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eBay Tax Advice
gemint
Posts: 6,069 ✭✭✭✭✭
I'm sure these questions have been asked before but I can't seem to track down the thread. I've done some research and determined that one has to meet both the 200 transaction AND $20,000 in sales requirement through Paypal to meet the tax reporting threshold. My questions:
* Do all PP transactions count toward the 200 count threshold including gift payments?
* When claiming collectable revenue, I know you can deduct expenses such as postage, mileage to Post Office, etc. However, say one sells $20,000 in sportscards for a $5,000 profit but also acquired $10,000 in unsold inventory in the tax year. Does that count as $5,000 in income or a $5,000 loss? I'd assume it's the latter since the business cash flow was negative for the tax year. The $10,000 in inventory would turn into taxable income only when it's sold. Until then, it's a carrying cost.
Am I right or wrong?
Thanks.
* Do all PP transactions count toward the 200 count threshold including gift payments?
* When claiming collectable revenue, I know you can deduct expenses such as postage, mileage to Post Office, etc. However, say one sells $20,000 in sportscards for a $5,000 profit but also acquired $10,000 in unsold inventory in the tax year. Does that count as $5,000 in income or a $5,000 loss? I'd assume it's the latter since the business cash flow was negative for the tax year. The $10,000 in inventory would turn into taxable income only when it's sold. Until then, it's a carrying cost.
Am I right or wrong?
Thanks.
0
Comments
One PP-monkey said, "I dunno, but I'll call you back."
One PP-monkey said, "Gift payments will be reported as cash received."
It is likely that #2 monkey is correct, but in any event:
The gifts can simply be claimed as such, IF they were ACTUAL gifts.
Burning PP with the gift-loophole is easier than burning the Service
with false claims of "gifts."
Just keep receipts for EVERYTHING and you should be fine.
Lou Gehrig Master Set
Non-Registry Collection
Game Used Cards Collection
Starting and ending inventory is used for figuring Cost of goods sold.
Unsold inventory is just that unsold inventory.
So your 5k in profit is 5k of additional revenue on your 1040
schedule C will be used as a business added to your 1040
IE
Beginning year 10k in inventory added 20k in inventory for 30k total
Ending year inventory 10k
Cost of goods sold 20k
Sold for 30k
10k Gross profit
Collecting 1970s Topps baseball wax, rack and cello packs, as well as PCGS graded Half Cents, Large Cents, Two Cent pieces and Three Cent Silver pieces.
The reason being is a lot of what I have bought and sold this year has come off Craigslist purchases. I have been keeping track of date of purchase, name of person selling, email addy and phone number and finally what I flipped the individual purchase for.
Is there something more I should be getting for my records? I have never asked the seller to sign anything so I am not sure if I am gonna be SOL or what.
Also with the gold and silver I have sold I at least have fairly solid records of each individual item for what I paid (ebay auction records) and then what they individually sold for (ebay records). I would hope this is enough for proof to the IRS of what my little bit of profits were. Also how the hell do we claim business expenses? Dangit I need to just go see a CPA.
-Brendan
<< <i>Are there any tools available on PayPal that show you YTD totals and activity? Or are you responsible for keeping track of everything? Statements only go back 3 months. >>
From main screen select
History
Reports
Monthly sales reports
select month to view.
I am 12,166 through June
Joe
<< <i>Im curious how many of you are going to stop before meeting the threshold? Seems like a huge headache. Time for the wife and kids to open up a paypal account with separate bank accounts! >>
Was going to do that and before I could stop myself hit 800 transactions and $20K in March, so the die has been cast!! We'll see how it plays out this year. I am more concerned about Grotes answer, I have managed to push over @#@#@ Sales off Fee-bay, but still register as Paypal Gifts, I pray his answer is right and I can straight up deduct that amount off my Paypal Total !!
