Taxes and eBay

[dieselram94]

I am thinking of becoming more active on eBay. My question is how do you keep track of taxes. As in cost basis?

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[NJcigarman]

I use the free Outright application on eBay. Keeps track of fees, sales, and cost of goods. Very easy to use but you got to take the time to enter the goods you buy. In my case I buy most of my product with the paypal debit card. These purchases will automatically go into the system. You can add your gasoline/mileage, labels, office supply's etc.
Again it is called outright which is Go Daddy Bookkeeping and you will find it under applications.

 

[clovis97]

I put all my receipts in a box after every sale I attend. Auctions, estate sales, train shows, etc.; all those receipts get tossed in a box.

Tally those up every so often, and that is your gross cost of goods.

I take the gross ebay sales for the year, deduct the fees, deduct the costs of goods, and wallah...you have your net profit.

Put all of those numbers into your IRS Schedule C or CZ, and you can figure your net profit. Don't forget to deduct your mileage on the Schedule C. The mileage deduction adds up FAST.

 

[dieselram94]

Thanks! It's not as intimidating as I thought. I am definitely going to start doing more eBay and this is a huge help.

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[clovis97]

Diesel,

That should have read "Schedule C or C-EZ". Sorry for the typo.

I've never used the C-EZ form, but am plenty familiar with the Schedule C. The nice thing about the C is that it allows for your mileage (a big +), and other expenses. If you buy an item, and need to paint it before you sell it, you can deduct the cost of the paint. Many people deduct the cost of their cell phones, internet connections, some meals for clients, advertising, etc. The big benefit is that if you clear $10,000, the deductions can bring the tax liability way down.

I met a guy once that skipped the C form, and just added his gross profit to his 1040, which is crazy, if you ask me, unless you like paying taxes.

You'll also have to fill out the SE tax form...so you can pay 15.2% to Social Security. If you fail to fill out the SE tax form, don't worry. They'll figure it for you, and send you a bill, plus fines and penalties, LOL. The IRS is really cool that way.

I'm not a tax guy, but the forms really aren't that hard, IMO.

YMMV, of course.

 

[dieselram94]

Excellent information. I figured this would be the best place to ask about this. The last thing I want is to make a mistake and have an IRS problem. I am very honest when it comes to taxes, as I hope to never be audited.

So I will keep excellent records and keep track of my mileage and I will look up the schedule C form so I can become familiar with it. I think I have used it before. I usually just have HR block do my taxes. Thanks for the information! I really appreciate it.

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[clovis97]

Go to the IRS website, and get the Schedule C form and instructions. Read over them, and study them as best you can.

Doing this will help you understand what is tax deductible, and what isn't. Don't quote me on this, but you can deduct clothing costs if you buy uniforms, but not 5 pair of blue jeans that you wear for work. You can deduct 50% of a client's meal if you take them out to eat, but not your meal, IIRC. You can deduct ink and toner, as well as paper for the printer, but those two items need to be put in the office expenses line on the C. If you need to reduce tax liability towards the end of the year, and were on the fence about buying some new equipment, knowing that it might be deductible might help you decide. KWIM?

Understanding the C form will make you a better business man, and will save you money on taxes, as well as tax preparation. Get a calendar to write down those miles.

Again, I am not a tax guy. YMMV, and don't quote me as being 100% correct.

 

[dieselram94]

I like the calendar idea. Does the IRS require any proof of miles?

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[clovis97]

Just your handwritten mileage on a calendar.

You might read the official rules on mileage deductions. You can deduct mileage to and from an auction, but if you stop at your Aunt June's house 12 miles away after the auction, that is not tax deductible.

I can't stress enough that I'm not a tax guy. The forms and rules change a little bit each year, so reading them will benefit you well. I've been filling out a Schedule C for 21 years straight, but that doesn't make me an expert.

 

[dieselram94]

I can appreciate that, always best to read the rules. Do you think that filling out the schedule c and running a small business like this is any red flag for the IRS? Have you ever been audited?

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[clovis97]

No audits here, knock on wood.

I also don't push the limits of the law, or get into the 'gray' area very much. I don't take a home office exemption, even though I fully deserve one. I've read again and again that the HO write off is a big red flag. Not worth it for $14 in saved taxes, IMO. My books are pretty much iron clad, and I have receipts to prove it. Any mistake that is made would be a sheer mistake on my part, and not one that was made by trying to cheat them.

