Transitioning from Hobby to Business
Hello, everyone!
I've been using eBay since 2007 and have sold some things here and there every now and then.
I quit my job to be able to take care of my mother. I have been selling some things that I personally owned, but have also been reselling things for profit since the beginning of October.
I understand there is a tax criteria to determine whether this is a hobby or business. I have tracked my Cost of Goods and profit for my own curiosity and this would be my primary source of income at this time.
I have just recently started looking into how I would be able to file my taxes as a business. The one thing that has me concerned is I have not kept my receipts for all the items I have bought to resell. They are all less than $75 which I have read is not so much an issue, but I do not know the date I purchased the goods to satisfy that basic requirement. I also have been paying with cash and using my personal debit card for expenses which I understand mixing personal and business finances to be frowned upon.
Should I just file as a hobby this next tax season and start 2024 fresh with the things that I know now?
Any advice would be appreciated. Thank you! 🙂
dbfolks166mt
·2 years agoNobody on this forum knows enough about your particular situation and all of the details to offer you solid advice other than you have to claim the income on your taxes, or at least you should. You will probably get a 1099 as it looks as though you will break the $600 issuance threshold.
You do not declare you activity as a hobby the IRS makes that determination. Best advise would be to talk to a tax advisor there are just too many individual aspects to filing taxes it is difficult to speak or offer advise on detailed specifics.
If you are going to continue to sell you have already caught onto a couple of things that help with both business and taxes. First is to have a separate bank account for your eBay transactions as well as a separate CC or debit card and of course keep all receipts and start a spreadsheet to keep track of your sourcing activities regardless of whether you obtain a receipt for something you bought at a garage sale or not. Your eBay fees and shipping expenses are easily pulled from eBay and/or other system reports.
dnasilver
·2 years agoJust to add to db's comments. We concur that seeking advice from a CPA or Tax Attorney is advised since everyone has different financial situations. Skip the thought of "hobby". There are no longer any deductions available for hobbyist.