eBay and Taxes. Where to Begin?

I know you are required to submit income to the IRS. My question is where do you even begin with eBay sales? What is the best method you have found in doing this?




Thank you in advanced for your answers and opinions.

 

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I've thought about this too, and I am always left scratching my head. It's easy if you buy one coin for $10 and sell it for $20. The profit you should report to the IRS is $10.

But what if you buy a pile of coins and you only sell a few of them and keep the rest?

 

That would be true but you have to account for eBay final value fees, listing fees, PayPal fees, shipping charges and so on. Meaning if you bought a coin for $10 and sold if for $20 you're profit is $5.73. Unless on the other hand you have an eBay store or Top-Rated Seller status. Then again..Will the IRS even know what I am talking about. LOL

 

Check with the IRS is your best option, not strangers on the internet. If someone told you the wrong info and then you get penalized, you're gonna go and blame CT members and that's not cool.

Without looking it up, it likely depends on how much you made from your sales. If it's like what you'd make at your yearly garage sale and you sell a lump of items once a year, they likely won't care. If the sales are actually what you do as your primary means of income, they're gonna want you to claim such income.

 

Who needs expensive attorneys and CPAs? When I need legal and tax advice, I always go to internet forums.

 

The reason I am asking people on forums is I have spoken with 4 different accountants and have gotten 4 different answers. I was hoping someone who had sold large amounts of items on eBay in the past would have some advice. I won't hold them accountable for their advice just as anyone on this wonderful forum doesn't hold its members to their opinions. Instead of me talking with people who have never even used eBay and don't have the slightest clue in what I am saying. I would ask coin collectors and dealers in the hopes that someone who has done it successfully in the past without getting audited would have better advice. I appreciate your concern though.

 

Whether you are selling on e-bay or face-to-face, it is important to keep track of what you paid for a coin and what you sold that coin for (along with any fees paid to eBay or PP or elsewhere). That way you can calculate your profit (profit=price-cost-fees), which becomes income to report to the IRS. It is just that simple, but requires detailed bookkeeping -- no way around it. I use a simple spreadsheet, but then again I only have sold a handful of coins.

 

True. But how do you prove it, how do you show it, how do log it, how do you submit it.

 

These are all questions I have asked and gotten different answers.

 

Proof is in receipts. I log it in a spreadsheet and do the calculations there. I submit it using the IRS form.

I am surprised accountants have given you conflicting information -- this is a common question and the answer should be very standard. Keep your receipts, calculate your profit after subtracting costs, and claim the income.

 

Not trying to give any advice, but if you are selling on ebay or anywhere else You have to keep track of total sales, costs, shipping, fees. Then file just like any other sole proprietor as a small business. Starting this year, the federal Schedule C will have a line specifically for payments from online third party payments. aka paypal. Any tax preparer should be able to file for you, but only with the information you provide. Oh and you will be the one responsible for keeping the receipts to prove what you have on the form. Document, document, document. Then hope it's enough if the IRS decides to check up on you.

 

What if you don't have a single receipt of anything that you bought? (I had no idea it would grow as it did)

Accountants are giving me conflicting information on things like documentation, business licenses, and how to go about doing it.

 

The bottom line is that anytime you make a profit doing just about anything, it will be taxed. Here is a good article:

http://www.nytimes.com/2008/02/10/business/yourtaxes/10ebay.html?_r=0

 

eBay is required to report sales where you meet BOTH of the following criteria: 200 transactions during 2012 AND $20,000 or more in sales, even if you have multiple i.d.s. All transactions and sales roll up under your social security number. If you don't meet that criteria, I wouldn't worry about it too much. If you do meet that criteria, you must be able to show your total cost vs. your total net. Where things would get hairy is where you are selling your own, personal collection that you accumulated over many years. What makes matters worse is if you are doing a combination of selling coins for profit and selling your personal collection.

https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W

 

That's my problem. The majority of what I sold was a collection I collected for 10 years. Then a collection I inherited/bought from a friend. (I bought the other half of the inheritance at the market price way back when.) Then Joplin MO tornado of May 22nd, 2011. Followed by a pregnant wife. So thus I decided to clean house to take care of her and start rebuilding my life. When it comes to paperwork and documentation.... I poured a gallon of water out of my computer tower...my screen was smashed in my back yard. The "famous shoebox" with all the papers was no where to be found. The documents I did manage to salvage got put into storage and grew a forest due to the moisture. Whoever said it stops raining before a tornado comes should be shot. It rained the whole time.

 

This really should be basic stuff for any CPA that works tax returns. Your CPAs may be looking at different ways to file the income. At some point the IRS calls it a business and not a hobby. IRS.gov is a cool site. Look for the instructions for form 1040 and find Hobby tax. It might help a bit.

 

You can try subscribing to ebay's sales reports. I think they will generate reports to at least document the fees you paid over the last year. Now that you know, I would recommend starting to save them from now on.

 

I have all the documentation from eBay regarding sale price, fees, and shipping charges. I just have no idea how to document it, or prove what I have in the item. I keep all that stuff now just don't have proof of anything pre 2012 due to the EF5 tornado that ripped up 12 miles of my hometown and my house. (Which is the majority of the things I have sold this year)

 

If I go to a Flea Market and set up between a few shows that I do..I provide a receipt if it is just a penny purchased..Try to put persons name on it..But most of the time the response is I don't need a receipt..So Just put cash sale down for purchase..But I keep a inventory of all coins and purchase cost..Keep all expense cost gas to get there and home cost of table Everything..If you just keep in your personal collection and don't sale you just show receipt for purchase and hang onto it..They can't tax you on what you don't sale and make a profit..Don't know about your state but most you don't pay personal properity taxes on coins..Now some states charge sales tax on coin purchases a lot of them don't you just need to know what your state requirements are Here as in Fla, Tn. and some others you have to have sales tax number business lic just to set up for a two day flea market Tn. is so much a day for lic and sales tax number and you pay the piper....LJ

 

And they are taxed differently

If you have no hard records just estimate it the best you can. If they question it you have a pretty good excuse if you were hit by the Joplin tornado and believe it or not the IRS will be somewhat understanding of that (As long as you really were hit by the tornado.) Especially if they can see that you have been keeping records since that time. It shows good faith and that you are trying to abide by the rules.