Sold items that I bought, paid tax on, sold for profit (or loss) and filing taxes
Thanks for receiving this question, I hope someone can provide clarity.
In 2022 one of the items I sold on eBay, it sold for $535.55. The fees were $46.65 so the net was $488.90.
I paid $250 for the item. Tax was $22.29 for a total of $272.19. I can printout the actual receipt
The difference between the net on eBay and total I actually paid for the item is $216.71
Yet the 1099K in section 5 shows $535.55
Does anyone know the protocol when filing taxes? Am I responsible for paying tax on $535.55 (and other items I sold) even though the net for this particular item was $488.90?
Many thanks for any and all help. If this helps, I sold five items on eBay in 2022. I can actually provide a receipt for each item that I purchased but does it make a difference when the item was purchased? For instance the item that sold for $535 I bought in 2018 but it was brand new never used and even described that way when selling it.
714ricki
·3 years agoYou would report the full amount, then you apply all the eligible deductions.....cost of good, fees, shipping, etc. Any taxes will be based on the profit from the item.
caldreamer
·3 years agoIRS requires that you report "gross income" as shown on 1099. Then you deduct "business expenses" on Schedule C on Federal income tax form. You can only take deductions if you file as a " business".
You deduct all business expenses (costs of goods sold, EBAY fees, shipping (cost to print label) packing materials, office supplies). You pay taxes on "net income" after all business expenses deducted.
monica-sells
·3 years agoexcellent advice in this thread...clear and concise....
to break 1 point down for clarity, you said...
"...Being that I'm not a business, just an individual getting rid of items..."
It is to your advantage to classify your selling as a "business".....
if you don't consider it a business, you do not get the advantages of reducing that top line with simple, valid deductions/expenses......
so, although it is just a 'side hustle', it still loosely follows the definition of a "business".....
don't be afraid of Schedule C, it is your friend
luckythewinner
·3 years agoThe 1099-K shows gross payments received, not net profit. That is what the law passed by congress requires.
If you are selling as a business, the protocol would be to use Schedule C to report $535.55 as income, $46.65 as fees & commissions, $272.19 as cost of goods sold. You can also deduct the cost of shipping and packaging as an office expense.
It is not eBay 's job to keep track of your income and expenses, and the IRS requires you to report all your income and expenses, not just your net profit. Just like your math teacher, they want you to "show your work".
doublepromo
OP3 years agoThank you very much for answering this for me. I'm not a business. It's just items (clothes, electronics) that I've had, some never used/worn and rather than chuck the items or donate (I still do donate here and there) if there is a profit to be made, I use eBay. Although I've sold items on eBay for years, the "new" way that includes the 1099K is unfamiliar territory.
Being that I'm not a business, just an individual getting rid of items, do I still use Schedule C?
I'm all for doing the homework on this and I'm thankful for your straightforward answer. I actually did look this up a bit but many people give mini-dissertations before getting to the answer that's needed.
luckythewinner
·3 years ago"Being that I'm not a business"
Be a business.
All it takes is saying you are one and filing a schedule C.
Because if you do not file as a business, I do not think you cannot deduct expenses.
If you get a 1099-K you will pay taxes on the 1099-K amount unless you categorize it and make deductions against it. And generally, business tax rates are lower than capital gains tax rates.
nobody*s_perfect
·3 years agoIf you are doing it to make a profit, then you fit the IRS definition of a business. And you should have been reporting your income all along.
djvp53
·3 years agoOne thing to realize is that businesses under our tax code get better treatment than, you know, regular people. Businesses include "sole proprietorships" which is just a person selling a good or service. That includes me. I am just a person in business selling some stuff I bought. You don't have to operate through a corporation, LLC, LLP, or any other entity to be a business. You don't have to have a storefront or an office to be a business.
If you are business, you can deduct your expenses including your eBay fees, shipping costs, and the cost of goods sold. If you aren't a business, 100% of what you received will go on your tax return as income with no deductions. How strongly do you want to insist you aren't a business?
nobody*s_perfect
·3 years agoYou need to report the entire $535.55. Then you can deduct all of your expenses, including the purchase price, eBay fees, and whatever you paid for shipping. It doesn't matter when you purchased the item. Most eBay sellers use Schedule C, so take a look at that form and its instructions to get a better idea of how the IRS sees this.