posted on February 19, 2001 11:01:22 AM
HELP!!! I have been buying and selling on eBay since August of 2000 and still consider myself fairly new to the whole online auction process. I am about to file my taxes and wondering,,,what am I suppossed to do about my eBay earnings? I have spent thousands of dollars the past year buying a computer, shipping supplies, items to resale, etc. all for my eBay ventures. I'm not a good bookkeeper AT ALL. I have only probably sold a little under $1,000 worth on eBay so far (being my ONLY income for the whole year!). Should I report everything? If so, how do I do it? Any advice? What does everybody else here do?
Also, I have mostly been selling most of my own items from the home, and some Yard Sale finds. I'm running out of stuff to sell, I need to find a reasonably priced wholesaler source to find more items to sell. Any suggestions? I neeed the $$$!
posted on February 19, 2001 11:04:54 AM
Stop fooling around asking for tax advice on a chat room. Hire a competent tax professional and let them guide you thru. Good luck.
Oh....and the truly good deals will not be pointed out to you in a chat room. why would someone with a succesfull line of wares want to instruct their own competition. Do your own homework.
posted on February 19, 2001 11:17:45 AM
DrTrooth---wow. Why don't you just hit me over the head with a hammer! Thanks for the brutally honest reply. I'm just a young mother of two who lost my job because of an auto accident injury and looking for a fun way to make money & stay home with them. I was hoping somebody out there was kind enough to offer any helpful advice to an unexperienced seller.
posted on February 19, 2001 11:34:46 AM
The best advice you'll get here is to use a Qualified Tax person. In order to deduct the items you've purchased, you need to have receipts and good records. You need to talk to someone who knows not only Federal tax law, but State law as well, and Local as well. That means hiring a Professional.
The advice you get here is worth just what you pay for it. Dr Tooth's reply wasn't that harsh, it was just the truth.
posted on February 19, 2001 11:38:30 AM
Dr. Tooth speaks the truth!
My accountant is my most valued business asset.
He more than pays for himself year after year.
posted on February 19, 2001 12:18:30 PM
baytayshields: re: Taxes
DrTooth's response may not have been the MOST tactful but it was the truth. Speaking from direct experience, if you are going to file as a business using Schedule C, you are very well advised to let a tax professional help you.
Certainly, as with any legal or tax matters, you should never place any strong reliance on anything you see on usenet or message boards.
To save money, you may wish to make a first pass at your 1040 and then let him review it for mistakes. A review should take less time than actually doing it.
As for finding wholesale sources ..... Most eBay professionals consider their product sources their most valuable asset. This is because selling is easy - finding something to sell with which you can make money is much harder.
[deleted some extra words]
[ edited by wbbell on Feb 19, 2001 12:20 PM ]
posted on February 19, 2001 12:55:54 PM
I asked the same question to the IRS. They have a web site and answered within eight hours. It is detailed and mostly considers those with a tax number and business on E-bay but did address other situations. You report your gains or losses on the gains and loss form (can be downloaded from the IRS site. Consider all of your expenses such as gas, travel time, cost of item, etc. Look up www.irs.gov.
posted on February 19, 2001 01:32:17 PM
I recommend that you don't hire a tax
accountant for a one time filing. I
did that once and they don't ask you
questions, or get a grip on your
situation unless you fill them in with
all the details. That means you
actually have to know more them them.
It's a rip off. Go to the IRS website
or 800 number, learn what you need to
know and fill it out yourself.
Basically anything that you used for
business expenses is deductable, but
know the exceptions that may apply.
For starters go to a big library and ask the librarian about any trade publications you can get our hands on for the fields you're interested. You may need a business licence and establish yourself as business before some of these companies sell to you though.
posted on February 19, 2001 01:45:53 PM
Hi baytayshield,
I'm not the greatest bookkeeper either, but I have made some improvements to track my auctions & paperwork.
For starters, print out all the records from eBay from Aug. 2000 .... all the fees, etc. You're gonna have to retrace a lot of footwork now, but at this this is a start. But everyone is right. You need to consult an accountant. Yes, have someone watch your kids while you do this .... it's gonna take some time, but I'm sure you'll get through it! Fortunately, I kept good enough records, that we're getting money back (yeah!). All those business expenses were a nice write off.
I purchased eBud earlier this year to keep track of my recordkeepping better. This is helping as well as a payment log. This program helped me eliminate all the extra paperwork I was hauling around.
As to wholesale accounts, you need to be in touch with your state board of equalization and find out about a permit. I got my whole sale license in Aug. 2000.
avmom
(not avmom on eBay)
edited for typos
[ edited by avmom on Feb 19, 2001 01:47 PM ]
posted on February 19, 2001 01:58:19 PM
If you are going to continue selling, start keeping records. Tax time is a lot easier with good records. This won't help with your 2000 taxes but next year you'll be prepared. If you are really new at bookkeeping, go to any office supply store and buy a Dome Simplified Monthly Bookkeeping Record. It's self explanatory, super easy. In the meantime find a good accountant. I've had the same CPA for 16 years and he's worth every penny I pay him and then some.
posted on February 19, 2001 02:02:53 PM
Hi Baytayshields,
I'm not afraid to tell you where I get my stuff. I go to estate auctions and find interesting things to sell at great prices! You can also try your local Salvation Army or thrift stores. You'd be amazed some of the great things you can find there. But actually the auctions are the best. I've gotten things as cheap as a dollar and sold them for upwards of 30 or 40 dollars. It takes a Saturday morning here and there, but it's definitly worth it. I wish you the best of luck in your ventures. I know how hard it is to be at home and want to contribute to the family finances.
posted on February 19, 2001 02:06:01 PM
The name is Dr. Trooth, not Mr. Tact.
