An ebay newbie needs a tax education!

harebearva

Alright everyone, please educate me. I'm a fairly new ebayer. I'm not a dealer, just a guy trying to make a buck. I'm selling about 1,000-1,500 a month and I have a limited amount of coins to sell, probably about 10,000 worth. I'm pretty sure I need to file a 1099 but is there anything special about coins and selling on ebay that I should be doing? does the irs track ebay sales? HELP!

Barndog

The answer depends on your integrity. Law requires that your income is reported to the IRS -- ebay-derived and otherwise (with some exceptions of course, but I'll let the CPAs handle that question for you).

BillJones

If you are selling from $1,000 to $2,000 a month, you are a dealer.

By law you must report your income and pay taxes on it. AND if you deliver goods within your home state, and your home state has sales taxes on coins, you should be collecting and paying them.

It's one of the sad aspects of running a business. Governments are uninvited partners who have rights to your revenues.

flashbang

There is a certain amount that you can make/sell and still do it as a private citizen. Filing a 1099 would cover that as far as taxes are concerned. I'm not sure of what that exact threshold is, but an accountant could easily provide it for you (I would suggest one in your area due to possible local or state regulations). Once you cross that amount level, you would be obligated to create a business to practice under (according to the law).

harebearva

Ok guy's Check me on this. I contacted the person that does my taxes. All of the coins I'm selling were a gift from my parents. My tax guy said that I would deduct the book value of the coin at the time of the sale from the price that the coin sold for at auction and then deduct expenses and then I pay tax on the remainder. does this sound right?

Barndog

If your tax guy is a CPA and you trust him, that is what is important.

BECOKA

<< <i>Ok guy's Check me on this. I contacted the person that does my taxes. All of the coins I'm selling were a gift from my parents. My tax guy said that I would deduct the book value of the coin at the time of the sale from the price that the coin sold for at auction and then deduct expenses and then I pay tax on the remainder. does this sound right? >>



That is correct. In addition you may notice most of the coins will sell out of state. Since this is a one year project, chances are you will not sell enough within the state to justify collecting sales tax. If by chance you sell mostly within state you may want to consider registering a business name with the board of equalization and start collecting sales tax.

BlindedByEgo

My CPA talks about things like "basis", "net profit" and "expenses". Find a tax person you trust, and do it right.

It's been in the news qiute a bit in the past year or so regarding the gubmint looking at Ebay income. My motto is to "render unto Ceasar what is Ceasars", if you know what I mean.

I don't know who you would write a 1099 to; more like what you might put on a schedule C.

Good luck!

harebearva

I'm beginning to breathe a little easier now, I thought I was gonna be into uncle sam for 30% of the value of my coins. Can anyone suggest a good or "the best" resource for determining the current value of my coins. I guess I need to know the value at the time of the auction to know whether they are selling for more or less than their current value. Currently I have the 2006 redbook.
Thanks again to everyone for all the great info.

BECOKA

<< <i>Can anyone suggest a good or "the best" resource for determining the current value of my coins. I guess I need to know the value at the time of the auction to know whether they are selling for more or less than their current value. Currently I have the 2006 redbook.
Thanks again to everyone for all the great info. >>



Your best bet for income purposes(i.e. not paying too much tax) is to use the price guide at PCGS.com. It is more of a trend pricing scheme and in many instances show some of the highest prices paid and not realistic yet but it is becoming more and more acceptable.

harebearva

all of my coins are modern proof commems , silver and gold bullion sets and proof sets. On the PCGS guide what grade would I use as all of my coins are ungrades ?

drsvenghali

Just use the don't ask, don't tell policy.

BECOKA

<< <i>all of my coins are modern proof commems , silver and gold bullion sets and proof sets. On the PCGS guide what grade would I use as all of my coins are ungrades ? >>



If they are proof there is a 90+% chance they are PR69. If they are uncerculated bullion there is a 20% chance at MS69, 40% chance at MS68 and 90+% chance they are MS65-67.

