posted on October 8, 2000 09:09:27 PM
When I started ebaying, it was my understanding that as long as I was just selling my own household stuff (like in a yard sale) that it was not considered a business (just like a yard sale isn't considered a business) and that the $ I made was not taxable... Just basically an online yard sale..post it, sell it, collect $, go on..
Is there any limit to the amount of *your own household stuff* that you can sell? Could you sell everything in your house and it still be considered a non taxable yard sale type of thing?
And would the tax people ever know about it?
What if, in a year's time, you sold, say $4000 worth of stuff on ebay....ALL of it your household stuff, clothing, dishes, stuff stuck in corners..this was all stuff you originally bought at retail price somewhere, and so you're not really making a profit on most of it usually...if the sweater you paid $60 for sells on ebay for $39...you haven't made any profit, right? It isn't taxable right?
But if you sold $4000 worth of your *stuff*..would the taxman come calling wanting you to prove that it was originally your stuff somehow? (I don't have the receipts for sweaters/books/whatever that I bought back in 1983, for example..)
If you buy stuff at yard sales and such..and then put that on ebay....that's a business and is taxable, yes? Would you have to get a business license in your state, or ?
I'm hoping to keep it real simple. I just have a LOT of stuff that is my stuff..don't want to get audited because I sold a lot of it...
posted on October 8, 2000 09:30:26 PMIs there any limit to the amount of *your own household stuff* that you can sell? Could you sell everything in your house and it still be considered a non taxable yard sale type of thing?
I don't think it would be a good idea to make decisions regarding your tax liability based on advice received on an internet message board.
posted on October 8, 2000 09:50:26 PM
Nope, not "just you," MrP.
I know we all want to save a few bucks where we can, rhubarbsfarm, but I think it's not unwise to invest in half an hour with a tax accountant, particularly as it appears you haven't kept any records whatsoever of your ebay transactions.
posted on October 8, 2000 10:00:15 PMrhubarbsfarm, I don't think there's a particular "limit" before one must claim their ebay sales. What a CPA could tell you, though, is whether it is advisable in your case to do so.
In the meantime, you could gather the records you do have, such as credit card statements and cancelled checks (for the things you've purchased), and auction printouts (for those same items when you sold them).
posted on October 8, 2000 10:13:23 PM
There was an interesting article in the business section of our local paper about a week ago that dealt with this in a way. What the writer said surprised me. According to her, the money one makes in a garage sale is all profit. Since the items sold in a garage sale are "discards" their value has become 0 since it no longer has any value to you. Whatever price you sell the "discards" for is 100% profit and subject to income tax. The writer suggested the best way to profit from getting rid of discards was to donate them to a charity and take the deduction off of your income tax for the amount you could have sold the items for. The writer didn't seem to place any value on the time a person might spend sorting, pricing and running the sale.
The writer went on to say that the IRS generally has a "don't ask, don't tell" attitude toward garage sales--unless you have them so frequently that the increased traffic on you street irritates the neighbors enough to complain to the authorities about you.
I'm not sure the writer of this article was correct. If I buy a car, drive it for a couple of years and then buy a new one to drive--that doesn't mean my old car is worth 0--and I don't think I would owe taxes on whatever I sold the old car for--would I?
cybercat
--
What if the Hokey Pokey really is what it's all about?
posted on October 8, 2000 10:43:41 PM
I agree with mrpotathead & HartCottageQuilts -- if you're concerned, talk to a CPA. I'd love to know what s/he has to say about cybercat's newspaper article!
My personal opnion? (Worth what you're paying for it!) I'd be surprised if it became a problem if you're just selling "stuff" that's personal. If your lifestyle isn't radically changed by your proceeds and you're not already a high-audit-risk person, you're not likely to have problems. Is it apparent
posted on October 9, 2000 04:17:06 AM
I consulted our CPA about 2 months into this. I was concerned because my husband has his own business, basically, and I didn't want anything I was doing to end up causing suspicion or WHAT. I don't know enough about it.
