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How to Sail Through Tax Season

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News Team
News Team
Last Edited 10:04:08 AM by Community Team

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It’s that time of year when we gather up our tax-related documents and either go it alone or meet with our trusty CPA.

 

Either way, preparation is the name of the game. So here are our tips for smooth sailing this tax season and throughout the year.

 

1. Know what you can deduct.

Understanding what you can deduct on your taxes is essential to good bookkeeping. And, though it varies for every business, here’s a list of expenses that you might want to compile before meeting with your tax professional:

 

  • Shipping-related costs
  • Business vehicle expenses (most likely calculated in terms of mileage)
  • Home office costs (usually a portion of your rent/mortgage, utilities, and Internet service)
  • Bank and transaction fees (including PayPal)
  • Classes, seminars, and training expenses related to your business on eBay
  • Advertising costs
  • Office equipment and software expenses
  • Business trip costs (for the purpose of sourcing new inventory or attending a trade show, etc.)

You can learn more about business deductions on the IRS website. The key is to keep detailed records, including receipts complete with notes indicating the business purpose for each expense.

 

2. Use bookkeeping software.

 

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If you want to put in the work, you can keep track of your business expenses using a simple spreadsheet. However, bookkeeping software can greatly simplify the process and give you access to automatic reports that reveal how your business is doing at-a-glance (i.e. no heavy number-crunching necessary). Here are two bookkeeping services that have historically worked well for sellers on eBay:

 

  • GoDaddy Bookkeeping (formerly Outright) automatically pulls information from your eBay, PayPal accounts, and other business-related accounts (credit cards, etc.). Then, those transactions are organized into the same expense categories as you’d find on your Schedule C (Profit and Loss Statement). You can also run a number of helpful reports, all from your mobile phone, if you want.

  • QuickBooks is a more robust alternative to GoDaddy Bookkeeping. You can use it to track your inventory and expenses from eBay, take photos of receipts, and then upload and categorize them to make generating your Schedule C easier. Also, QuickBooks has a scalable design so that you can add more features as your business grows.

 3Spend more time organizing your finances.

 

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If you ended the year with a shoe-box full of random receipts, consider taking a little time every week, going forward, to organize your office and business-related paperwork. Instead of posting what you had for lunch on Facebook, use this time to file paperwork or investigate ways to streamline your record-keeping practice. For example, you might want to consider a service like Shoeboxed or Neat to scan, organize, and generally keep track of important documents.

The upside of having a weekly (if not daily) date with your business finances is two-fold: not only will it be easier to find what you need at tax time, but you’ll have a much better outlook on the health of your business as a whole.

 

And, although it’s our goal to help you get prepared, we also recommend that you have a trusted local tax professional on your side to ensure that you’re taking advantage of available opportunities, and keeping well within the guidelines of the ever-changing, ultra-complex business tax laws.

 

Have some tax-time tips of you own? Let us know in the comments below.

 

Feel free to share this article via email and on Facebook, Twitter, Pinterest, and LinkedIn.

 

6 Comments
by vintige · Thrill-Seeker
vintige
Thrill-Seeker

This is a great article! I think that many sellers are confused with taxes and what to do with them here...When I decided to start claiming taxes, I could not find many articles online that made it very clear. I think this makes it very clear and should be very helpful to sellers who are wondering about this.

by varebelrose · Guide
varebelrose
Guide

Sure would be nice if eBay (and Paypal, although thats another ball of wax) offered a year-end summary report that included gross sales, postage expenditures, total fees, etc. Seems like that would be so easy to provide, I honestly do not understand why they do not do this.

by dhbookds · Rockstar
dhbookds
Rockstar

I agree with above poster....and HAD HOPED Seller Hub would offer something......but, no

 

We NEED one report with the following: 

Total Sales

Total refunds

Actual shipping paid to ebay shipping

Total ebay fees.......

 

I also realize paypal fees/shipping would have to be separate, but it's inconceivable that ebay can't provide the basics....from their stats....

by deideib74 · Rising Star
deideib74
Rising Star

Great points! Ebay has so many capabilities, and the sellers make so much money for this business. One WOULD think that the suggestions above are not out of reach.

picadillytrolls
Adventurer

thank you.  

antiqueboutique05
Adventurer

Hello Everyone I was Audited for Ebay in June of 2016 and  It was truly Horrible They are going after Ebay and Etsy with a vengence.I was Lucky to Keep Good Records But Not Good Enough for the IRS. The IRS wants a PAPERTRAIL .Print the Page that says the item was SOLD then they want to know who bought it to prove it wasnt sold to my state for sales tax.Then How did they pay?  Not only print the page that says they paid by pay pal but show it went in the Pay Pal account.Which in my opinion is stupid.THEN at the end of every Month the exact Money made in Pay pal for that month MUST!!!!! GO in to a bank account and print Invoice for that month to prove Numbers match( what you do with it is not there concern JUST THE PAPERTRAIL! She told me that when you open a store on ebay YOUR IN BUSINESS!! DUH!! its not Rocket Science Business License and Tax license it is not expensive.So I hope this can help someone else