Taxes and Expenses
After subtracting eBay fees, shipping cost, packing material, refunds, mileage ect I showed a basic take home of under 7k. No worries there because it's just a fun hobby to keep me active during retirement. However the difference in my taxes is over $2100. Can 7k make that much of a difference? Do these expenses come off your gross at 100%? or does turbo tax only let you have a percentage of your basic expenses? A little annoyed tonight. Thanks for any help you can give.
28 comments
kathysflatware
·2 years ago“Taxpayers may be qualified for a health insurance premiums deduction if they are self-employed or have income from a side business.â€
I missed this last year. You can deduct premiums if you pay for your own medical insurance, like Medicare. Also those costs for your spouse, if you file jointly.
I found this out when I read a piece about overlooked tax deductions for seniors with a side gig. May have been NY Times, but I’m sure you can find it quoted other places. Checkout the IRS regulations. It might be worth having someone who advises seniors on taxes help you out or have a professional tax preparer advise you.
southern*sweet*tea
·3 years agoSocial security retirement? https://www.ssa.gov/benefits/retirement/planner/taxes.html
Hubby's only source of income is SS retirement - he is 73, so well past the full retirement age. My income is split from working a part-time outside job and my online gigs. Our combined income last year (we file jointly) was just under $30k. We got a $149 refund. I did file quarterly taxes last year, but won't this year since I have my offline employer take out extra so I don't have to fool with the SE filing.
No tax was owed on his SS retirement. It all depends on how much you make.
"You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:
dbfolks166mt
·3 years agoSocial security retirement? https://www.ssa.gov/benefits/retirement/planner/taxes.html
You have two different things mixed together in your response.
Hubby's only source of income is SS retirement - he is 73, so well past the full retirement age. My income is split from working a part-time outside job and my online gigs. Our combined income last year (we file jointly) was just under $30k. We got a $149 refund. I did file quarterly taxes last year, but won't this year since I have my offline employer take out extra so I don't have to fool with the SE filing. Regardless of whether you paid quarterly taxes if you file a schedule C and have income from your eBay, or other venue(s), selling activities you still have to file the SE form with your taxes. That revenue is still taxable at a rate of 15.3%.
No tax was owed on his SS retirement. It all depends on how much you make. This is accurate as is the following but it is different from what is above.
"You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:
southern*sweet*tea
·3 years agoI report the income, I just won't make the estimated SE tax payments, as there will be no need since I have my offline employer do that now. You only have to do the SE quarterly payments if you expect to owe $1000 or more in taxes.
https://www.irs.gov/payments/pay-as-you-go-so-you-wont-owe-a-guide-to-withholding-estimated-taxes-and-ways-to-avoid-the-estimated-tax-penalty
"Who May Need to Pay Estimated Taxes
Individuals, including sole proprietors, partners and S corporation shareholders, may need to make estimated tax payments if:
"Having enough tax withheld or making quarterly estimated tax payments during the year can help you avoid problems at tax time.
Taxes are pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive income, rather than paying at the end of the year.
There are two ways to pay tax:
This will help you avoid a surprise tax bill when you file your return. You can also avoid interest or a penalty for paying too little tax during the year. Ordinarily, you can avoid this penalty by paying at least 90 percent of your tax during the year."
"Why you should change your withholding or make estimated tax payments
If you want to avoid a large tax bill, you may need to change your withholding. Changes in your life, such as marriage, divorce, working a second job, running a side business or receiving any other income without withholding can affect the amount of tax you owe. And if you work as an employee, you don't have to make estimated tax payments if you have more tax withheld from your paycheck. This may be a convenient option if you also have a side job or a part-time business."
dbfolks166mt
·3 years agoI report the income, I just won't make the estimated SE tax payments, as there will be no need since I have my offline employer do that now. You only have to do the SE quarterly payments if you expect to owe $1000 or more in taxes.
That makes perfect sense. When I first read your response I had assumed that you meant you didn't have to file the SE form with your income tax.
stainlessenginecovers
·3 years agoPosts #7 and #13 says it all.
You have to pay 15.3% Self Employment Tax ON TOP of Federal Tax on that $7000.
But, know that 50% of the Self Employment Tax is a write off against the initial Gross (along with fees, shipping and many possible other things)
ms.rodriguez*
·3 years agoMy accountant just did mine and I did not have to pay anything towards social security. I'm retired. I just turned 65 too. It does not make sense to pay social security tax if you are already retired. I am wondering if my guy made an error.
dbfolks166mt
·3 years agoMy accountant just did mine and I did not have to pay anything towards social security. I'm retired. I just turned 65 too. It does not make sense to pay social security tax if you are already retired. I am wondering if my guy made an error.
It's possible they did but not enough information to know how they prepared your taxes and if you had net revenue from eBay or any other source. While you may be retired you are still required to pay social security and Medicare taxes on income that you have not already paid those taxes on.
nobody*s_perfect
·3 years agoIf you filed a Schedule C and made a profit, then the amount from line 31 would go onto Schedule SE, which figures out your Self Employment Tax, which is the alternative name for the social security tax paid on self-employment earned income. If you filed as a hobby seller who made no profit, then you wouldn't have a Schedule C which is generally used for businesses.