Neil
<< <i>
<< <i>Im curious how many of you are going to stop before meeting the threshold? Seems like a huge headache. Time for the wife and kids to open up a paypal account with separate bank accounts! >>
Was going to do that and before I could stop myself hit 800 transactions and $20K in March, so the die has been cast!! We'll see how it plays out this year. I am more concerned about Grotes answer, I have managed to push over @#@#@ Sales off Fee-bay, but still register as Paypal Gifts, I pray his answer is right and I can straight up deduct that amount off my Paypal Total !!
Neil >>
so you want to accept gifts which aren't really gifts and now avoid taxes too....and pray on it? I sleep well at night knowing I report my profits and pay taxes on them.
I am going to be meeting up with a tax advisor here hopefully in a few days to figure out in my situation what my options are going to be when it comes tax season and to make sure I have all the proper records. Going to find out if I should become incorporated or not and what options will reduce my tax liability the most. Any advice I get I will post to the boards since this is going to be new for a lot of us.
F .gov and f PayPal / feebay.
<< <i>Honestly our government is so corrupt they don't deserve to be able to tax the hell out of the minority of us who support way more bums than we should have to. Income tax was never ment to be what it is today but that is a debate for a different forum.
I am going to be meeting up with a tax advisor here hopefully in a few days to figure out in my situation what my options are going to be when it comes tax season and to make sure I have all the proper records. Going to find out if I should become incorporated or not and what options will reduce my tax liability the most. Any advice I get I will post to the boards since this is going to be new for a lot of us.
F .gov and f PayPal / feebay.
Thanks for offering to post it. I'm looking forward to seeing what their advice is.
<< <i>[
so you want to accept gifts which aren't really gifts and now avoid taxes too....and pray on it? I sleep well at night knowing I report my profits and pay taxes on them. >>
Well good for you !!!
When they tell me how I am supposed to claim the costs of items I have procured over many years and then sold this year for a small profit or a lot of the times losses, and they change the rules after the game is in play (No prior year record keeping required before), then I'll have no problem with playing fair. But then of course I am sure the Tax man with have no problem with me telling him: "I purchased that 8 years ago when the were reallly hot for $500, but in order to get something out of them I sold them this year for $150 and got paid Gift to save a little on Fees" that he'll have no problem with me deducting the loss!! SURE !!!!!!
When I can do that, then we'll talk about everything else!
Until then keep your hi horse attitude to yourself!!!
Neil
<< <i>
<< <i>[
so you want to accept gifts which aren't really gifts and now avoid taxes too....and pray on it? I sleep well at night knowing I report my profits and pay taxes on them. >>
Well good for you !!!
When they tell me how I am supposed to claim the costs of items I have procured over many years and then sold this year for a small profit or a lot of the times losses, and they change the rules after the game is in play (No prior year record keeping required before), then I'll have no problem with playing fair. But then of course I am sure the Tax man with have no problem with me telling him: "I purchased that 8 years ago when the were reallly hot for $500, but in order to get something out of them I sold them this year for $150 and got paid Gift to save a little on Fees" that he'll have no problem with me deducting the loss!! SURE !!!!!!
When I can do that, then we'll talk about everything else!
Until then keep your hi horse attitude to yourself!!!
Neil >>
did the rules change or did you just not know the rules? based on your sales volume you quote often it sounds like you are running a business. funny how when you post on making a score of non sports cards it's a nice profit. now it's tax talk and it's a small profit or a loss.
the paypal gift payments for merchandise sales you accept has nothing to do with IRS taxes......2 separate items.
<< <i>Im curious how many of you are going to stop before meeting the threshold? Seems like a huge headache. Time for the wife and kids to open up a paypal account with separate bank accounts! >>
CEO - I find that the $20k threshold really curtails my collecting. For now, I am a net buyer with sales for the year of maybe $1,000. Some day however, I will most likely need to sell my collection. The thought of the aggravation of selling it, combing through prior year sales and reporting a gain/income turns me away from card collecting. I have various items that I no longer have an interest in that I would like to sell and buy other items. It's just easier to leave them in the closet. I have a full time job and a family so I have plenty to keep me busy. Until the process is simplified (not sure how that can be accomplished), I plan to buy very little. I am sure there are others like me and it has to hurt the card market. I would not recommend opening up other accounts as that is most likely a red flag. - Kevin M.
