posted on July 27, 2004 06:53:52 PM new
What do you guys do in realtion to taxes? I reside in the state of Nevada where there is no sales tax. However what about paying Federal taxes...do you guys pay quartly?
Thanks,
RC
posted on July 27, 2004 10:59:24 PM new
You're supposed to pay quarterly.
That said, I just pay the penalty (last year it was $140) and pay at the end of the year. It is impossible for me to determine what I may or may not make over a year so I don't even try.
And, I'm in Nevada also. I believe we are supposed to collect sales tax for instate sales. But, in my 5 years on Ebay I have sold a total of 3 items to Nevada residents.
posted on July 27, 2004 11:07:06 PM new
I thought that since Ebay was so vital to reviving a sluggish economy, that all sellers were exempt from paying Federal Income Taxes.
A $75.00 solid state device will always blow first to protect a 25 cent fuse ~ Murphy's Law
posted on July 28, 2004 05:46:28 AM new
I'm in Alabama, so I pay monthly sales tax to the state (I rarely sell to anyone in the state), but she told me fed income tax was to be paid at the end of the year. Just like a "real" job (hehehe). I'm working SO much harder than I did at my "real" job, but having way more fun!
posted on July 28, 2004 10:08:57 AM newI thought that since Ebay was so vital to reviving a sluggish economy, that all sellers were exempt from paying Federal Income Taxes.
posted on July 28, 2004 10:43:36 AM new
OK. I can already see this is going to get hopelessly bogged down.
SELF-EMPLOYED PEOPLE are supposed to make quarterly Federal estimated tax payments. This covers your Federal tax obligation plus your Social Security payments.
This has NOTHING to do with sales tax!
Two different kinds of taxes, two different taxing entities.
Now.
If you have a job IN ADDITION TO selling on eBay and already have Federal (and state) income tax withholding, don't worry about it.
But if eBay is your SOLE visible means of support, better start sending in those estimated tax vouchers quarterly. The IRS will send you a year's worth of vouchers (just add money) the first time you file your 1040 and indicate you made estimated tax payments.
Lastly, make sure you understand what the schedule is for Federal estimated tax payments. It's not on a calendar year. If you started making payments this year, your first payment was due on April 15. Then June 15, September 15 and the last payment for tax year 2004 is due on January 18, 2005.
I am not a lawyer or tax accountant but I have been doing this for years and believe me, I understand it.
posted on July 28, 2004 10:43:36 AM new Why would you have to pay quarterly - what makes ebay any different?
that would only be for people make really big bucks on eBay. Many businesses pay their federal taxes on a quarterly basis.
____________________
We are not afraid to entrust the American people with unpleasant facts, foreign ideas, alien philosophies, and competitive values. For a nation that is afraid to let its people judge the truth and falsehood in an open market is a nation that is afraid of its people. -- John F. Kennedy
posted on July 28, 2004 11:25:36 AM new
No, you are required to pay your taxes, and on income without withholding that is quarterly at least. There are penalties if you wait until the fat lady sings. When I worked at the IRS opening mail, at a 'tingle table', any quarterly payment with zero cash enclosed went straight into the round file. FWIW, unless this procedure has changed in the last 25 years, a small payment would leave a record of your attempt to comply.
posted on July 28, 2004 12:37:59 PM new
I average 1,500 gross on Ebay monthly. Net about $700. I didn't pay my taxes till year end and it cost me $140 in penalties on $5800 tax bill (we have other self employment income).
They don't seem to be too upset, but they do bill you interest and penalty for not paying quarterly and do expect you to pay it.
Even if Ebay is your only source of income, anything over $400 in self employed income has to have Social Security payments. And, the really bad news is, it is double because you get to pay your portion and the employers portion. So, my FICA for last year came to around $1260(I don't have the tax return in front of me but it is 15% or maybe 15.2 or something similar) ...almost triple what it cost us in income tax for the year (on the Ebay income only)
And, even if Ebay is your ONLY source of income so you would not owe much income tax, the FICA is still due if you earn over $400 in self employment income this year
Then, of course we get into the "hobby" or "business" issue. That's another whole discussion
posted on July 28, 2004 12:45:24 PM new
Parklane: I didn't mean that one isn't required to pay taxes. But most of us do it once a year. But businesses, and many folks who make a lot of money on eBay pay their taxes quarterly instead.
____________________
We are not afraid to entrust the American people with unpleasant facts, foreign ideas, alien philosophies, and competitive values. For a nation that is afraid to let its people judge the truth and falsehood in an open market is a nation that is afraid of its people. -- John F. Kennedy
posted on July 28, 2004 01:30:39 PM new
If you sell on eBay you should be paying quarterly taxes. It is the law and it is easier than letting it build untill the end of the year.
posted on July 28, 2004 02:48:35 PM new
lindajean -- Please clarify: there is no difference between hobby and business as far as the IRS is concerned, right? It's all just money to them.
posted on July 28, 2004 03:10:18 PM new
Linda Jean when you mention you gross 1,500 on Ebay monthly.....what exactly does this entail?
