Tax questions for sellers with 50k or more in annual sales
Hello all!
Happy New Year!
I’m just wondering if anybody cares to share or offer any tips and or suggestions as far as 1099K forms go for sellers above the threshold. I feel like all the tax advice is for the small time sellers (for hobby) not income. I plan on hiring a CPA however, I’d love to do some prior research on my own and better understanding. I cannot locate even one YouTube video for DIY for sellers that sell at a higher bracket thank you so much in advance
29 comments
looksgoodfromhere
OP2 years agoSo much advice and key points, I’m more confused then ever. I need to find a CPA who is familiar with eBay’s process etc. I had a virtual appt with one at H&R Block and it was so awkward! She was so inexperienced and clueless Let’s see what Google turn up when searching “CPA for e-commerce
thank you all!!!!!
kensgiftshop
·2 years agoI hope H&R Block has got better since I used them.
The first full year of online selling, I decided to go through them and they had no idea about online sales.
I've always done my own taxes and thought it would be easier to have someone else do it, boy was I wrong.
Had to pay them a little over $300 and pretty much had to explain to them how to do it.
This was either in 98 or 99.
mam98031
·2 years ago@looksgoodfromhere
See if these help.
https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-1099-K/ba-p/33141019
https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses
https://www.irs.gov/businesses/gig-economy-tax-center
https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html
https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
chapeau-noir
·2 years agoFWIW, I exceeded 50k/yr and just use TurboTax home and small business.
mam98031
·2 years agoThat is the way I do it too, for years. It has served me well.
mr_lincoln
·2 years agoHi @looksgoodfromhere
-Download the IRS Schedule C AND the Instructions, read the instructions for the various sections for deductions to help reduce your tax burden
-Deductions may include:
Mileage driven for your eBay business to ship items, pick up inventory, packaging materials, etc. at 65.5 cents per mile (for 2023) driven on your personal vehicle, square footage in your home used for the business up to the limits on the Schedule C, Refunds issued, out of pocket shipping you paid, cost of packaging materials, ink for printer, paper, etc.
-You will need a beginning and ending value of your inventory
-I complete the Schedule C and then include it with my other tax info and submit it to a CPA
luckythewinner
·2 years agoOMG don't fall into the trap of accrual accounting or accounting for your inventory unless you have to.
If your business does less that $27 million a year, you can use cash basis accounting and treats inventory as non-incidental material or supplies.
See IRS publication 334 for an explanation of treating inventory as non-incidental material or supplies, if you can do this it will save you a lot of grief.
"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".
dbfolks166mt
·2 years agoOMG don't fall into the trap of accrual accounting or accounting for your inventory unless you have to.
. Agree 100% on avoiding inventory reporting if you are able to do so under the exclusion. Not so much on the accrual accounting. I have always declared accrual accounting on my schedule C because of the simplicity of doing so. Your own personal accounting method covers not only the eBay portion of your reporting but all other aspects as well. Since I use the accrual method I account for revenues and expenses at the time they are recognized or incurred rather than when the cash flows. Cash accounting can become complex in the last couple of months of the calendar year since revenues and expenses are recorded based on the flow of the cash. If you purchase something in November of 2023 and put it on your CC, pay your statement in late December but the funds are not taken from your bank account until January 2024 with cash accounting that is a 2024 expense, with accrual it's a 2023 one.
Unavailable member
·2 years ago💯
cash basis is so much easier - AND allows for earlier expense recognition, lowering your tax bill today. Not sure why anyone would want to recognize a real expense years from when it was incurred.
mam98031
·2 years agoI agree. I've done my books on the cash method since I started selling on the internet some 25 years ago.
mam98031
·2 years agoI use the Cash Accounting method not Accrual Accounting. Far easier for me. IRS just wants you to be consistent. Pick a method and stick with it.
This IRS publication can help a new seller to decide what method is best for them.
https://www.irs.gov/pub/irs-pdf/p538.pdf
Exception for Small Business Taxpayers
If you are a small business taxpayer (defined below), you
can choose not to keep an inventory, but you must still
use a method of accounting for inventory that clearly reflects income. A small business taxpayer can account for
inventory by (a) treating the inventory as non-incidental
materials and supplies, or (b) conforming to its treatment
of inventory in an applicable financial statement (as defined in section 451(b)(3)). If it does not have an applicable financial statement, it can use the method of accounting used in its books and records prepared according to
its accounting procedures. See Regulations section
1.471-1(b). If, however, you choose to keep an inventory,
you generally must use an accrual method of accounting
and value the inventory each year to determine your cost
of goods sold.
dbfolks166mt
·2 years agoI use the Cash Accounting method not Accrual Accounting. Far easier for me. IRS just wants you to be consistent. Pick a method and stick with it.
. Glad the cash method works well for you, it does for a lot of businesses especially smaller ones or individuals. I am just the opposite however since I have way too many expenditures that occur in one calendar year but the cash does not move until the next calendar year so I simply use the accrual method rather than trying to follow the cash flows for hundreds of expenses.
There are pro's and con's to both which is why I suggested this be one of the things the OP talk to their accountant about.
mr_lincoln
·2 years ago@mam98031 You hit a key point on filing taxes for something like selling online ... be consistent, pick a method for certain things and stick with it.
mam98031
·2 years ago@mr_lincoln
That method can actually serve us well in all kinds of things. Being consistent can help you find problems with they arise and all kinds of different things in our lives. Its also good for our sanity to set up procedures for ourselves to follow. It just makes all kinds of things in life easier IMHO.
mr_lincoln
·2 years ago@mam98031
Very true, reminds me of times when I was a Service Engineer out on a customer's production line troubleshooting a machine in order to fix it to get the production line running again. That of course followed half to a full day of travel to the site, (flying, renting a car, driving to the plant, etc) ...