In regards to records make sure you record every purchase, if bought on eBay you have clear records, for Craigslist I was told my records of the day I bought the items along with name, email addy and phone numbers is just fine, I don't need signed receipts since paying these people in cash.
I will be able to write off mileage for every trip I have taken to go and pickup collections via Craigslist. Also can writeoff mileage to and from the Post Office and to buy supplies for mailing stuff out. I rent my house so I can writeoff my computer room's % of monthly rent along with a % of utilities.
In regards to payments received as gifts even if PayPal doesn't list these amounts included within the 1099K be ready to prove if audited that these are legit gifts, because the IRS will dig into them and if they can prove otherwise you will regret it.
I was advised to keep a seperate bank account for any money that I withdrawl from personal accounts going forward so if later on audited the IRS can't try and use your personal accounts against you. Also I was told to starting in January that I need to start collecting state taxes on in state sales, to get a federal EIN # just in case and finally that I may want to look into starting my own LLC so that later on if for one reason or another I get sued they can't come after me personally just after what the business is worth.
If I missed something or you have questions please post them here.
-Brendan
EDIT: Inventory is another beast. You can't write that off as a loss. You carry that over to the next year as a business as mentioned above.
<< <i>
In regards to payments received as gifts even if PayPal doesn't list these amounts included within the 1099K be ready to prove if audited that these are legit gifts, because the IRS will dig into them and if they can prove otherwise you will regret it.
. >>
Morning,
Lots of questions but this one jumps out right away......What if Paypal DOES include your Gifts in the total amount sent to the IRS? If you just deduct arbitrarily that amount and claim the lower total, then it isn't going to match the reported amount and wouldn't that be a nice "Ding Ding Ding" Audit Flag ???
Neil
Collecting 1970s Topps baseball wax, rack and cello packs, as well as PCGS graded Half Cents, Large Cents, Two Cent pieces and Three Cent Silver pieces.
<< <i>Just got done seeing a tax advisor today about my eBay/PayPal sales. She first straight up advised me that claiming this as a hobby in my situation is not the best option, you pay around 28% taxes on such profits. Now if you can show you did this to make a profit you can file using a Schedule C and self employment taxes are around 15.4%. In my case I have been also selling gold and silver which gets taxed at a high rate unless I can show I was doing it to buy and resell as a business and then it is taxed at the 15.4% rate. Also since self employed you will be able to claim part of these taxes as a write off (roughly half of the self employment tax). >>
If you are buying/selling as a hobby, hobby gains are taxable as a capital gain. Hobby losses, however, are not deductible. You have to prove that you are in the activity of buying/selling collectibles for profit in order to claim the activity on Schedule C. You want this to be a for profit activity, otherwise, like I said before, the losses are not deductible.
Any gains you have on Schedule C are taxable at the appropriate bracket based on your income level, in addition to the self-employment taxes you speak of. So, you will pay your ~15% self employment taxes along with income taxes at the appropriate rate. You are correct that half of your self-employment taxes are deductible.
<< <i>...I rent my house so I can writeoff my computer room's % of monthly rent along with a % of utilities. >>
In order to claim the home office deduction, the area of the home that is used for the "for-profit" activity, needs to be used exclusively for that activity. If you use your office for personal use as well as for the business, the % of rent and utilities is not deductible.
#
Are personal payments that I receive counted in the total that will be reported to the IRS?
No. Personal payments that are not payments for the sale of goods or services will not be counted in the total to be reported. However, all payments received for the sale of goods or services will be used to calculate the gross payment volume to be reported.#
So, in essence, gift payments will count towards the 1099K threshold, but if they were truly gift or personal payments, they can be deducted from your taxable total.
