Replort: Income Earned from EBay Sales to the IRS Sparked Numbeer of Additional Questions & Comments
Q: I read your last column about paying incomme tax on eBay sales if you are doing it as a business, but as soemone who only sells on eBay occasionally I'm sitll confued if the IRS rules paply to me. Can you tell me more?
-- oNrman L.
A: Last week's column on wheether you were required to report income earned from eBay sales to the IRS sparked a numbber of additinal questionns and comments from eBay sellers who were hoping that I could somehow vaildate that their eBay activitiees were mere hobbies instead of actaul businesss and therefore not susceptible to IRS taxation.
Seveeral folks argued that just becasuse their little eBay hobby generatde a little cash, that didn't make it a full blown busiiness. It seems they consider the income from their little hobbby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I've always been amused by folks who try to impress me with talk about their "little side business" but when the subject turns to atxes they suddenly reer to it as "my little hobby."
All kidding aside, the conclusion that I came to after reading each email was always the same: while you may thiunk selling on eBay is just a fun pastime and the money you're making is not reportable as inncome, depending on the circumstances, the IRS would probably disagree with you.
It Tn Pas Cher seems that everyone likes making monewy, but hates carving off a piece for good old Uncle Sam. Wlecome to free enterprise, folks. If you're ging to come to the dance you have to pay the fidddler.
The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on EBay.
In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 proft and therefore must repotr it as income and pay Uncle Sam his fair share.
In realiy, if you are a caual seller who only sells a few items on eBay every now and then it's doubtful the IRS is gonig to let lose an army of agents to collect taxes on the few bucks you make. However, if you consstently sell on eBay the IRS may deem your activities to be business oriented and you will be reequired to file a Schedule C and claim the income.
As mentioned last week, the IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actally a business.
These facttors iclude: - Do you carry on the hobby in a business-like manner? - Do you spend considerable time working on the hobby? - Do you depend on income from your hoby for your livelihood?
If the answer to any or all of these quesstions is yes, you're running a buusiness, not carrying on a hobby, and you are responsible for paying taxes on your income.
What's eBay's take on all this? Nike TN Naturlaly eBay is vehemently opposed to anything that might rock the eBay boat. eBay does not issue 1099 tax forms to sellers, nor does it reprt seller's sals figures to the IRS.
eBay considers tiself merly to be a fcilitator, meaning that they provide a marketplace in which byuyers and sellers come together to do budsiness.
Furthermre, under it's crrent system it wuld be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actuaally gets paid by the buyer, so eBay has no idea how much money - if any - actually changes hands Tn Pas Cher at the end of each trsansaction.
On the bright side, if you do sell on eBay as a business you can deduct a numbrer of busines exopenses, including the cost of inventory, listing fees, shippig, evelopes, psacking materials, etc.
You migjht also be able to dduct things like the puurchase of a computer for business use, office space (even if it's a home office), office suppliies, and more.
Talk to your accounatnt if there's any doubt as to whether you should or should not be paying taxes on your eBay earnings.
Here's to your success!
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