IRS Paypal Ebay...

[TheGrooveking]

Just wanted to FYI you guys if you weren't aware that ebay sales are considered income by the IRS. A good friend of mine was audited because he sold some old tools and lawn tractor stuff on ebay, in total $3K or less. Well they made him pay tax on it because he wasn't able to prove that he paid for the stuff. The tools were given to him by his dad/uncles and he had multiples, the lawn tractors were units he'd garbage pick or neighbors would give him because they didn't run.

So I suggest you guys keep detailed records of how much you paid for something, any shipping and or sales tax paid so when you sell it you can show that it wasn't free and becomes a capital gain as to say. In the audit the showed him the printouts of all of his paypal/ebay transactions so there was no arguing that he had not sold them.

Just an FYI, remember the IRS is the only government agency the FBI, CIA and NSA fear....

TheGrooveking

 

[FoMoCoPower]

Been using Ebay to report my income for the past 2 years. Technically,you need to report anything over $400.00 a year.

 

[markviii]

I think those of us who have small businesses will have more paperwork to generate in the form of 1099s. For my picture framing business, I must issue a 1099 to any vendor from whom I purchase $600 or more of goods. Those of us who sell things on Ebay and other places need to try to find our old receipts for those items we're trying to sell (we've sold some 30+ year old stereo equipment and wouldn't have a clue where to find those receipts!). Just wait until they start expecting you to send in the sales tax you should have collected on the sale!

It took the IRS 2 years to get back to me about some missing 1099 info on my 2008 return - we ended up owing $1000 for $2700 on a 1099 that we thought was part of an inheritance (well, it was, but technically it was a payout from an IRA, so taxable).

Things are just getting too complicated.

Chris

 

[srmofo]

The Fairtax

 

[gary300]

I have been an ebay power seller for several years now, and I know that many pepole sell and and never report their inclome to the IRS. I did this for a few years, but after my ebay sales started to grow to a substanstial level I got a CPA an together we got everthing legit. I don't want to lay awake each night wondering when Paypal or Ebay is going to report my sales volume to the IRS (some states are mandating this to get more revenue). Keeping it all above board, paying the federal extimated income tax, the CA BOA and having a business license to sell out of my home is worth it. Not that much expenditure as a percent of profits to have piece of mind.

 

[mcdtommy23]

Just wanted to FYI you guys if you weren't aware that ebay sales are considered income by the IRS. A good friend of mine was audited because he sold some old tools and lawn tractor stuff on ebay, in total $3K or less. Well they made him pay tax on it because he wasn't able to prove that he paid for the stuff. The tools were given to him by his dad/uncles and he had multiples, the lawn tractors were units he'd garbage pick or neighbors would give him because they didn't run.

So I suggest you guys keep detailed records of how much you paid for something, any shipping and or sales tax paid so when you sell it you can show that it wasn't free and becomes a capital gain as to say. In the audit the showed him the printouts of all of his paypal/ebay transactions so there was no arguing that he had not sold them.

Just an FYI, remember the IRS is the only government agency the FBI, CIA and NSA fear....

TheGrooveking

Wait a minute. Why does the burden rest with the taxpayers? My **** my sales period. Prove I didn't. Pay x for something x years ago. This **** really pisses me off. Tell the auditor you bought it from his mother 20 years ago for x amount cash and x amount of **** favors.

 

[gary300]

Wait a minute. Why does the burden rest with the taxpayers? My **** my sales period. Prove I didn't. Pay x for something x years ago. This **** really pisses me off. Tell the auditor you bought it from his mother 20 years ago for x amount cash and x amount of **** favors.

The thing is, now Ebay requires electronic payment (I.E. Paypal). No more personal checks or money orders. They did this mainly so that they would not lose revenue due to under the table sales between ebay sellers and buyers.

It's not right, but Ebay is still the only real game in town for serious online sellers. Yeah, I have tried Craigslist, but for serious sellers that is not an option. Either is Amazon.

 

[desert_buick]

Been using Ebay to report my income for the past 2 years. Technically,you need to report anything over $400.00 a year.

Negative. You have to "report" any and all income. The issue is whether or not you have to file a tax return.

The $400 rule is related to self-employment income. If you have $400 of S/E income you have to file a tax return, even if it's less than the sum of your personal exemptions and standard deduction (the general rule of "who must file").

