You,Pay,Taxes,eBay,Income,amp, business, insurance Do You Pay Taxes On eBay Income?
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Small Business Q&A with Tim KnoxQ: I read your last column about paying income tax on eBay salesif you are doing it as a business, but as someone who only sellson eBay occasionally I'm still confused if the IRS rules applyto me. Can you tell me more?-- Norman L.A: Last week's column on whether you were required to reportincome earned from eBay sales to the IRS sparked a number ofadditional questions and comments from eBay sellers who werehoping that I could somehow validate that their eBay activitieswere mere hobbies instead of actual businesses and therefore notsusceptible to IRS taxation.Several folks argued that just because their little eBay hobbygenerated a little cash, that didn't make it a full blownbusiness. It seems they consider the income from their littlehobby to be financial manna from Heaven and thereby not taxableby earthly tax collectors. I've always been amused by folkswho try to impress me with talk about their "little sidebusiness" but when the subject turns to taxes they suddenlyrefer to it as "my little hobby."All kidding aside, the conclusion that I came to after readingeach email was always the same: while you may think selling oneBay is just a fun pastime and the money you're making is notreportable as income, depending on the circumstances, the IRSwould probably disagree with you. It seems that everyone likes making money, but hates carvingoff a piece for good old Uncle Sam. Welcome to free enterprise,folks. If you're going to come to the dance you have to paythe fiddler.The IRS rules are clear: you must pay taxes on all personaland business income and that includes money you make sellingon 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 profit and therefore must report it as income and pay Uncle Sam his fair share.In reality, if you are a casual seller who only sells a few items on eBay every now and then it's doubtful the IRS is goingto let loose an army of agents to collect taxes on the few bucksyou make. However, if you consistently sell on eBay the IRSmay deem your activities to be business oriented and you willbe required to file a Schedule C and claim the income. As mentioned last week, the IRS uses a number of factors todetermine if an eBay hobby that generates sales revenue isactually a business. These factors include: - 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 hobby for your livelihood?If the answer to any or all of these question is yes, you'rerunning a business, not carrying on a hobby, and you are responsible for paying taxes on your income. What's eBay's take on all this? Naturally eBay is vehementlyopposed to anything that might rock the eBay boat. eBay doesnot does not issue 1099 tax forms to sellers, nor does it reportseller's sales figures to the IRS. Ebay considers itself merely to be a facilitator, meaning thatthey provide a marketplace in which buyers and sellers cometogether to do business. Furthermore, under it's current system it would be impossiblefor eBay to issue accurate 1099s to sellers. eBay does nottrack if a seller actually gets paid by the buyer, so eBay hasno idea how much money - if any - actually changes hands atthe end of each transaction. On the bright side, if you do sell on eBay as a business youcan deduct a number of business expenses, including the costof inventory, listing fees, shipping, envelopes, packing materials, etc. You might also be able to deduct things like the purchase of acomputer for business use, office space (even if it's a homeoffice), office supplies, and more.Talk to your accountant if there's any doubt as to whetheryou should or should 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
You,Pay,Taxes,eBay,Income,amp,