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My wife and I was talking, and she brought up a good point, so I wanted to see what the rest of you who sell actively on ebay.com do.
When it comes to Ebay earnings and taxes, do you calculate that into your taxes when you file each year, as part of your income/business income, or not?
I mainly do it, to get more out of the stuff I find, then just scrapping it, and use it for extra spending money.
Doesn't really go to the business per say.
Just wanted to see what you guys do with it.
I believe this year is the year eBay starts sending out 1099's. Can't swear to that, though.
ebay sent out 1099's at the end of 2011 also. Dont worry about it unless you sell over 200 items and receive more than $10,000 thru paypal payments. If you meet those criteria you will get the 1099. I file it as a business, that way i can claim cost of goods and overhead against it.
First off its not ebay that will send you the 1099. Its paypal. Second off its $20000 and 200 transactions that trigger paypal sending you the 1099. Here is the link with all the info. https://cms.paypal.com/us/cgi-bin/ma...ng_us/IRS6050W
I believe Uncle Sam's belief is you are supposed to pay taxes on all income
even if not documented with a 1099 or W2
And I find the income is a basis to offset expenses
Internet, the 2nd & 3rd phone lines, % use of the home as the office
which allows the same % deduction of home expenses >> Electric, heat, taxes, snow plowing, grass cutting and so and so and so
Last year the IRS was not set up for the PayPal 1099 so you just entered the amount in other income
I am reporting about a 5% profit after everything is taken out. Rent is not cheap.
Interesting they have such a high threshold. I believe anything over 600 bucks triggers a 1099 in the course of normal business.
thanks everyone for your input. I decided I will add it to my business taxes.
George...How many businesses have you bought and sold and you still don't know what income is whether it be gross or net?
that is not what I was getting at. I was simply asking if anyone else treated it as taxable income and claimed it on their taxes or if they decided not to.Quote:
Originally Posted by KZBell
some people just sell on the side and use it as spending money, where others are hard core and really make it part of their business.
I personally claim everything and document every expense.
only stuff I don't claim is gifts, inheritances, etc.
You don't see big business doing that, they hide every dime they can,Quote:
Originally Posted by GeorgeB
True, but unlike them, I don't feel like heading to prison for tax fraud either.Quote:
Originally Posted by Mechanic688
Then I would pay the taxes on ALL the income you generate in order to put your mind at ease.Quote:
Originally Posted by GeorgeB
If you say you claim "everything"....like you did above....then this is part of "everything"
Hi PTS, technically, it IS eBay since they are now the parent company of PayPal after buying it in '02. That's when they started the push for you to use PayPal to receive payment for your auction items. It wasn't long before you couldn't uncheck the PayPal box in your listing. No wonder with the nice fee that comes to them (if I remember correctly 4.5% back then).Quote:
Originally Posted by PartTimeScrapper
George.....I do report my PayPal transers into my bank account. I've got eBay fees set up to be paid out of PayPal balance so that expense is already taken out before tax time.
Your right got me on a technicality. Ebay does own paypal.
Not sure if you mean you report that to or not. If not, you should, as that is a tax write off for your business.Quote:
Originally Posted by Pnutfarmer
Any expense, (gas, tools, equipment, paying customers, etc) is all taxable write offs. Going to lunch, even to MCd's is a tax write off.
Your not selling to either paypal or ebay. you are selling to the buyer of your product. Shouldnt get a 1099 until your fee's hit $600
hmmmm... paypal says this,
"Will I be affected by the 2011 tax changes if I only meet one of the thresholds?
No. A seller has to exceed both IRS thresholds ($20,000 in gross payment volume and 200 separate payments) in a calendar year before a Form 1099-K is required. We may require that you provide a tax identification number before you reach these thresholds however we will only report your payments if you exceed both thresholds."
so it would appear you have to have over $20,000 gross AND 200 separate payments. I was worried! I would hit the 200 payments, but am faaaaaar from the $20,000 gross. BUT this was for last year and who knows if it will change for this year???
Well that would only take about a month and a half for me then. The buyers are the lifeblood of my business, i offer free shipping and a 30 day full return policy to keep them happy.Quote:
Originally Posted by directrecycle
I think they will lower it to $10k and 100 transactions. There are still way too many people flying below the radar.
