Selling,eBay,Just,Hobby,Real,B DIY Is Selling On eBay Just A Hobby Or A Real Business?
When starting a new work at home business it is very easy to become consumed by it. We spend so much time trying to get the business up and running that we may end up becoming burned out and lose our motivation. There is so much to learn and Normal 0 false false false MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable{mso-style-name:"Table Normal";mso-tstyle-rowband-size:0;mso-tstyle-colband-size:0;mso-style-noshow:yes;mso-style-parent:"";mso-padding-alt:0in
Small Business Q&A with Tim KnoxQ: I made extra money selling things on eBay last year. These were items I picked up at yardsales mostly. My husband says I am responsible for paying income tax on the money I made, but I disagree. This is just my hobby, not a business. What do you think? -- Gladys A.A: With so many people selling on eBay these days this is a question I get all the time. To many eBay sellers the thought ofrunning an actual business is about as appealing as gettingnegative feedback, so they go out of their way to convincethemselves that selling on eBay is really "just a hobby" andtherefore, should not be susceptible to income tax laws. While you might think selling on eBay is just a hobby and theextra money you're making is not reportable as income, dependingon the circumstances, the IRS just might disagree with you. The IRS rules are clear: you must pay taxes on all personal andbusiness income and that includes money you make selling on eBay.In its most basic sense, the IRS rules mean that if you buy avase at a garage sale for $10 and sell it on eBay (or elsewhere)for $20 you made a $10 profit and therefore must report it asincome and pay Uncle Sam his fair share.In reality, if you are a casual seller who only sells a fewitems on eBay every now and then it's doubtful the IRS is goingto lose much sleep over the few bucks you make. However, if you consistently sell on eBay the IRS may deem youractivities to be business oriented and you will be required tofile a Schedule C and claim the income. The IRS uses a number of factors to determine if a hobbyis really a business. These factors include: 1. Do you carry on the activity in a business-like manner?If you conduct your eBay activities in a business-like manner,i.e. you keep business records, track profit and loss, keep aseparate checking account, etc. then whether you think so ornot, your hobby is really a business. 2. Do you spend considerable time working on your hobby?If you put considerable time and effort into your eBay sales, theIRS may contend that you do so for profit and not fun. It seemsthe folks at the IRS don't believe in doing things strictly forpleasure. My guess is, neither do you. If you weren't makingmoney selling on eBay I doubt you'd bother getting up at4 a.m. to hit all those yardsales. Then again, maybe you would... :o)3. If you depend on income from your eBay activities for yourlivelihood?If so, it's a business, not a hobby. There are a number of other factors the IRS uses to determine ifa hobby is really a business, but that covers the basics.You can learn more at the IRS website at www.irs.gov.What's eBay's take on all this?eBay is vehemently opposed to anything tax related (especiallythe forced collection of sales tax, which is a whole 'notherissue). It's understandable that eBay is not a fan of the IRSsince trying to enforce tax rules on buyers and sellers wouldundoubtedly be detrimental to the way eBay does business. eBay does not does not issue 1099 tax forms to sellers, nor doesit report seller's sales figures to the IRS. eBay considers itselfa faciliator, i.e. they provide a marketplace in which buyers andsellers come together to do business.However, since eBay is not directly involved in the transactionsthat take place between buyers and sellers, it would be impossiblefor eBay to report sales figures. Furthermore, eBay does nottrack if a seller actually gets paid by the buyer, so they haveno idea how much money actually changes hands, making itimpossible for eBay to issue accurate 1099s to sellers. On the bright side, if you do sell on eBay as a business you candeduct a number of business expenses, including the cost ofinventory, listing fees, shipping, envelopes, packing materials,etc. You might also be able to deduct things like the purchaseof a computer for business use, office space (even if it's ahome office), office supplies, and more.I'm not accountant (nor do I play one on TV), so please do nottake any of this as tax advice or legal opinion. Talk to youraccountant if there's any doubt as to whether you should orshould not be paying taxes on your eBay earnings. Here's to your success!Tim [email protected] For information on starting your own online or eBay business,visit http://www.dropshipwholesale.net Article Tags: Ebay Does
Selling,eBay,Just,Hobby,Real,B