Whether or not e-bay income is self-employment income depends on the level of activity. If you make a living selling on e-bay, it's probably self-employment income (unless the business is conducted through an incorporated entity) and subject to self-employment tax (15.3% of the net income) which is an additional tax on top of income tax. If all you do on e-bay is sell your 1984 Buick, it's not self employment income. Chances are, you lost money on the deal and you don't report it at all since losses on non-business assets aren't deductible. But, if you sell the 1968 138 code Chevelle you've had in the garage since it was new, you'd have to pay tax on the gain whether or not it was a business asset.

Income tax is not the only pita. An e-bay seller may be required to collect and remit sales tax, even if it's not enough activity to be self-employment income. California has a ridiculously low threshhold for how many sales makes you a "retailer" subject to sales tax reporting.

As if that isn't enough, if you buy something from out-of-state and don't pay sales tax on it, you may be subject to "use tax", and may be required to pay the tax (at least in California). I've already responded to audit notices from California "reminding" businesses that out-of-state purchases are subject to "use tax." California is desperate and is just trying to dig out the change that's dropped between the sofa cushions. I know how that feels, I've been there.

d_b, CPA

 

[Fubar]

I think those of us who have small businesses will have more paperwork to generate in the form of 1099s. For my picture framing business, I must issue a 1099 to any vendor from whom I purchase $600 or more of goods.

Chris

I've gotta little 1099 story for ya. I run a auto repair business, totally an above board legal business. One of my customers is a propane gas company. I repair their vehicles, and am payed by their company checks just like every other business I do repairs work for. Well, at the end of the year (a few years back) I get a call from their accountant (private contractor) and she wants my 04 number (Fed tax I.D. number). I ask "What for??" She replies "I'm sending you a 1099" I ask "why is that, I am a business, not a sub-contractor that would tipically get one, Plus you will be including the MA sales tax that your client payed" She replies "I'm giving you one on the labor alone for every bill you have charged out, Those get 1099s from now on". I know the definition of a sub-contractor, am I am not one. I have my own place of business, Make my own hours of business, have my own insurance, have a MA exempt sales tax number, and the vehicles are brought to me, and repairs are done on my property. We fought like hell with her, all to no avail. Even called the IRS that said it's technically legal, but not the proper way to do it.

Bottom line, she sent me a 1099 for all the labor charges anyway. The checks from the company were already reported as income, so we had to separate all that to submit the 1099 and not get double-taxed. I dropped them as customers even though the people are friends.

And just WHY was she doing this??? PAs are strictly regulated to what they can charge for their services. For every 1099, there is a separate charge. She she took the labor for EVERYBODY that did work outside of their employees and sent them 1099s for the extra charge......

 

[Fubeca]

As a part of the new healthcare legislation, there will be a change to 1099 reporting starting in 2012. In the past, 1099s only had to be issued to contractors, the new law will require 1099s for all business payments that exceed $600 to basically anyone.

This is a huge pain in the **** for small businesses. Fubar, you will be getting 1099s from all businesses that pay you more than $600 after 2011. Plus, you will have to keep track of all of your business payees, and their tax information so you can issue 1099s for each one that you pay more than $600 (non-employee). So your oil supplier, parts supplier, rent, electricity - etc. ad naseum, will need to get a 1099 at year end.

There is some talk of getting this part repealed - but I'm not holding my breath.

Stuff like this is why I never support anything that 'must pass now'. Our politicians just don't get it.

 

[gahrajmahal]

I am still fuming after reading this post, but Thanks to all who have replied. We poor working slobs can't get a break can we?

Here is my Tax related warning... (state of Ohio) At the end of each year we all have heard the message to "maximize your tax deduction" by contributing to your 401K, IRA etc. I think TurboTax even goes thru this exercise. Well last year we get audited for doing this exact thing after our CPA figures our taxes. (married couple filing jointly, working for employers) We were told to go to the bank that year and take out an additional $4000 IRA, it would lower our taxes. Since I did not like my employers plan and we had the money that year we did just that. My W2 form had a box checked that said my employer offered a retirement plan and since I didn't take advantage of that, my bank IRA couldn't be used in its place, even though it is the exact same thing. We ended up paying about $2200 in back taxes, interest and penalties.

 

[Fubeca]

Your CPA has an obligation to give you correct advice. This could be malpractice. I would be asking for him to pay the penalties and interest and to refund your fee.

If you are covered by an employer plan, you can be limited in the deductibility of a traditional IRA even if you don't participate in the plan - as you've unfortunately discovered.

 

[Tom2]

It's hard to imagine them going after a guy selling some tools and lawn mowers all for less than $3k? That's pretty scary. Theres gotta be hundreds of thousands of people who sell that much worth of **** on eBay each year, and how many save any paperwork from the transactions?

