posted on November 3, 2000 10:00:33 AM
I'm a college student who sells on ebay to pay my expenses. I was wondering what % of my profits I would have to pay if I claimed taxes. Would I even have to pay income tax if I made under a certain ammount? Do I pay double Social Security tax? I would just have to fill out a C form, correct?
Thanx for the help
posted on November 3, 2000 10:07:40 AM
Well, I would say get an accountant. Your taxes are different for each state. If you are claiming it you will also have to collect SALES tax for items you ship to within your state. There are several things you'd get to deduct - like mileage, cost of goods sold, supplies, etc. If you work out of your home and have part of your home used specifically for ebay selling you get to deduct part of your bills like electric, heat, etc. It's best to get an accountant so he can tell you what you should do and what deductions you are entitled to. If I had to guess the % of taxes I would say at LEAST 1/3 of your sales would go to taxes.
posted on November 3, 2000 10:09:52 AM
There are so many variables involved in filing a correct tax return that you are not going to be doing yourself any favors by following advice you receive on a message board. Find a local accountant who handles tax returns, and ask him.
posted on November 3, 2000 10:11:20 AM
First, it would pay you to make an appointment with a tax person to find out the answers for your specific situation. Or check out any of the useful books by H & R Block, Lasser, etc., to get a good overall view of business taxes.
What percentage of tax you will pay depends on your income bracket. If it's low enough, you may not have to pay any income tax at all, but you will almost certainly have to pay into FICA (Social Security). You don't pay "double"...you pay your share and the employer's share (since you don't have an employer). However, the latest regs allow you to deduct all or most of the employer's share on your Schedule C. I can't recall the exact details...another good reason to check with a knowledgeable professional.
Your taxable income is based on your gross sales less your expenses...you don't pay tax on just however much you earn from auctions. If you have postage expense, mileage, eBay fees, etc., these are all deducted from your gros income to arrive at profits. If you are using a portion of your residence regularly and exclusively for your eBay business, you MAY be eligible for an in-home office deduction as well.
In other words, your situation is too complex to allow for a simple answer. Usually it is better to be "in business" rather than declaring eBay income as a hobby, because this allows you to actually take deductions against income and may actually produce a LOSS that is applicable against other earned income.
I'm not a tax pro myself, but I work for one during tax season and have edited major tax preparation manuals for years. Bottom line: pay a tax person $50 or less to find out for sure how the laws apply to you and which scenario is best.
posted on November 3, 2000 03:58:38 PM
The percentage of tax taken out is based upon your income. I'm lucky enough to be in the 28% tax bracket. UGH!
You will have to fill out a C form if you have profited over $400 and are running a business and not a hobby. If it is a hobby, well that's another story.
I'm running a business. I work 30 to 40 hours a week selling on eBay and my intentions are to run it as a business. I have my receipts and notations for expenses and I have a list of all my customers and money sent to me.
When you are self-employed, you will have to fill out a Schedule SE form (self-employment tax) in addition to the schedule C for the IRS. The self-employment tax is the SS and medicare taken out of your pay.
I'll be able to do my own taxes, however I suggest you get H& R Block to do yours.