Anyway, I did go on to become a regular (albiet very part-time) buyer and seller, so I am glad I started my record-keeping at the beginning. I won't talk about what the CPA said regarding tax liability because everyone needs to consult their own professional on this. Good luck!
posted on October 9, 2000 04:26:34 AM
I heard CPA's have a chart used for donation purposes that lists under itemized pages household items and their fair market values (for donation purposes).
posted on October 9, 2000 04:42:50 AMIf I buy a car, drive it for a couple of years and then buy a new one to drive--that doesn't mean my old car is worth 0--
No, it doesn't; but it's worth considerably less than when you bought it. Assuming it's got a book value of $1K and you sell it (to some sap) for $2K, it could be argued that you indeed sold your jalopy for a profit.
posted on October 9, 2000 04:56:11 AMzeenza There is indeed a schedule that you can use for donated items at tax time. There is a book called "Cash for your Used Clothing" that details all kinds of "thrift store" type items from small appliances to furniture and clothing. This book has a $25.00 retail value and is by Client Valuation Services. Each copy is registered and you must get a new copy each year. I found this book at Cheapskate Monthly Online at a substantial discount.
This is supposed to be an IRS approved booklet in which you can keep your records and receipts for donations throughout the year contemporaneously.
As far as if you are a business if you are just selling your items, it might differ from state to state, so the sound advice is to see your tax professional.
posted on October 9, 2000 05:01:20 AM
You don't figure profit from the book value of an item, you figure it from the difference between what you paid for it, and what you sold it for. If you paid 4k for a car, and sold it for 2k, there is no profit.
The sad fact is, if you're buying items to resell, they you're a business. The tax man wants his cut of any profit. Keep good records, deduct every legitimate expense, and don't pay a penny more than you have to.
It goes without saying that everyone should get their tax advice from a professional. Advice and opinions here are free, and should be taken with caution. There are also local and state laws that vary from place to place, a tax accountant or CPA would know all the details.
posted on October 9, 2000 05:06:24 AM
[i]You don't figure profit from the book value of an item, you figure it from the difference between what you paid for it, and what you sold it for. If you paid 4k for a car, and sold it for 2k, there is no profit.
[/i]
Duh. Of course you're right, Meya. Clearly I should have THREE cups of coffee before attempting to respond here
posted on October 9, 2000 05:14:00 AM I'm on my second, but I think I need more as well. There is nothing like taking cold medicine for 5 days, coughing all night, and then a couple of strong cups of coffee to get one going in the morning!
posted on October 9, 2000 05:21:22 AM
Yeah, but assuming you have a "day gig" with other (sorf of) living human beings, at least you can entertain yourself by coughing dramatically (and contagiously) whenever the boss walks by No fun working for yourself when you're sick. I don't get much sympathy from the menagerie.
posted on October 9, 2000 05:24:20 AM
I respect the advice to "consult a tax professional" but the problem is finding one. The last time I brought it up with a CPA in my state, she had no idea in the world what online auctions were about or how tax law might apply to them....said she would have to do some research.that was last year. I guess I've been hesitant to pay anyone for advise that might not be as legit as the past experience of people here. When I call, they all say they know what they're talking about---but do they? I'd be more likely to trust some of the people here than random CPA's from the phone book.
posted on October 9, 2000 05:31:22 AMHCQ, No "Day Gig" here either. Just 4 kids, 1 husband, 3 cats, and the dust bunnies.
My 13 year old daughter missed all last week of school, and is home again today. She has horrible croup, and will probably be seeing the doctor again. Hubby thinks I should call my doctor as well, I have 3 things to package and ship, plus a stop at the bank to make. (do 13 year olds GET the croup?)
We had 4 house guests over the weekend, 3 17 year old girls and their 24 year old friend. The cable guy was here yesterday morning when all 8 kids arrived home from church and took over the house. He said he "enjoyed the confusion". I suspect he leads a very boring life.
My head feels as big as a basketball, I'm off to find the sinus medicine.
posted on October 9, 2000 05:54:28 AM
Your bigger problem from selling off a bunch of household stuff might be that your bank will refuse to let you deposit all those checks into your "personal" accounts. They may require you to have a "business" account, which often (but not always) costs more. They don't care about taxes and such, but to them, if it walks like a duck and quacks like a duck, its a duck, so if you have a whole bunch of deposits, you're a business.
Otherwise, while *anything* is possible when dealing with the IRS, it would be quite surprising to have the IRS select you for an audit, and find that you owe taxes, from truly selling household goods. This is, of course, just my own opinion, and is not offered up for any other purpose, but its hard to see how sales of household items will trigger off the IRS's interest - $4K per year deposited over a period of 12 months isn't going to attract their attention. Just make sure you keep records of exactly what you sold, so you can prove you were selling off household goods purchased originally at retail (and later sold at ebay for 10 cents o the dollar).
