2022 - 20k Sales reported how much do I have to pay to IRS

[wayuuki]

I sold about 20k on ebay during 2022 and after paying ebay fees, USPS shipping fees, item cost, gas, etc... I ended up making 2k profit . IRS sent me an offer letter with a Proposed amount due for 5.5k

How come they want me to pay 5.5k on something I earned 2k.... please help...

[chariot_badges]

Google the term "self employment tax".

And weep.

Hey, we voted for these clowns.

We did this to ourselves.

It must be what we want.

[chapeau-noir]

Was it an offer in compromise? If you ended up with only 2.2k profit, you only have to pay tax on that 2.2k profit so I'm not sure where 5.5k came from. Are they questioning your deductions or did you not file?

(Self-employment tax - 15.3% - pays into SS and medicare and is 50% deductible - I paid it for about 20 years, which is why I now have SS instead of working until I'm 95).

[theteamsetguy]

@wayuuki ,

How come you didn't declare the eBay income on your 2023 income taxes? I don't have the letter from the IRS but I'm sure there was interest and penalties included in the $5,500.00. The penalties for not declaring income are very severe as they should be. 

At this point I would highly suggest you google a CPA in your area and contact them. If you don't want to contact a CPA you can call the IRS and they can set you up on payment plan. The down side to a payment plan is the interest and penalties continue to be added to your back taxes until you pay it off. 

Also, how long have you been selling on eBay and not declaring your income? Because now that you are on radar of the IRS for under reporting income your chances of getting audited for prior years increases dramatically. Don't be surprised if you hear from IRS for prior year tax returns. The statue of limitation for back taxes is 10 years. However, if the IRS determines your willfully underreported your income, they can go back as long as they want because the statute of limitation does not apply for tax payers who willfully under report their income. 

Hope this helps. 

[wayuuki]

I filled out 2022 taxes so early without knowing ebay will generate a 1099 on 2022. My accountant said to me to wait until this year for IRS amendment and recently received this letter ( off course they are charging $ 304 Interest ) , but how come they came up with 5.5k proposed amount on a 2.2k net earnings ?

Im not an expert with this tax issues...

[wayuuki]

Previous years I did not get a 1099 because i did not sold the required amount $$ or # of sales . 

2022 is the first year that eBay generates a 1099 for me

[krazzykats]

Sounds like you need to amend your return for 2022.   I'd have my accountant do it, that's what I pay them for.

There's a form for that.

[wayuuki]

Correct , that is what I'm doing right now. What I don't understand is how come IRS proposed me to pay 5.5k for 20k sales on 2022 and for which i made net earnings of 2.2k

[theteamsetguy]

@wayuuki ,

Just because you did not receive a 1099 does not mean you were not required to report the income.

https://stewardingram.com/how-to-report-self-employment-income-without-a-1099/

[remote_controls_and_more]

How would the IRS know how much profit and loss you had with your ebay business if you didn't report your income and losses to them? Is this your first time having a job? You have to report your income every year , doesn't matter if you get a 1099 or not.

[wayuuki]

Im now focus only wity 2022 IRS PROPOSED pay amount.... thanks for your comments 

[ajs_coins_and_alchemy]

Am I crazy? It sounds like your $5.5k is taxes on the full 20+k and I'm guessing you never filed the expenses & deductions

If you didnt file your 1099 and expenses and all that, they are assuming 20k in taxable income. Your 1099 reports your gross receipts and you need to deduct all your expenses/deductions from that ... How can they know your $2,200 net income if you didn't file expenses/deductions? 

[wayuuki]

Only IRS will assume you must pay 5.5k out of 20k Sales....

[ajs_coins_and_alchemy]

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@wayuuki wrote:

Only a clown will assume you must pay 5.5k out of 20k Sales....

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Are you kidding? The IRS doesn't assume anything. You have a reported 20k in gross receipts. Thats your income until proven otherwise

[remote_controls_and_more]

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@wayuuki wrote:

Only a clown will assume you must pay 5.5k out of 20k Sales....

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Maybe you should just ignore the IRS letter like you did with the filing of your income for your 2022 taxes. It will probably just go away.