what you should know about ebay/paypal if you don't.

I guess this would be more for new sellers or people who are considering selling but can be beneficial to all.

let's look in depth at what is REALLY going on. I tend to over analyze things and this is what I see. you sell say a baseball card for $150 dollars. you pay 10% fee ($15)...whatever. BUT...if you sell a $100 dollar bill your profit margin is really on $50 but you STILL pay $15. $10 more than you should have to. then they take 10% of shipping. then you have paypal fees. now what I learned for the first time this year is that paypal is now reporting sales to the IRS because I got a tax form from them of my reported sales. (which is fine) however, if you sell a $100 dollar bill for the $150 then they will report a $150 sale to the IRS. only issue being...is that on $100 of that you already paid your taxes on. so again the only taxable income really should be that profit margin of $50. so really sellers are getting it good.

 

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I agree that fees are very high. Be sure to figure out your cost and other basis when reporting capital gains or losses to IRS. Cost and other basis can include sales tax, shipping, etc.

 

PayPal reports how much money you got through them.

You owe taxes on how much profit you made, which means the amount you were paid, minus how much you paid for the bill, your eBay fees, your PayPal fees, your postage, and your shipping supplies -- in the case you describe, probably $25-30.

If you don't understand all this, you should put the brakes on your eBay selling until you do understand it.

 

I sold some silver I bought in 2011. I lost about $50 on the deal. Does eBay owe me $5?

There's a bunch of stuff I won't sell on eBay because I'd come out behind after fees. I'd do most of my silver selling there, instead of at the local coin show, if their fees were lower. They make their decisions about fees, and their business and profit increase and decrease accordingly. They act in their interest, and we act in ours.

 

I might suggest QuickBooks. It is simple enough that this completely tech challenged person is able to keep credible books for his company on it. You can make QuickBooks as simple or as sophisticated as you need. But as been said before, playing chicken with the IRS isn't a game for the faint hearted.

 

You are mixing up your PROFIT (which is taxed) vs. your SALES (which is what is getting reported).

Just to use random-ish numbers on a theoretical $150 sale:

$100 is the price you paid for the item with money you have been taxed on
$ 30 are things you paid in fees (ebay, paypal), shipping costs (material, fees)

PayPal reports your gross money collected of $150. However, your cost basis is $130. So your NET PROFIT is $20, and that $20 is what you/your business is to be taxed on.

This requires record keeping to support. Whether you have set up an LLC, and have an S corp etc. Tax treatment/pass through taxes etc is very important to understand if you are doing this as a business.

 

Also, depending on how much/often you sell, there's such a thing as hobby income. I don't know what the current amount is that you don't have to report, it used to be anything under $400. I haven't dabbled in ebay for a while although I've been a member since the beginning.

 

I heard several years ago that paypal only reported income over $30,000. Is that still the case?

 

You are already supposed to be reporting your sales info to the IRS on your taxes whether or not you reach the level at which Paypal sends you a form. As others have stated you need to be able to prove the cost of goods sold and your losses and gains on every item you've sold. If you can't prove the acquisition cost the IRS is going to want to tax you on the entire amount of funds received on an items transaction.

 

couple years ago I think they said 12k to need an EIN # or something like that. things are always changing.

 

I am saying selling a $100 bill for $150. if it were something I bought then that is different. but selling money I was already taxed on I pay double on the 100 I already plan on keeping an itemized list of what I sell and for how much but I mean this is getting out of control. then there is something that you can only use paypal for purchases in the future to come. something along those lines. it seems its almost getting more complicated than what is is worth.

 

i'm lucky I can find the power button without assistance lol

 

so... I would think maybe with paypal reporting sales I should be able to write off my cost? envelopes, padded envelopes, tape, 2x2, shipping labels, gas mileage? some or all?

 

Sorry, I'm not seeing it, except that you're trying to double-count taxes.

Say you earn $125, and after your various income taxes are paid, you get a $100 bill to take home. You can spend that $100 to get a coin, sell that coin on eBay for $150, and pay tax on your profit. Or you can sell the $100 bill itself on eBay for $150, and pay tax on your profit. It's the same either way.

I've seen people post extended rants about how they get paid $100, but 15% comes off for SS taxes (wrong, but never mind), 25% comes off for federal income taxes (probably wrong, but assume for argument that it's true), 10% comes off for state income taxes (sure, whatever) -- and that that "adds up" to 50% of their income gone to taxes before they even spend anything! And then when they do spend it, the recipient has to pay the same taxes from their end, so The Gummint takes 100% of that money in taxes! I don't know whether they're being intentionally deceitful, or whether they honestly believe that percentages work that way.

 

If they can have fractional banking why can't they have fractional taxing? They are going to get it in the end anyway.

 

Sure, keep track of how much you spend on all that stuff, and the amount of each you use, if you like. I decided it wasn't worth tracking, because I sell a few items per year, not a hundred per day.

Actually, gas mileage is tricky, and requires better record-keeping than most of us care to spend time doing. In fact, I'm not sure it can be deducted at all for a "hobby" undertaking. But this is probably a good time to remind everyone that I Am Not A Lawyer, and in fact my wife is the one who generally does the taxes...

 

This may not be a fruitful discussion for you and me in particular to undertake.

The main objections I have to the line of argument I mocked are:

1) It ignores deductions, which substantially reduce one's taxable income at various steps.
2) It ignores that each successive step generally taxes what's left AFTER the previous steps. You can't calculate even stacked percentages by adding; you have to multiply.

Arguments over whether current tax rates are appropriate, and whether tax money is spent wisely, will probably result in high blood pressure and a locked thread. I'd rather not.

 

Well... I started my business using a handwritten ledger book! That's how company records were kept the previous 200 years before this blasted digital revolution.... In all seriousness, I am sure it was mentioned before. You simply need a reasonable record of cost/sell/profit and a second (I would suggest separate) ledger for business costs. That's your overhead, mileage, postage, copying. That sort of thing. Those are legit deductible business expenses.

 

No they don't, but if you've kept good records and you can prove that $50 loss, you can write it off against profits made from other deals to reduce your overall taxable income and thus reduce your taxes. There may be a problem in that that $50 you mentioned is a capital loss and it may only be able to be written off against a capital gain rather than regular income. I'm not sure about that.