Was your buddy being audited aside from this, and that was just something that came up? Or did he just one day get a call or letter from the IRS? Does he have a high income aside from this or do anything else that would have raised suspicion?

 

[Torque1st]

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[nehog]

Well, for those who thought that that health care bill was even slightly good, I hope you see the reality now... The public has been screwed big time by the democrats, and this is one more nail in the coffin of freedom.

As soon as this act goes in to force, all my ebay listings will include a federal tax computation of about 40%, so buyers know who to blame for the much higher prices for everything.

 

[sgrammel]

The IRS = Theirs

 

[hot rod reverend]

Havent's posted on here until now, but one of the reasons I put up my garage was to give me more space to run my part-time ebay and online sales business for what else? Car parts.

when I started selling old Ford parts 4 years ago, I never thought all of my junk was worth anything. Then an old friend of mine who happened to be an accountant took a look at everything I was doing and told me that it would be much safer to report it all.

Once I figured in what it took to sell and ship stuff (like the mileage to the post office, the paypal fees, the office supplies [paper, ink, labels, tape, etc], paint supplies [for parts I cleaned up to resale], equipment cost, etc, etc, etc, all of the business expenses started adding up. Although I had sold over 10K in one year's time (no cars, mind you - just parts), in reality because of all of the expenses that it took to sell stuff on ebay or online, I had only made about 15% of my gross profit.

to date, I keep a spreadsheet on everything I do that is car related...most of the time it is all a wash, and I have reported all of my "extra" income and my business expenses.

 

[jam022316]

Freaking government. God forbid you make a little money with out them taking their chunk of it.

 

[ckucia]

If you google 1099 2012, you'll find plenty of references on the 1099 fiasco.

And it doesn't take effect until after the next presidential election - how convenient.

One article I read said there's somewhat of a silver lining because it will force compliance of another little-known IRS regulation - that businesses have to record the tax information for any vendor they interact with at the time of a transaction.

Wonder how long it will be before this is extended to individuals, as well as business. Its all just to ensure compliance doncha know...

 

[ironheadtom]

I've gotta little 1099 story for ya. I run a auto repair business, totally an above board legal business. One of my customers is a propane gas company. I repair their vehicles, and am payed by their company checks just like every other business I do repairs work for. Well, at the end of the year (a few years back) I get a call from their accountant (private contractor) and she wants my 04 number (Fed tax I.D. number). I ask "What for??" She replies "I'm sending you a 1099" I ask "why is that, I am a business, not a sub-contractor that would tipically get one, Plus you will be including the MA sales tax that your client payed" She replies "I'm giving you one on the labor alone for every bill you have charged out, Those get 1099s from now on". I know the definition of a sub-contractor, am I am not one. I have my own place of business, Make my own hours of business, have my own insurance, have a MA exempt sales tax number, and the vehicles are brought to me, and repairs are done on my property. We fought like hell with her, all to no avail. Even called the IRS that said it's technically legal, but not the proper way to do it.

Bottom line, she sent me a 1099 for all the labor charges anyway. The checks from the company were already reported as income, so we had to separate all that to submit the 1099 and not get double-taxed. I dropped them as customers even though the people are friends.

And just WHY was she doing this??? PAs are strictly regulated to what they can charge for their services. For every 1099, there is a separate charge. She she took the labor for EVERYBODY that did work outside of their employees and sent them 1099s for the extra charge......

Being a business owner in Ca (not anymore, though) I used to get 1099s from certain customers every year. I just gave them to my tax guy and he said as long as those amounts had been included in the income I claimed for the year, it wouldn't change anything so there were no worries there. I am sick of the whole ebay thing though. My same tax guy warned me years ago the feds weren't gonna leave that kind of money on the table. I've really enjoyed using CL and meeting new people and dealing in a little cash here and there like we used to.

 

[kierin]

I've gotta little 1099 story for ya. I run a auto repair business, totally an above board legal business. One of my customers is a propane gas company. I repair their vehicles, and am payed by their company checks just like every other business I do repairs work for. Well, at the end of the year (a few years back) I get a call from their accountant (private contractor) and she wants my 04 number (Fed tax I.D. number). I ask "What for??" She replies "I'm sending you a 1099" I ask "why is that, I am a business, not a sub-contractor that would tipically get one, Plus you will be including the MA sales tax that your client payed" She replies "I'm giving you one on the labor alone for every bill you have charged out, Those get 1099s from now on". I know the definition of a sub-contractor, am I am not one. I have my own place of business, Make my own hours of business, have my own insurance, have a MA exempt sales tax number, and the vehicles are brought to me, and repairs are done on my property. We fought like hell with her, all to no avail. Even called the IRS that said it's technically legal, but not the proper way to do it.

