taxes on ebay profits?

[DMRick]

Well IMO, an opinion can not be wrong, because it is only an opinion.

I know..except that sometimes when someone reads an opinion, they see it as the way something is (they don't see the "opinion" part, and I wouldn't want to steer anyone wrong : )

As I said, I think most people's opinion match yours...now if only we could get the IRS to see reason!

(Too bad about that garage sale 5 years ago, guess I accidentally got away with something there)

LOL..if the last garage sale you had was 5 years ago, then I'm betting all you sold was stuff from your closet..and I'm sure you had all your receipts to prove you sold at a loss!


What gets me, is when the IRS (big meany's!) close down lemonade stands. I saw on the AOL header they did just that again last week. We had a little kid charged with not paying taxes on income from his worm (for fishing) stand several years ago...boy did that make people mad, until they finally backed down. THe kid would have actually owed tax, because they had so much interest income from a savings account.

 

[C.Ann]

This is an interesting - although confusing thread..

Think about it.. A person such as myself - who is doing a sweep of their house to unload accumulated items from the past 35 years - is obviously not going to have receipts for those items unless it was purchased quite recently.. And if a person is selling items that THEY purchased in a garage sale years ago - used for several years - and no longer want - then again, there isn't going to be any receipt available to prove original value..

So - I guess my question is this.. Let's say I purchased an item in a garage sale 5 years ago for 50 cents.. I'm done with it now - or no longer interested in it - so I put it up on eBay for $3.00.. Several people bid on it and it ends up selling for $6.00.. (Are you following me here?) When filing taxes (remember - there's no receipt available) the "profit" would then be the difference between the listing price and the actual sale - correct?

And how could you claim deductions and expenses if you have no receipts for the items you're selling?

Trying to get this right because I for one, do not want to mess with the IRS.. They are mean, mean, MEAN!!!!

 

[Mrs. Snowgod]

My experience for 2002 tax year, using H&R Block:

Profit would be the difference between your price as documented by a receipt/invoice, etc. and your selling price. So, C.Ann, unfortunately your 6.00 high bid on your yard sale item with no receipt is technically a 6.00 profit.

Expenses would include:
ebay fees
PayPal fees
Stamps.com monthly fee (if you use it)
your shipping/packing materials
postage you pay over and above what a customer paid if miscalculated (and if you overcharge for postage, that should be added to your profit)
mileage to & from the post office, as long as you have documented it well and can also give detail on your personal use of your car, too.
Ask your tax advisor about deducting a portion of your computer, your digital camera, printer, ink cartridges, paper, etc. Too complex for the scope of this thread, but possible.

Again, a tax advisor is an expert and should be consulted for sure, but this was my recent experience.

Not to overly plug H&R block, but I love my tax person - she has given me wonderful advice and info to minimize my tax liability, and she also met with me in the middle of the year to prepare for this in advance. If you already have a relationship with a tax preparer, call him/her with these questions, and you should be able to get some simple answers up front.

There are a lot of tax advantages to having a small business, and the key is documentation. You could easily take a little notebook with you when you attend yardsales, and just ask for a handwritten receipt - even write it up yourself and have the seller sign it. Those receipts are ultimately only critical if you are audited, but they give you protection and piece of mind, as well as a hard copy record if your computer ever crashes and you lose all your spreadsheets!

 

[DMRick]

When filing taxes (remember - there's no receipt available) the "profit" would then be the difference between the listing price and the actual sale - correct?

No. The listing price has no play in this.

The government deals only in receipts. If you have no receipt the profit is the entire amount you sold something for. If you have a reciept, you would just take off what you paid for it (but only if filling out a schedule C) and that's your profit..in most garage sales, that's a loss..which of course the government doesn't allow you to take. It's a one way street.

If you do have a receipt, the profit would be the entire amount again...UNLESS you fill out a schedule C, which has places to remove the cost, the fees, etc.

Before eBay, this was seldom a problem (except for the person who made a business out of garages sales). The IRS seldom said a thing, since they figured you are just getting rid of stuff you paid much more for...they could have asked for receipts, but they just didn't...prob didn't want to face the wrath of a nation.