If you wish, you may think about the value of a tax professional as this.1/3 for the return, 1/3 for piece of mind......and for the 1/3 for the day if you are audited....think of it as insurance...and if you are ever called for a chat by the IRS as the Tax Professional's name is on the return THEY are the one who will be there with you.
You will think you were a genius for having them.
Oh....and if you are on disability, make sure that you are not voiding/bending some rules that apply to your disability. Those fines and penalties can get kinda nasty. If you are disabled....well that means you can't work...and believe it or not....this is work...and if it is fun....well it still is income.
Good luck.
Dr. Trooth
[ edited by DrTrooth on Feb 19, 2001 02:10 PM ]
posted on February 19, 2001 02:17:53 PM
You don't need an accountant to figure that your situation is a wash--you don't really have income to speak of for the year. (unless you want the year's profits to go to an accountant for an unnecessary filing) I would gather up all your equipment receipts and start keeping records and receipts for the new year. You can either use a spreadsheet or a ledger book. One column records your income, the other your unreimbursed expenses. Your accountant will want monthly totals of both. Your computer equipment is capital expenses and can be depreciated over several years.
You don't have to be a bookkeeper, but you do need to keep records. Then you can go to the accountant for 2001.
posted on February 19, 2001 02:37:02 PM
The may be a dumb question but.......how do you keep records of things purchased at auctions or yard sales for IRS purposes? They dont give receipts, does anyone buy their items at yard sales: how do you prove what the items cost you? Thank you.
posted on February 19, 2001 02:40:20 PM
Dr. Tooth speaks the tooth - get yourself a professional. How much will it cost? Well, since it seems that your records are in disarray, probably more than what you sold to try to make heads and tails of your records.
It seems like you are running more of a garage sale on ebay than a true business. As you probably have more of a loss than a gain on your business, the IRS will probably denied you taking the loss since you are selling off personal effects rather than business goods. One usually cannot deduct losses on personal effects except due to casualty type losses.
However, if you insist on trying to become a business going forward, you do have a problem with the computers and capital expenditure. For if you decide to be a business in the year 2001 forward, these assets purchased in year 2000 and not 2001 are an issue. Gets very complicate to establish a basis for depreciating these personal assets being enter into business use.
By the way, since you do have kids and you did not indicate if you have a spouse with income, you should consider a professional anyway. There may be possible tax credits that you are not aware of.
posted on February 19, 2001 02:55:23 PM
How do you keep yard sale records? Its called a contemporaneous journal. Kept in the car....or at least at home and as you go, or when you get home you write down all your mileage, your expenses, etc. food fuel & purchases.
Ooooo I know....thats such a hassle.....well you want to be in business....thats what you have to do.
Besides...once you have discovered all the deductions that you are entitled to....especially if you have well employed spouse....you may surprised what happens to your tax liabilities.
posted on February 19, 2001 03:02:19 PM
Thanks Dr. Tooth. No, it won't be a pain to keep a journal of the expenses. I will just have to get into the habit of doing it! : )
posted on February 19, 2001 03:15:42 PM
Keep another "contemporaneous journal" in your car to record mileage and car expenses such as tolls, parking, etc.
And it doesn't hurt to get a book-type calendar and get in the habit of making daily notes about business-related activities. This, plus your garage sale book and your car expense book, will be a godsend if you are trying to figure out when you took that buying trip, or track down that missing receipt for the new monitor.
This year, for the experience, you might want to purchase TurboTax. Even if you do use a pro (and you probably should, at least the first year), this program is great at "interviewing" you and helping you understand basic bookkeeping issues and tax deductions.
Also, consider using an E.A. rather than a CPA or tax attorney to do your taxes. They are not only generally less expensive, but they are the only tax pros actually licensed to practice by the government...and they are able to argue cases before the Tax Court if necessary. I've used both, and found that the CPAs charged me more--and listened less--than my E.A. Also, CPAs generally are more experienced with large businesses (corporations and the like) and considerably less experienced with small businesses like we have.
posted on February 19, 2001 04:32:20 PM
Depreciating equipment already owned is not a big deal. You figure it as partially depreciated to start. Not rocket science.
posted on February 19, 2001 04:41:25 PM
I have my taxes done by H&R Block Executive and find they are very good and reasonable.
I pay about $300 a year and they will go in and speak for you if you are audited. I keep a spirol notebook in the car and in the front write my miles and in the back I work in from the other cover - just flip it over - and write garage sales etc.
I always hold back a few deductions because if I am ever audited I want them to owe me.
I never stretch things and I never lie to the tax preparer. That would be a disaster.
H&R has been able to handle my taxes even when they got very complicated and I had multiple foreign tax credits and a lot of stock trades.
Dr Tooth's reply wasn't that harsh, it was just the truth.