Is this before paypal fees, listing fees, final value fees,...etc with a final net of $700.00? Then do you pay quarterly taxes on the $700.00?
Thanks,
RC
posted on July 28, 2004 07:36:53 PM new
Yes the 1500 is before PP, Ebay, cost of items sold etc.
No, I don't pay quarterly...but I AM SUPPOSED TO..which is why they billed me $140 in penalty last year.
As far as hobby or business goes. It is the same as far as having to pay taxes.
But, if your sales are considered a "hobby" there are no deductions such as mileage for car, home office etc allowed. To be a business you must be in business with the intent to make a profit. (You don't necessarily have to make a profit for the first few years).
I only threw that out there because the worst thing you could tell the IRS if you were audited was that you only do this as a part time hobby or not as a business.
I do have an accounting degree but have never worked in the tax field. However, I did take 3 tax courses and have done our taxes for 26 years and my husband has always been self employed.
Edited to add that a business must be a continuing operation. In other words, you can't list this week and then skip three months and then list a little more. That is what they would consider a hobby
[ edited by lindajean on Jul 28, 2004 08:11 PM ]
posted on July 28, 2004 09:07:23 PM newYou don't necessarily have to make a profit...
Actually, you don't ever have to make a profit. You just need to convince the IRS that your activity is a business. Profitability is one yardstick distinguishing a business from a hobby but not the only one.
If you are engaging in eBay selling 14 hours a day and have no outside job, trust me. They'll believe it's a business.
posted on July 28, 2004 10:28:12 PM new
Linda Jean,
Thanks for all the info, I really appreciate it. I'm taking my business to the "Next Level", which is why I'm currently educating myself as much as possible in relation to Taxes, and "Incorperating".
Sole Propreiters get killed when it comes to Taxes, so I'm definatly going to "Incorperate", and it it's allot safer from a legal standpoint...with 20 million civil lawsuits being filed here in the United States each year! However, with that being said I'm currently looking into a Company which will handle all the "Legal Stuff", and the Incorperation process for me for $905.00..is that a good deal...or should I run the other way?
You mentioned you husband is self employed is he incorperated? I'm also going to start using "Quicken"...what do you recomend? You seem like a pretty "Bright Lady", which is why I'm asking you the above. Thank You,
Ryan C
posted on July 28, 2004 10:42:13 PM new
No, we are not incorporated. We just stick with the simple schedule C.
I don't use Quicken because I don't have an accountant and don't need anything that complicated.
For me, it is simple. For Ebay, Auctionsage has a report I print up every mail day. It shows each item by amount, PP fees, s&h and buyers address. (actually, it will show anything you want, but that serves my needs).
That information and a simple spreadsheet to enter the data by day gives me everything I need. I use Endicia for postage so have a record of that expense, the report gives me my Paypal expense, Ebay gives me a monthly total for their expense and I use a weighted average inventory system to come up with cost of items sold.
I keep a small mileage record in my car where I jot down any trips that are expenses and I also enter supplies expenses on the spreadsheet as I buy them (which is always in bulk so there are very few entries there).
I only make an entry or two a day and keep my receipts in file folders by type. Then at year end all I have to do is enter a couple of items and I am done.
I know I could do it all with quicken, but this is just the way I started out doing it way way back before computers (of course, I had to do it all manually back then ) and it is just the easiest way for me to keep it organized.
Your accountant can make recommendations as to the best way to keep the records so he/she can do the taxes at year end.
As far as cost of incorporating, I really don't know what that runs. But, if that quote comes from a lawyer it sounds reasonable to me.
posted on July 29, 2004 05:33:19 PM new
I am a full time teacher and I ebay a bit on the side. By biggest year was nearly $20,000 gross on Ebay. At the end of the year, I ended up owing a $150 penalty for not doing the quarterly. Basically, if you are a big seller and you don't declare the income, you could be up the creek for tax evasion...
They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety. B. Franklin
posted on July 30, 2004 09:02:15 AM new
"Even if Ebay is your only source of income, anything over $400 in self employed income has to have Social Security payments. And, the really bad news is, it is double because you get to pay your portion and the employers portion. So, my FICA for last year came to around $1260(I don't have the tax return in front of me but it is 15% or maybe 15.2 or something similar) ...almost triple what it cost us in income tax for the year (on the Ebay income only)"
It's no wonder that so many small business's go out of business. Taxes will kill you, especially if you have to have employee's.
Seth
Many businesses pay their federal taxes on a quarterly basis.
(on the Ebay income only)