And of course doing the troubleshooting while the Maintenance Manager, Production Manager and all Line Workers "patiently" waited LOL!
mam98031
·2 years agoOK here I go dating myself. I was a bookkeeper long before books were kept on a computer. Being consistent is what kept my sanity. Because when that big ledger book ended up being out of balance I had to work until I found the issue. So being consistently right or consistently wrong, being consistent really help to find and fix things much easier.
Back in those days I really would have gone nuts if I did things one way one day and another way the next.
dbfolks166mt
·2 years agoA couple of the more important things to ask your CPA about is the type of accounting method you report on your schedule C. If this is your first time filling out a schedule C you have to declare the type of accounting YOU use not eBay. The main two are accrual and cash accounting and both have their pro's and con's but once you declare you have to remain consistent in that declaration year to year. You can change but it is a pain. The other is inventory. Most small sellers generally do not report inventory under the small seller exemption but if you do report inventory you have no choice in your accounting method and MUST use the accrual method.
soh.maryl
·2 years agoRather than ask for advice here, regardless of your level of sales, it's really best to seek the advice of a tax professional.
mam98031
·2 years ago@looksgoodfromhere
Keep in mind that a 1099K reports your Gross Receipts, NOT your Gross Income. It reports the total money that came into your MP account on Ebay without any deductions for anything. So you have to subtract refunds, shipping and Ebay fees to arrive at your Adjusted Gross sales before other costs to arrive at your net taxable income.
Ebay reports go by Payout dates as to other sites. If the Payout date was in 2023, then those numbers will be on your 1099K. If the payout for some of your 2023 sales does not happen until 2024, those sales will be on your 2024 1099K, well if you get one.
Just to always keep us on our toes. For some reason on the 1099K Ebay help page they call it Settlement date. But in MP it is called the Payout date. I've asked why they did this, but no one comes up with a good answer nor have they changed it.
luckythewinner
·2 years agoI'm not sure I understand why a 1099-K would get handled any differently for a large seller than for a small seller.
If you have $50K+ in income without a 1099-K, you report the $50K in income on your return and deduct you expenses.
If you have $50K+ in income with a 1099-K, you report the $50K in income on your return and deduct you expenses.
What specific advice are you looking for beyond that?
mam98031
·2 years agoYou likely can't find a YouTube video because whether you get paid $1,000, $10,000 or $50,000, the tax rules are the same for everyone. Now you may end up in a different tax bracket, but the rules are the same. So I'm unsure what you think you are looking for!?!?
https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-1099-K/ba-p/33141019
https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses
https://www.irs.gov/businesses/gig-economy-tax-center
https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html
https://www.irs.gov/pub/taxpros/fs-2022-41.pdf
tobaccocardyahoo
·2 years agohttps://www.irs.gov/forms-pubs/about-publication-583
And remember you have to pay quarterly estimated income taxes.
It is not that complicated and you could do what you need to without professional help.
Sometimes you are better off without professional help if the accountant knows nothing about your business.
theteamsetguy
·2 years ago@tobaccocardyahoo ,
A good CPA will ask questions and get to know the client and their business. The OP indicated he was in a high tax bracket. Therefore, the OP would probably benefit from using a CPA.
tobaccocardyahoo
·2 years ago@theteamsetguy
A CPA who asks lots of questions will often run up a substantial bill, may then attempt to justify their fee with questionable deductions, which cannot be substantiated, and $50K is not a income or high tax bracket.
I have had CPAs do my taxes and refused to sign the returns they prepared, and done it myself.
You do not have to be a genius to do tax returns, you just have to keep records, follow instructions, and be honest.
theteamsetguy
·2 years ago@tobaccocardyahoo ,
That is not been my experience.
slippinjimmy
·2 years agoI think you misinterpret the OP's comment about "higher bracket", I think they are referring to sellers doing more business than those real small timers that are selling just a few thousand.
50k of gross revenue isn't much really in terms of taxation, after expenses it's likely to be in the 2nd lowest tax bracket.
Unless your net is well into 6 figures there isn't really anything different in the reporting, deductions etc than someone grossing 10k.
I tend to agree with @tobaccocardyahoo, a CPA that is not familiar with eBay and/or Marketplace selling in general is probably not the best choice.
This article contains a list of books (yes actual book printed on paper) that can give you all you really need to know about small business accounting. If you can keep the right records the actual tax return part for a sole-proprietorship is actually pretty simple stuff.
theteamsetguy
·2 years ago@looksgoodfromhere ,
My suggestion would be to hire a CPA . Yes, I know they cost money but a good one will save you a lot more money in taxes than what they charge. Don't be penny wise and pound foolish.
You go to the doctor for medical advice why would you not go to a CPA for tax advice? A CPA will know your specific situation. No one on a public chat board will know your financial situation well enough to give you good advice.
dbfolks166mt
·2 years agoNot sure if you will be filing using a Schedule C but the IRS instruction may be a good starting place.
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
nobody*s_perfect
·2 years agoI agree: Start with Schedule C and its instructions. That will give you plenty of insight into how the IRS sees things like expense reporting, and a head start on making the best use of a paid expert's time such as gathering up the relevant receipts, eBay summary reports, etc.