I would just use a PR69 and MS68 across the board for pricing.

solid

You should check with your tax person, but I believe that your "basis" in the coins would be the value
of the coins at the time you received them as a gift. If you sell them for a higher (or lesser) amount
at a later time, the difference would represent your gain (or loss), which should be reported in some
manner (Schedule C, capital gains, other income, etc.).

Ken

Geoman

First, I know just about nothing with regard for taxes. My wife does our taxes using Turbo Tax.

That being said, my wife told me last week that you can deduct a portion of expenses for a "hobby." Don't know if this is true or not. I assume she got that info off of Turbo Tax. However, my wife says my coin collecting is a hobby, and I may be able to deduct something. I told her not to worry about it this year. So she is submitting our taxes without anything regarding a "hobby." I also do not sell much online, or to fellow coin club members - maybe $500 a year total. So, is there a fine line between calling coin collecting a "hobby" or selling enough to be considered a part-time dealer? Maybe it is a dollar amount you need to reach? Just curious as to what others have heard about a "hobby" deduction.

kranky

<< <i> my wife told me last week that you can deduct a portion of expenses for a "hobby". >>



Never heard of that. In fact, it's practically the opposite - if you profit from your hobby, you must pay tax on the profits. If you don't profit, you can't deduct a thing.

Some people try to claim their hobby is a business in order to deduct losses, but that's an area that is well-scrutinized by the IRS. If you claim it's a business so you can deduct losses, you better be able to show you are operating a business.

relayer

I've never deducted any of my losses selling on eBay

ldhair

<< <i>but I believe that your "basis" in the coins would be the value
of the coins at the time you received them as a gift. >>


True. Current market value is of no use in figuring your basis.

Steve

Just reading this thread confirms to me that we "coin collectors", as opposed to true coin dealers who do really conduct a business and have to legally report to the IRS, do come up with many rational reasons not to have to pay taxes on dealings within the hobby. This is only natural and comes down to our own moral ethic. We know the IRS most likely will never find out about things like this. Even on EBAY, why would the IRS check a specific person out UNLESS the person has other tax problems besides an occasional profit on a cash transaction at a coin show. Bottom line to harebearva, if you want to do it right, follow your accountant's instructions. If you want to avoid paying taxes, just don't report it and 99% chance, nothing will happen. JMHO. Steve

MrBreeze

<< <i>My tax guy said that I would deduct the book value of the coin at the time of the sale >>





<< <i>You should check with your tax person, but I believe that your "basis" in the coins would be the value >>





<< <i><< but I believe that your "basis" in the coins would be the value >>



This is what my experience has been. The basis would be the value when they were purchased, as your CPA said. If they were a gift, you would not be able to use that date as the basis. The basis is still the original price your parents paid. That would be a huge loophole if everyone could gift every asset they have to their kids to avoid capital gains. Think about it for a second. If you inherited the coins and they came from the estate, you could then claim that date as your basis. But, gifting does not establish a basis for value when deducting the original "cost" from sale cost. Please note, I am not a CPA, but that has been my experience with a couple of situations I have been involved with, in the past. Still, the best idea is get a specific response from your CPA about how the law applies to your situation. Why don't you say you run a coin farm and you could get the government to actually pay you?

LindeDad

I will disagree with some of the advice above. Only use the PCGS price guide if the coins are PCGS certified. If the coins are RAW use the Red book from the year that you recieved the coins as your base value.
Keep track of each coin and the expenses involved, eBay fees, PayPal fees, end of auction fess, and shipping and handling, and if you log the hours involved, these can all be deduced from the sale price.
The big thing is keep detailed records and you will know if your making or losing money.
I have found that it is hard to make profit on ebay unless you put a lot of effort into it.

PS Extra expenses, Computer, camera, internet service.
keep thinking of more stuff.

ldhair

I stand corrected. MrBreeze is right.
I missed the gift part.
If it passes by will, your basis is market price at the time you receive it.
If gifted, your basis is the same as your parents was.