I think that the people who get into trouble with the IRS are the ones really, really pushing the gray areas, or the ones trying to outright cheat the IRS. Like the guys trying to write off a $28,000 Harley, 4 ocean cruises, and $14,000 worth of extravagant meals with 'clients'. Some of those people are really asking for trouble, especially if it crosses the line. KWIM?

Just be honest, and keep every single business receipt, even if it is for $1.54 for a pack of ink pens.

The federal tax isn't bad, IMO, based on the net at the bottom of the form, but the social security tax is a killer. Not to get into a political debate, but they say that SS won't even be around after 2028...and I'll have to be 70 before I can collect. Not a lot of fun sending them thousands of dollars, most likely, for nothing. With my health, I doubt that I even live to be 70; the average life span of someone with my health problem is 59.

The SSI tax is a crushing blow...and a soul breaker...each and every year.

As always, YMMV...and I don't know if I mentioned this, but I'm not a tax expert.

 

[clovis97]

Okay, I can't resist. The whole SSI thing just ticks me off.

The government has money to bomb Iraq, the Afghans, expand welfare to anyone that wants it, spend billions to shoot rockets into space, spend millions and billions on defense, save Goldman Sachs and every other investment bank in the US with TARP funds, spend millions looking for the lost 777 jet....but they can't find the money to save and fix SSI.

All the while, they vote themselves life long pensions, while the little guy struggles to keep a roof over his head and takes a crushing blow every April on the SS tax.

I tell ya, the SS tax is a soul breaker.

 

[dieselram94]

Okay, I can't resist. The whole SSI thing just ticks me off.

The government has money to bomb Iraq, the Afghans, expand welfare to anyone that wants it, spend billions to shoot rockets into space, spend millions and billions on defense, save Goldman Sachs and every other investment bank in the US with TARP funds, spend millions looking for the lost 777 jet....but they can't find the money to save and fix SSI.

All the while, they vote themselves life long pensions, while the little guy struggles to keep a roof over his head and takes a crushing blow every April on the SS tax.

I tell ya, the SS tax is a soul breaker.

I'm with you on the social insecurity thing. I am likely to never see a penny from it as well. I always am very honest on my taxes because as you mentioned saving a small amount now can trigger an audit and the irs interest rates and penalties are not very inviting.

 

[dieselram94]

As far as ssi goes I know of many, many younger people who receive dissabillity and have never worked or worked a very short amount of time therefore they payed in nothing and receive large payments, and you and I get to pay so they (for the most part) can live the easy life while the whole time knowing we will never get anything back out of the money we have paid in. I hope you defy the odds with your illness and stick around for a good long time.

 

[NJcigarman]

Just like the supermarket when I shop. I swear I am the only one who does not have a EBT card.

 

[dieselram94]

Just like the supermarket when I shop. I swear I am the only one who does not have a EBT card.

Same where I live in Maine...welfare capital.

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[Atlanta Mi Dave]

Same where I live in Maine...welfare capital.

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Gee... I thought where I lived(Michigan) was the welfare capitol!

 

[clovis97]

The waste is every where.

I have a relative in the Marines that is in charge of some type of howitzer guns. He says that a hitch pin to tow the guns costs $1,200, but an ordinary hitch pin from a farm store would work just as well for $20. You should hear some of the stories he tells about how the government spends money.

I wholeheartedly agree about the EBT cards, but IMO, that is the waste that, as common citizens, see on a first hand basis in the grocery stores. The EBT is just on a personal level. You don't hear people griping about the billions that NASA has wasted over the years, or about the money the military spends looking for that lost jet in the Indian Ocean. How much fuel and resources have they spent so far?? Those search airplanes are burning $9 a gallon fuel at an alarming rate.

Can you all imagine how low our taxes would be if the government quit the corporate and welfare handouts, and lived like the rest of us do?

 

[BosnMate]

You guys got it all wrong. Oregon is the welfare state, double especially if you're here illegally, then you got it made. I could go on a rant right now, but I'd probably end up in trouble, so I'll go to bed instead. Mumble mumble mumble, grrrrrrrrr

 

[vwayne1]

I know that nobody wants to hear this, but it's a good thing they spent so much on nasa or we wouldn't be using the internet right now. Not to mention thousands of products and services we enjoy everyday. But of course, I don't enjoy paying taxes either.