If you are taking PayPal for paymentQuote:
Originally Posted by jghilino
You are offering a 45 day return policy
I woudln't claim anything I didn't have to George. If you didn't hit the thresholds setup by paypal for 2012 why offer Big Brother another way to get into your back pocket? If you were a server at a restaurant and made $200 a night in tips would you claim the whole thing or the minimum allowed? Like others have said those thresholds will more than likely be lowered so take what you can Exxon Mobile style.
Quote:
Originally Posted by CTscrapman
IRS has funny ways of biting you in the butt if your not 100% careful. There is some things that you do not have to claim, but I have learned time and time again that you claim anything you can, and do a write off on anything you can as well.
When I drove truck commercially I kind of ignored my taxes for a couple of years fearing what all I would owe. I was hired as a sub-contractor and owned my own truck. I got a friendly letter from the IRS and that's when I went looking for a tax professional in my area of expertise. Long story short I did not end up paying any taxes cause as my prof. explained it,"there's a lot of grey area here".
I'm sure there's quite a bit of grey area here in this industry, just have to be smart enough to recognize it. If not you might as well just hold your billfold open for them and trust them to leave you something,,,,lol
JOKE****
Quote:
In order to simplify tax collections in the near future the
IRS will issue a new easier to use tax form.
1. How much money did you make this year? _____________
2. SEND IT IN.
If you DON'T claim everything you earn I wouldn't say that on a public forum. Big Brother is everywhere.Quote:
Originally Posted by CTscrapman
See, I'm the odd opposite to this. I had close to $40,000 in sales last year, but less than 200 payments. What I've found is that with eBay, you are much better off farming big items than small.Quote:
Originally Posted by ScrappinRed
If that is the case, then what is the point of your post and the thread??? You seem to often ask questions that you have either already decided a course of action for, or want to automatically go against the responses you receive.Quote:
Originally Posted by GeorgeB
And which is it do you claim it or not, your like a walking talking contradiction.Quote:
Originally Posted by GeorgeB
I'd speculate he does it so other people can debate and decide a course of action for themselves. This forum isn't just about helping yourself, it's about helping others if you can...Quote:
Originally Posted by Hiccup
Collins, thanks for the "speculation."Quote:
Originally Posted by GeorgeB
you cant avoid a visit from uncle sam if its due. Audit insurance is worth every penny if you are having your taxes professionally prepared.
As this relates to my "normal" profession, let me post a few things to keep in mind.
The IRS rules say - "Generally, all US citizens are liable for federal income tax on their world wide income, without regard to whether the income arose from sources within or outside the United States."
The rules further go on to define what is income - "Gross income for federal income tax purposes mean ALL income from whatever source, except for the items specifically excluded by the Code (Code Sec 61). For the excluded items, consult your tax person. All income from scrapping would be reportable, whether or not you receive a 1099. Check or cash doesn't make any difference either. It is all reportable.
On the other hand, the IRS rules also state that - "a taxpayer, may deduct from gross income the ordinary and necessary expenses of carrying on a trade or business that are paid or incurred during the year."
I tell clients that, if they need to spend the money to help you make the money then it is deductible. If you have extra help available on a weekend and you run out of gas for the cutting torch, it would be reasonable to drive 120 mile round trip to get full bottles. However, it would not be ordinary and necessary to drive from Texas to California to get gas for the torch. The thing to keep in mind is be reasonable and prudent.
How can you get caught? I have seen cases where a person purchased a new Harley with the proceeds of scrap appliances. The now ex-girlfriend called the IRS, the audit started and the guy had no defense and could not prove how he had a loss on his business and was able to pay cash for the cycle. He had to pay tax, underpayment penalty, negligence penalty, several other penalties and interest. He wasn't happy, but now brings in every cash ticket - income and expenses - to make sure he never has to suffer thru that again.
The bottom line? Report everything - income and expenses and you will never have to worry about sleeping at night or having anyone question your integrity. Don't report everything and risk the possibility of someone suspecting you and turning you into the IRS to collect a reward (and yes they have a form for that!) Also remember that not reporting all of your income is fraud. There is no statute of limitation on fraud with the IRS. They can go back as many years as they want to.
The solution? Get your business to the point that it makes a great profit for you. That will leave you with enough to pay yourself AND your taxes.
I asked to simply get everyones opinion on what they do. if you read one of my last posts in this thread, you will see where I said that.Quote:
Originally Posted by Hiccup
you see people on here all the time asking peoples opinions.
also in regards to your last statement, you obviously don't really read well. I have already clearly said that I claim EVERYTHING except for gifts and inheritances.
if you believe me to be a walking, talking, contradiction, no one says you have to read my threads.