albertabrightalberta
mam98031 • Volunteer Community Member • Buyer/Seller since 1999
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@css2001 wrote:The 2023 Form 1099-K reporting threshold question is asked here a lot. Whether you get a 1099 or not you still owe taxes for any third party payments you received as income.
Minor clarification (that's my ADD talking): You owe taxes on the NET of your reported sales, not the GROSS. 1099K is Gross, 1099K after legal deductions is NET.
My last partial year of consignment selling, before the '08 Recession mucked things up, I was on track to gross around $250K. The prior full-year had been nearly $200K. My taxes were calculated based on my NET income of around 27K for the full year and about half that for the partial year (didn't do much of anything after closing shop - no one was hiring).
Cost of Goods, cost of shipping supplies, cost of shipping charges, cost of my cellphone (allowed because I still had the 'land-line' for the house phone, printing supplies (paper & toner), a replacement thermal printer and an additional smaller thermal printer, even a new(er) computer that was used solely for the business (I've never been a gamer or streamer, odd after 20+ yrs in IT).
Point is, everyone is wetting themselves trying to figure out how to pay taxes on their entire eBay income. You don't. You track and document your deductions, deduct the ones that are actually allowed, and then pay income tax on the significanly lower net balance. You have to REPORT the gross (and the deductions), but you PAY on the net.
We now return to our regularly scheduled programming.....
-Bob.
Just because the issuance of 1099K forms has been postponed doesn't mean that we don't have to claim our income.
@css2001 wrote:The 2023 Form 1099-K reporting threshold question is asked here a lot. Whether you get a 1099 or not you still owe taxes for any third party payments you received as income.
Minor clarification (that's my ADD talking): You owe taxes on the NET of your reported sales, not the GROSS. 1099K is Gross, 1099K after legal deductions is NET.
My last partial year of consignment selling, before the '08 Recession mucked things up, I was on track to gross around $250K. The prior full-year had been nearly $200K. My taxes were calculated based on my NET income of around 27K for the full year and about half that for the partial year (didn't do much of anything after closing shop - no one was hiring).
Cost of Goods, cost of shipping supplies, cost of shipping charges, cost of my cellphone (allowed because I still had the 'land-line' for the house phone, printing supplies (paper & toner), a replacement thermal printer and an additional smaller thermal printer, even a new(er) computer that was used solely for the business (I've never been a gamer or streamer, odd after 20+ yrs in IT).
Point is, everyone is wetting themselves trying to figure out how to pay taxes on their entire eBay income. You don't. You track and document your deductions, deduct the ones that are actually allowed, and then pay income tax on the significanly lower net balance. You have to REPORT the gross (and the deductions), but you PAY on the net.
We now return to our regularly scheduled programming.....
-Bob.
Yes, IRS did make the change for the 2023 tax year. The expected change for 2024 to $5,000 is not yet firm. It is what they are considering doing. IMHO it is a likely change.
With that said, keep in mind this is JUST A FORM and nothing more than that. It does not mean you don't have to claim your income if you don't qualify to get this form. IRS requires us to report ALL income.
The 1099K form was born because of people selling on the internet and not claiming their income. It was a form create to help stop that. But again it is only a form and it does NOT set the threshold for reporting your income to the IRS.
For many that are only making a few hundred dollars here, the money needs to be claimed, but it isn't likely to create a big tax debt for you or anyone else after you take your expenses away. For the most part it is most likely to be a modest bottom line affect and some will find it has no affect at all due to their income bracket.
But claim you income with or without the form. IRS is moving in the direction of being much more serious about getting people to claim all their income.
@powell-memorabilia wrote:AND you can still get a home office deduction - unlike those that just have a home office for real jobs 🙂 AND you get mileage to and from the post office.
You can deduct any mileage properly recorded for any trip solely for business purposes. My CPA recommended keeping a ledger (a notebook) with date, time, odo-out, odo-in, and purpose of the trip. Trips that were deductable were accumulated and deducted. Trips that were not, were not.
My city does not allow storage of business inventory in residential areas, so I had to rent storage space in a commercial area - and that rent was deductable.
Since my inventory was not stored where I worked, there was mileage to/from the storage facility to pick up or drop off inventory. I was shipping twice a week back them, so I usually only had 3 trips a week.
Trips to/from my consignment client were deductable. I'd go for quick meetings and to pick up more inventory. Mileage was from home to client, client to storage, and storage to home.
I had an arrangement with the USPS carrier for my house - if the garage door was up, that meant I had orders to pick up. if the door was down, nothing was going out that day. FedEx arranged a twice-weekly pickup as well -- they don't do scheduled residential pickups, but my business was registered with the state, city, and county, so I got twice weekly pickups.
When it comes to deductions - talk to a professional. Chatter on the boards is a good start, but there were deductions I would have missed had I not hired a CPA to work with (flat annual fee, $25/mo paid annually) and had them identify what I could and what I could not deduct. They also explained the pros & cons of the home office deduction, how to get my cellphone deducted, and how to keep track of mileage, among a great many other things. They also prepared my quarterly tax filings and did our personal tax return each year - all part of the annual fee. They also explained the pros/cons of various business structures and helped me get my LLC set up.
Second best investment I made for the business - the first being SixBit and automating my work on MY desktop, not on eBay's (at that time) fledgling services. Even today, I can reload those old backups and review my listings from 1999 up thru today. Makes it super easy to identify my best customers, my best selling inventory, my profit margin (by sale, by sales, by item, by items, by customer, by customers, by state, by states.... you get the idea).
Today I'm back to hobbyist level - I have stock I'm selling, and I keep my stats good, but after working eBay all day at work, I'm less inclined to push my own accounts very hard. I learned work/life balance long before it was "a thing".
-Bob.
