Small Time Seller Struggling with Taxes, Can Anyone Help??
Hey guys,
I am a small time seller who only sells personal items. I'm really struggling trying to do taxes on my own. The biggest problem is I'm terrible at accounting and math. I've spent hours compiling what I thought would be the final spreadsheet I need to report this stuff accurately. Most of what I sold was at a loss, but I did have sales that gave me a profit. Here's the numbers I got:
Gross sales - $4708.94
Ebay fees - $695.09
Total Cost of item - $2741.80
Shipping - $510.38
Refunds - $ 94.82
When I add the cost of the item, plus Ebay fees, shipping and refund, it cost me $4042.09 to sell my personal items. That's a difference of $666.85.
I'm thinking my taxable amount would be the $666.85, but Taxact is asking me what the total amount of losses I had and when I add up all the balances that were negative were total cost exceeded gross amount, I get $890.69. What am I doing wrong?
duncanvr
·3 years agoYou should have an accountant to check your records, make sure you run reports on seller hub as others have said then get your accountant to work out the numbers. Also record your daily ebay activity figures in a spredsheet and compare. If your doing this every month even as a small seller an accountant makes sence.
caldreamer
·3 years agoGo to Payments, Reports, Reports (NEW) this report shows YTD totals for (orders, refunds, EBAY fees, shipping expense).
You must report "gross income" on tax form (if you file as a "business" you can deduct business expenses on Schedule C). Subtract (refunds, EBAY fees, shipping expense, cost of goods, packing materials, mileage). Keep receipts to prove your deductions. Whatever is leftover is your "net income" (this is the amount you get taxed on).
Your "cost of goods" seems really high (you only subtract "cost of goods" that you actually SOLD during 2022). You should keep spreadsheet showing (inventory#, description, cost of goods, date YOU purchased item, date you SOLD item). You keep running total (year after year on same spreadsheet). IRS requires that you report "beginning inventory and ending inventory" every year.
EXAMPLE:
1/1/2022 (total inventory on hand) $5,000 Beginning Inventory Amount
(inventory added) +2,000
(inventory sold 2022) -1,500
$5,500 Ending Inventory Amount
dbfolks166mt
·3 years agoYour "cost of goods" seems really high (you only subtract "cost of goods" that you actually SOLD during 2022). You should keep spreadsheet showing (inventory#, description, cost of goods, date YOU purchased item, date you SOLD item). You keep running total (year after year on same spreadsheet). IRS requires that you report "beginning inventory and ending inventory" every year.
EXAMPLE:
1/1/2022 (total inventory on hand) $5,000 Beginning Inventory Amount
(inventory added) +2,000
(inventory sold 2022) -1,500
$5,500 Ending Inventory Amount
The IRS does NOT require you to report an inventory if you qualify for the small business exemption and there is NO reason you would want to deal with the inventory mess if you don't have to. The following is from IRS publication 334. Following is a link to the publication and the section dealing with inventories.
https://www.irs.gov/publications/p334#en_US_2022_publink10005555
Inventories
Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use an accrual method for purchases and sales of merchandise.
Exception for small business taxpayers.
If you are a small business taxpayer, you can choose not to keep an inventory, but you must still use a method of accounting for inventory that clearly reflects income. If you choose not to keep an inventory, you won’t be treated as failing to clearly reflect income if your method of accounting for inventory treats inventory as non-incidental material or supplies, or conforms to your financial accounting treatment of inventories. If, however, you choose to keep an inventory, you must generally use an accrual method of accounting and value the inventory each year to determine your cost of goods sold in Part III of Schedule C.
Small business taxpayer.
You qualify as a small business taxpayer if you (a) have average annual gross receipts of $27 million or less for the 3 prior tax years, and (b) are not a tax shelter (as defined in section 448(d)(3)). If your business has not been in existence for all of the 3-tax-year period used in figuring average gross receipts, base your average on the period it has existed, and if your business has a predecessor entity, include the gross receipts of the predecessor entity from the 3-tax-year period when figuring average gross receipts. If your business (or predecessor entity) had short tax years for any of the 3-tax-year period, annualize your business’ gross receipts for the short tax years that are part of the 3-tax-year period. See Pub. 538 for more information.
Treating inventory as non-incidental material or supplies.
If you account for inventories as materials and supplies that are not incidental, you deduct the amounts paid or incurred to acquire or produce the inventoriable items treated as non-incidental materials and supplies in the year in which they are first used or consumed in your operations. Inventory treated as non-incidental materials and supplies is used or consumed in your business in the year you provide the inventory to your customers.
Financial accounting treatment of inventories.
Your financial accounting treatment of inventories is determined with regard to the method of accounting you use in your applicable financial statement (as defined in section 451(b)(3)) or, if you do not have an applicable financial statement, with regard to the method of accounting you use in your books and records that have been prepared in accordance with your accounting procedures.
Changing your method of accounting for inventory.
If you want to change your method of accounting for inventory, you must file Form 3115, Application for Change in Accounting Method. See Change in Accounting Method, later.
dbfolks166mt
·3 years agoFirst you may have spent a lot of time adding up what you could easily have pulled from eBay. If you go to your seller hub select Payments and in the drop down select Reports set the year for last year and it will give you those totals.
However hang on to your spread sheet for your own records since it has things like your cost of what you paid for the item which eBay will not know Also there are other expenses that you can deduct like packing materials, printer ink, tape and other supplies you used to support your selling/shipping activities. You can also deduct mileage you drove to pickup items you sold, trips to the post office.... The following IRS publication will provide more information than you probably want to know about filling out your schedule C.
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
I am not familiar with the tax package you are using so I am not sure where you are getting the negative numbers and/or losses. Are you doing this for individual items? If you are for tax purposes the IRS does not care about individual items they only care about the aggregate total. Does the tax package have any informational help files on what those items are?
lrdave35
OP3 years agoWell the first confusing thing for me was trying to decide if I want to report like a business or personal items sold. I went the personal items route which requires filling out a Form 8949 Capital Gains and Losses and 1040 schedule D. But then the tax software asked me to report each individual item sold. You also have to find the date that you purchased it so it gets report as long term or short term asset. Freaking nightmare for people like me who just want to online garage sale their stuff.
lloydsteventaylor
·3 years agoon here you will probably get many differing responses. my suggestion is see a tax preparer at least your first year. i would choose to report as a business which is much easier. you should be on a schedule c in taxact.
the most important question is did you receive a 1099 from ebay. if yes you have to report the 1099 amount as your gross sales on schedule c. it must match.this is very important . i see at least 2 things you can deduct: mileage at the standard mileage rate and supplies especially shipping supplies. that would reduce your net income even more. there may be other expenses i dont know.
dnasilver
·3 years agoSpend the money on a CPA so you can get the proper information. Capital Gains & Losses is for investment income.
dbfolks166mt
·3 years agoWell the first confusing thing for me was trying to decide if I want to report like a business or personal items sold. I went the personal items route which requires filling out a Form 8949 Capital Gains and Losses and 1040 schedule D. But then the tax software asked me to report each individual item sold. You also have to find the date that you purchased it so it gets report as long term or short term asset. Freaking nightmare for people like me who just want to online garage sale their stuff.
As that explains it. If you are in fact doing it using Form 8949 then yes it is going to ask you for each individual gain and loss. If you have a limited number of transactions that would probably easier. You may find using the schedule C and reporting like a business to be much easier since you use aggregate totals.