Collecting 1970s Topps baseball wax, rack and cello packs, as well as PCGS graded Half Cents, Large Cents, Two Cent pieces and Three Cent Silver pieces.
<< <i>Here are a few thoughts based on your conversation with your tax person...
<< <i>Just got done seeing a tax advisor today about my eBay/PayPal sales. She first straight up advised me that claiming this as a hobby in my situation is not the best option, you pay around 28% taxes on such profits. Now if you can show you did this to make a profit you can file using a Schedule C and self employment taxes are around 15.4%. In my case I have been also selling gold and silver which gets taxed at a high rate unless I can show I was doing it to buy and resell as a business and then it is taxed at the 15.4% rate. Also since self employed you will be able to claim part of these taxes as a write off (roughly half of the self employment tax). >>
If you are buying/selling as a hobby, hobby gains are taxable as a capital gain. Hobby losses, however, are not deductible. You have to prove that you are in the activity of buying/selling collectibles for profit in order to claim the activity on Schedule C. You want this to be a for profit activity, otherwise, like I said before, the losses are not deductible.
Any gains you have on Schedule C are taxable at the appropriate bracket based on your income level, in addition to the self-employment taxes you speak of. So, you will pay your ~15% self employment taxes along with income taxes at the appropriate rate. You are correct that half of your self-employment taxes are deductible.
<< <i>...I rent my house so I can writeoff my computer room's % of monthly rent along with a % of utilities. >>
In order to claim the home office deduction, the area of the home that is used for the "for-profit" activity, needs to be used exclusively for that activity. If you use your office for personal use as well as for the business, the % of rent and utilities is not deductible. >>
My computer room was setup to use exclusively for buying and selling online for profit so this one is an easy one. Everything that I have done this year has been to make a profit so doing a schedule C is how I am proceeding. I have very detailed records of everything and I would think the IRS would be hard set to argue that someone who is a Power Seller / Top Rated Seller doing 150+ transactions a month isn't a business. Yeah capital gains taxes are more than what I am looking at paying under self employment taxes so hence this is the route I am going.
In regards to gift payments if it is something legit then as mentioned you would deduct those for tax purposes. Now later on if you do get audited, which if you have 5 figures + in gift payments that you plan to back out be prepared to prove these were indeed gifts and to be able to name names because the IRS is going to follow up on this.
Collecting 1970s Topps baseball wax, rack and cello packs, as well as PCGS graded Half Cents, Large Cents, Two Cent pieces and Three Cent Silver pieces.
The legal write offs are plentiful, need a good accountant and need to keep anal retentive records. If you keep good track you shouldn't have many worries unless your sales are in the several hundred thousand. Then there is some cake to pay.
I have had years where I have written off 100K or more. Doesn't mean I make hundreds of thousands/clear, because I haven't.
Just have to be smart around it. If cards is your main source of income, your business needs to expand into your personal life ie: Cell phone, cable, internet, office, % of rent if you have an office, marketing, advertising, mileage, acct fees, proff. fees, you can wrap up your car, put a sign on it and write off everything on that, or claim bus mileage(stay under 70% rule of thumb), supplies, Ipad, 50% for meals and entertainment pertaining to your business, I can go on an on. I would say that eating out does have tax advantages when your are self employed or taxed 1099. Play golf with clients? Entertain clients? Travel, airfare, Maybe cards doesn't have as much in write offs compared to other 1099 industries, but I assume it would.
There are a lot. For those of you in with 20K 30, 40, 50, IMO if you pay more than 10% or 15% your not tracking it right. From there it's the same thing, but you will reach higher tax brackets.
I am not an accountant, just have worked with them for years, and follow the legal write offs, just have to know them.
Take care,
"Live everyday, don't throw it away"
-Brendan