Paying Social Security tax is based on your earned income, not on your age. In fact, if you earn enough, then your social security income would be taxed.
https://www.ssa.gov/benefits/retirement/planner/whileworking.html
mightymouse
·2 years agoYou need to pay SS taxes on your profit no matter what your income is. I pay 3000.00 a year and I've been collection SS for 8 years now.
babsklassykloset
·3 years agoI feel your pain. I can't give you any insight, just support. I too am in this same boat with the tax situation.
My husband is self employed and we already pay out fair share because of that, but when you add my approximate 7K as well from eBay it caused chaos tax wise.
My social security is being taxed this year because of my wanting to supplement my already meager monthly check.
Sigh.....deleted most of my listings and am in the process of a fire sale on those left. I cannot see the point in paying to work.
I wish the best in what you decide to do.
toysaver
·3 years ago"After subtracting eBay fees, shipping cost, packing material, refunds, mileage ect"
I also subtract the cost of the item.
luckythewinner
·3 years agoIncome tax in a 22% tax bracket on 7K would be is $1540.
Self-employment taxes of 15.3% on 7K would be $1071.
luckythewinner
·3 years agoBut you should be able to just print out your form and see what your net taxable income form your business was.
caldreamer
·3 years agoNormally your social security checks is not taxed (but if you earn too much money then your social security checks become taxable).
harafkac0
·3 years agoFirst off, self-employment capital gain does come in at around 30%.
That said, make sure you explore all of your deductions and specifically whether you wish to operate this ebay thing as a hobby or a business. And while I could certainly elaborate eloquently, I prefer to refer you to this article:
https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L7h6uJr0i
thelongball
·3 years agoMaybe a dumb question but did you take off your COG (cost of Goods Sold) which you have to have receipts for. Best to talk to tax professional though.
slippinjimmy
·3 years agoCan 7k make that much of a difference?
That would depend on how much other income you have.
dirk12955
·3 years agoThe OPs % of taxes owed is similar to what I ended up owing. I made enough net profit for it to affect my
Social security.
It's very confusing and best left to an accountant.
dbfolks166mt
·3 years agoThe OPs % of taxes owed is similar to what I ended up owing. I made enough net profit for it to affect my
Social security. Not sure if that is a good thing or a bad thing but congrats on selling that much.
It's very confusing and best left to an accountant. Agree. Fortunately I am one so I do my own taxes but at times I still have to check things because the laws keep changing.
dbfolks166mt
·3 years agoThe expenses should come off at 100% and you can look at your schedule C to verify that. How much you pay in taxes on the net income depends a lot on your filing status and what tax bracket you are in. If the $7K net income caused an additional $2.1K in taxes that would be about 30% which is high but as
@nobody*s_perfectmentioned that probably also includes the SE tax which I believe is at 15.3% on the first $147K.
Difficult to say for sure without seeing more details which you probably don't want to post on a public forum but make sure you double check your figures.
dirk12955
·3 years agoThat amount sounds pretty accurate.
I'm also drawing SS
Did the OP claim the home office expenses?
nobody*s_perfect
·3 years agoCheck Schedule SE. In addition to income tax, you also have to pay Self Employment tax on your net, in lieu of Social Security payments.
richard1rst
·3 years agoAND as you are considered self employees you pay DOUBLE the normal rate of SS tax ( meaning you pay 15.3%)
dbfolks166mt
·3 years agoAND as you are considered self employees you pay DOUBLE the normal rate of SS tax ( meaning you pay 15.3%)
It's not that you pay double but for self employed you pay the whole SE amount whereas when you are working as an employee the employer pays half. The rate is still the same it's just you are paying 100% of it.
bigoljim47
·3 years agoSome people forget. If you are doing work from your home you can use a certain amount for deduction. This also include electricity, home owner insurance. I have a Lady she is a CPA I have used her for many years. She does Taxes for several small companies . . There is a formula to get these amount. I never knew there were so many things that can be deducted, I gladly pay her the $200 each year, because she has saved me a lot of money
nobody*s_perfect
·3 years agoIt's not quite that bad; take a look at Schedule SE. First, you multiply the net income from Schedule C by 92.35%. Then your self-employment tax is 12.4% (not 15.3) of that. And then you can deduct 50% of that amount on your 1040 Schedule 1 (line 15).
https://www.irs.gov/pub/irs-pdf/f1040sse.pdf
dbfolks166mt
·3 years agoIt's not quite that bad; take a look at Schedule SE. First, you multiply the net income from Schedule C by 92.35%. Then your self-employment tax is 12.4% (not 15.3) of that. And then you can deduct 50% of that amount on your 1040 Schedule 1 (line 15).
https://www.irs.gov/pub/irs-pdf/f1040sse.pdf
Actually it is 15.3% of which 12.4% is Social Security and the other is 2.9% for Medicare. The Medicare goes on line 11 of the 1040 SE. But you do get to factor in both when doing the 50% calculation.