Along comes eBay and online stores, etc, and the IRS sees that people are making a business out of selling old stuff. Will the IRS bother you if they see that you are prob selling your closet stuff (by that, I mean not a lot of multiples of the same thing - what's the chances you have 10 identical toasters in your house..well you prob do CAnn LOL..but most people don't), old clothes, toys, etc)? Prob not. Can I tell my tax clients not to worry about it because the IRS will not bother them? No..because legally, you owe income tax on the profit..and if you don't have a receipt, the profit could be a lot (although almost always on a thread like this, someone will pop in and say their accountant said not to worry about it..of course he wouldn't get in any trouble..just you would). And if you have a recipt, you are suppose to fill out a schedule C or claim the toal as misc income. You really have to do what you feel comfortable with...and take notice I'm not telling you what I would do about income tax on the items from my own attic...since some stuff isn't good to share on a public board.

By the way, I always suggest you go to an accountant the first year, so he can set up your computer depreciation, other depreciations, office in home (and no it's not a red flag if you really have one), and show you what expenses are deductible (gas, postage, ink for printing out auctions, part of your internet cable..all if you use it just for ebay, etc).

 

[DMRick]

Not to overly plug H&R block, but I love my tax person

That's who trained me and I worked for for several years (as well as some community college courses)..but please go to a business H & R Block..there are a lot of first year, and not so savy Block preparers at neighborhood offices. It's also good to find one who is familiar with eBay, so they know about Paypal fees, eBay fees, etc. Also, you often can get a lower price by going to an accountant.
It's good to hear you had a great Block preparer (not my favorite place because of how they forced us to charge for each and every form, even some you may not need, and how they pushed the rapid refund to many poor people)..there are some of those out there : )
Once you go one year, redo your own taxes on Turbo tax (if you are up to doing your own), and see how you do..then you can do your own in subsequant years.

 

[Mrs. Snowgod]

It's good to hear you had a great Block preparer (not my favorite place because of how they forced us to charge for each and every form, even some you may not need, and how they pushed the rapid refund to many poor people)..there are some of those out there : )

Wow, I guess I'm lucky. She did emphasize the distinction between the regular H&R Block and H&R Block "Premium" (of which I go to the latter). And she was very sensitive to the number of forms, making sure I understood up front how they charge. This particular person has an "EA" designation on her business card and her title is "Master Tax Advisor". Is that as special as it sounds, DMRick?

 

[C.Ann]

Well thank you all - for confusing me even further - LOL !!!!!

I don't have any receipts for anything - period.. I've had the stuff for years..

So - do I file the schedule C or not? And can I still claim expenses (eBay fees, supplies, etc.) if I have NO receipts for anything I'm selling but I DO file the schedule C?

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I think I'll go back to bed now.................................

 

[DMRick]

This particular person has an "EA" designation on her business card and her title is "Master Tax Advisor". Is that as special as it sounds,

Yes it is : )
As an Enrolled Agent, she can go in front of the IRS for you..and believe me she is very smart! You picked good!!

 

[DMRick]

So - do I file the schedule C or not? And can I still claim expenses (eBay fees, supplies, etc.) if I have NO receipts for anything I'm selling but I DO file the schedule C?

You have to decide if you are going to claim income tax on your stuff : )

As far as a schedule C..if you are claiming it..I would go that way. Of course once you see how little your really made, after you take off all the great deductions, it can be a little depressing LOL! It will show your profit as less than you thought...but if you are using one room for eBay, you get to take off lots and lots of stuff (legally) that you would have had to have anyway (part of your property taxes, phone bill, heat and lights, etc, as well as part of your computer, camera (or all if you use it just for ebay)..just keep records of hours the stuff is being used and percentage of it for eBaying.

 

[C.Ann]

Originally posted by DMRick
You have to decide if you are going to claim income tax on your stuff : )

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Well - yes - I'm going to claim it one way or the other.. (Like I said, I don't want to mess with those mean IRS people!) but I didn't know if I would have to claim it under "miscellaneous income" (because I don't have receipts) or if I could still file the schedule C..
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Yep - I'm going back to bed................................ LOL

 

[DMRick]

night LOL!

Let me know if you need my addy to stop by for the garage sale. Although I don't think I have anything you'd want LOL! I expect to hear some people actually say..gee whiz, these are eBay prices, because I intend to put stuff out meant for eBay, just in case someone wanted to save on shipping!!