posted on February 24, 2003 08:19:22 PM new
Taxes for me are a real headache. I buy most of my merchandise at yard sales. Some of it sells, and the rest I donate. Any suggestions on how to account for all of this?
Also, I was wondering if any ebay sellers on this board have been audited by the IRS. If so, how did it go?
I'm not a tax cheater, but I was also wondering if the IRS has access to our ebay and Paypal records.
posted on February 24, 2003 10:09:16 PM new
If audited the IRS doesn't need access to your records at eBay or Paypal- but you will. The IRS is the only place where you have to prove your innocence against their allegations.
If auditied, the IRS will know more about your common household expences and assets as compared to your claimed income than you will. They may inquire why you are spending or living a lifestlye which is more than your income can support. They will claim you have under reported X amount of income and then it is up to you to prove otherwise.
The first question to ask yourself is - Are you operating a business or hobby ?
If a business, then all reasonable and necessary expences in operating the business are deductable. Keep maticulous records and receipts. If no receipts from garage sales are available, keep a buying diary recording when, where and how much you paid for an item. Enter all records on your PC spread sheet to keep track and totals (don't forget to backup to a floppy). Figure what percentage of you PC is used as a business and deduct the depreciation for it, as well as your ISP fees, homeoffice/storage deduction, mileage for buying and to the PO, packaging supplies, and if you're deduction saavy you'll do your research and see if your eBay username/FB rating are depreciable intangible assets too,etc. You'll soon find that making the money was much easier than the tax reporting for it. Remember too that just as a profit must be reported as income, losses can bring your other income down. But you can not show a loss every year.
If you're operating as a hobby, them only the actual cost of goods sold are deductable against the price of goods sold- and if a "profit was made, it is reportable income.