The writer of the article referenced by cybercat is full of nonsense. Used items certainly have a value, and the fact that you want to transform the item into cash doesn't mean that value is zero, it just means you'd rather have the cash than the item. Having once held a yard sale to raise money to pay the rent (back in my earlier, less-prosperous days), I can assure the writer that not all things sold at yard sales are "discards with no value"
posted on October 9, 2000 01:01:29 PM
Hey, whoa, wait a minute... I *do* have records of my ebaying..right down to even the actual envelopes buyers mailed their payments in. I've even kept the auction description writeups. LOL! I'm just wondering what the experiences of others may have been - or what others may know about whether we have to report as "income" $ received from things that we originally paid LOTS MORE for when new. I've been told that yard sale income is not considered taxable, as it is not profit...and that should apply to ebay as well..(If you're not buying for resale on ebay)...
We don't have any CPAs here..there ARE a couple people who do taxes onces each year for people..I've asked them about this before and they don't know. They don't know what ebay IS, actually.
I don't have receipts for things I bought new like the baby's clothing that the baby outgrew that I put on ebay...or a book I bought in 1983 new for $32.00 or something at the bookstore that this year I put on ebay and got $9.99 out of...I have receipts for a few bigger ticket items I bought years ago (like musical instruments, etc.), though. But the majority of the smaller ticket things (clothes, books, etc.)..I didn't keep receipts when I bought them - the receipts went into the trash along with the tags, bags, etc...When I bought most of my stuff that I sell on ebay..ebay didn't EXIST then! I had no idea that 10 or 15 years down the road I would be doing online yardsales.
I have toyed with the idea of giving up the day job at some point and going to auctions online in a major way(purchasing at yard sales, auctions, etc. with the purpose of resale on ebay)...if and when that happens, I know I'll have to get a business license and report that as income, etc...
But if,when, and until that becomes a reality...I'm wondering if since most everything I sell is stuff I originally bought new, (years ago) and am selling for less than I paid.....
You gotta' understand that folks here are absolute packrats and I'm no exception..I have a houseful of "perfectly-good-don't-throw-that-away-it-might-be-useful-or-it-might-be-worth-something-someday" stuff...lots has just been sitting for years and years..
posted on October 9, 2000 02:01:23 PM
My experience is, that any money you make is "income". If it goes over a certain amount you have to file federal and if you have legit deductions, you can deduct them and if you don't, you pay the tax.
As far as sales tax goes, any retail sale...a sale to someone who does not have a tax number, is subject to sales tax and they (the tax guys) don't care if its been sold a million times or once. You don't have to have a license to sell, you have to have a tax ID to collect sales tax.
As far as income goes, you may not owe any income tax but if you make over I think 400. in self employment.....you owe social security tax.
In the markets in NYC the tax guys use to show up every so often and those selling without a permit, tax ID were closed up and made to pay a fine, sometimes made to show up in court.
I would think that since every transaction that occurs at ebay is so accessible that it would pay to handle it legit. Keep records and file if you reach a certain amount and have a tax ID for your state.
Just my slant on things. You need a professional for details but in my opinion and experience, income is income and "they" don't care where it comes from.
posted on October 9, 2000 03:33:13 PM
Take a look at this article that appeared in Money magazine online. It should answer some of your questions without the expense of consulting a tax attorney.
posted on October 9, 2000 09:20:05 PM
brighid868 -- yeah, it can be hard, given how complicated the tax code is, to find the right specialist. Back in my younger days, when I was in the horse biz, the tax code changed drastically for us, and I was petrified about trying to do my own taxes. Ended up with a major-firm CPA who also showed and bred horses, so she had paid great attention to the changes. Relief!
posted on October 10, 2000 04:52:45 AM
I have been studying tax law for many years, and there are a few misconceptions here.
1 - The sale of personal property is not income. However, items purchased for resale constitute taxable income.
2 - Yard sales are not exempt from taxes. The latest FASB implies that any more than 4 sales per year makes you a vendor, subject to taxation. The only exception is the sale of personal property that was not bought for resale.
3 - Sales on ebay are taxable income. You need to have your original purchase receipts (yes, even from a yard sale) to document how much you paid for the item, and the IRS requires full record keeping, just like any other business.
posted on October 10, 2000 07:14:52 AMThe sale of personal property is not income
So if I sell that $10,000 diamond ring I dug out of a Goodwill dumps - oops, I mean found on the beach with my metal detector - it's not income? Hmm. Although this sounds like the "broken cookies don't have any calories" school of reasoning, it sure is appealing. Please elaborate.
