking for those who are operating a business illegally without a city license in a restricted zone. And they pass on their findings to IRS.
I read about this in the local newspaper. Residents were upset because neighbors were having a garage sale every weekend, turning their yards into a mini flea market, selling quantities of the same items, like packets of white socks, restaurant dinnerware, cds, etc. Since the police department started tracking the sales, the people fencing stolen property were hauled off to jail, those who were liquidating inventory were given a summons, and the others were given warnings.
posted on January 6, 2003 04:53:47 PM new
I never sell used items to profit. With the cost of clothing so high new, there is virtually no way to profit on them.
The way I see it is this: if I buy a top for $20 and wear it and then sell it on Ebay for $12.00, I feel I actually only paid $8.00 for it. (Not taking into account fees, etc.)
Nothing wrong with getting a bargain on something!
This is how I factor how much I will spend on my kids clothes~knowing I will get a few bucks back when I sell them! Makes the price ticket a little easier to swallow!