Bottom line, she sent me a 1099 for all the labor charges anyway. The checks from the company were already reported as income, so we had to separate all that to submit the 1099 and not get double-taxed. I dropped them as customers even though the people are friends.

And just WHY was she doing this??? PAs are strictly regulated to what they can charge for their services. For every 1099, there is a separate charge. She she took the labor for EVERYBODY that did work outside of their employees and sent them 1099s for the extra charge......

You should have told her that she would need to pay a processing fee to receive your tax id.

 

[Brad54]

If you google 1099 2012, you'll find plenty of references on the 1099 fiasco.

And it doesn't take effect until after the next presidential election - how convenient.

One article I read said there's somewhat of a silver lining because it will force compliance of another little-known IRS regulation - that businesses have to record the tax information for any vendor they interact with at the time of a transaction.

Wonder how long it will be before this is extended to individuals, as well as business. Its all just to ensure compliance doncha know...

So what businessmen here have a company vehicle? If you buy gas for that vehicle, do you buy more than $600 a year? If so, plan on calling every gas station you've bought gas from and getting their tax ID number so you can send them a 1099.

CNN Money did a story on this, and their example was like they were writing it directly to me. They said if you're a freelancer (which I am), and you need to buy a new computer (which I do), you will have to get the tax ID number from the Apple Store at the mall so you can send them a 1099.

This current administration is so ******* stupid I want to puke. Sending out 1099s to everyone a small business works with is going to create a huge work-load for small businesses, plus a whole lot of extra costs. Besides the envelopes, stamps and forms, we'll have to pay someone to track down all those ID numbers, and we'll have to pay our CPA even more money because they'll be doing more work and charging us accordingly.
That's food directly off my family's table.
I can't fathom what it's going to do to big businesses.
This new rule is going to jack the price of absolutely everything up.

The Democrats never understand how business works to begin with, but this is the most inexperienced President and Presidential Cabinet in the history of our country, and these kinds of burdens are what happens when you get a bunch of know-nothing ideologues in office telling business how things work.

And yeah, this is political, but so what--If Ryan doesn't think the whole 1099 deal isn't going to affect him and the running of this site, I'd guess he's going to be in for a rude awakening.

-Brad

 

[Tscott]

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Preach it brother


Tom

 

[Tom2]

The only hope we have is that because the pendulum has swung so far to the left, we can get a really big swing to the right. Remember, it took Carter to get Reagan.
I think we're already seeing this with the midterm elections.

Unfortuntely, many GOP'ers don't like the fair tax. The thousands of accounting firms, CPAs and tax groups aren't going to like it either - because it puts them out of work. And our society loves to create jobs, just for the sake of creating a job. It doesn't matter if it adds something to the economy, or leaches off of it.

Its nice to dream about the Fair Tax..but being realistic, I don't think anything is going to change the status quo. The tax code will just get longer and more complex every year. To the point where average people cannot run a business. All it does is run out the small people and only the big boys can afford enough attorneys and accountants to play ball.

 

[comedyman809]

marrying a CPA was the best thing to do for me!!!!

 

[Skyline]

As of this last year, eBay has made it very easy to figure out all your income and costs. On Paypal, you can now produce an annual summary that gives you much of what you need to produce a Schedule C. Add to this report any other expenses you have related to the business and you have everything you or your accountant will need to complete the Schedule C.

For our eBay business, we run 100% of all business expenses through a single debit card, so that's pretty easy; the twelve bank statements have all our non-eBay expeneses except inventory purchase. And we add all the receipts we get from folks when we buy tool collections. While I have a CPA that does my family returns, (and the two companies we own), the eBay income goes to our teenage son, and I do his return including the Schedule C with TurboTax Home and Business. I would say, start to finish, the whole process takes less time than it takes to run out to Staples to buy the software each year. If all you're worrid about is staying legal with eBay sales; this is not really a big deal.

I do think there is a moral issue here though. In my mind, once you start buying items (like tools), specifically to resell on eBay, you'd better be paying taxes. I just think it's wrong for the IRS to come after someone who's just clearing out the garage...or retiring as a tech and selling their tools. In this case it's very hard to establish your cost of goods sold. eBay produces a pretty clear paper trail, so you'd better be ready for the consequences...or stick to CL.