Basic questions about tax filing

[viridians]

I'm well aware that it's best to consult a tax professional.  But I just wanted to ask a few basic questions so I'm sure I'm not getting things astronomically wrong.  My current understanding with taxes is that during tax reporting season you need: total sales, fees and taxes, and other expenses such as shipping.  Subtracting fees, taxes, and shipping (+) expense yields net sales.  Afterwards net sales has expenditures and all other deductibles subtracted assuming expenses are appropriate and can be readily proven with a receipt.  This yields the final taxable amount of which my taxes are based on.  
Basically: (Total sales - fees and taxes - selling costs (given on eBay) - expenditures (stock, equipment, etc) = amount owed to the IRS
Some questions:
Just to be sure, I'm not required to report my loss and profit item by item to the IRS.  The reporting would be a synthesis of my yearly totals of total sales, fees and taxes, and other selling expenses, off-eBay costs, and finally the claimed amount I owe to the IRS. Correct?
For collecting receipts, would bank statements be alone be substantial enough or would I have to go to the respective retailer's digital/physical receipt(s)?
Do I have to report month-month or in any other division other than a culminative year?

Here's a screenshot of a sample my spreadsheet of my calculations for amounts to report before expenditures for the first few days I sold on eBay.   

Thanks so much in advance!!!

[wes-4507]

You don’t report item-by-item, but you should have that info in case you’re audited.

[stoney45]

Often people forget other expenses such as the room where you work (square footage of the area) and the various costs of that area as a percentage of your house or rental.  And anythere else related and necessary to running that business...think printer, ink, computer, etc.   

[powell-memorabilia]

Most of us run on cash basis.  Plenty of ways to do it - there is no one way.  Me, I just use eBay payouts, then take out my other expenses (like inventory purchases, home office, mobile phone, internet, mileage, etc.).

[mybigsale]

The following channel answers a lot of your questions with free videos (he also appears to be a CPA). There appears to be many others giving TAX advice, some specifically in regard to filing eBay Taxes. They can be found with a simple search.

Not Your Dad's CPA - YouTube

[dbfolks166mt]

Most of us run on cash basis.  

     Do you have data to support that or are you guessing/assuming? I have always used accrual accounting on my schedule C. Cash accounting presents some issues at the end of the calendar year since it is based on the flow of the cash not when the expense or revenue was incurred. 

     Accrual and cash accounting, along with hybrid methods, each have their pro's and con's but accrual is the only one recognized by GAAP and is required for publically traded companies which of course most eBay sellers are not. 

[powell-memorabilia]

82% of sellers >$100,000 in revenue on eBay use cash basis accounting.  I appreciate your fastidious fact checking exercise.  And, we’re all glad to know that you are using an accounting method just in case you go public.  

[dbfolks166mt]

     A couple small changes. 

Basically: (Total sales - fees and taxes - selling costs (given on eBay) - expenditures (stock, equipment, etc) = amount owed to the IRS  Taxable Income +/-. You can have a loss. 

     If you are referring to sales tax you do not pay that the seller does. 

Some questions:
Just to be sure, I'm not required to report my loss and profit item by item to the IRS.  The reporting would be a synthesis of my yearly totals of total sales, fees and taxes, and other selling expenses, off-eBay costs, and finally the claimed amount I owe to the IRS. Taxable income Correct?

If you are filing taxes and using the schedule C your above assumptions are basically correct. You should take a look at the schedule C and the IRS pub that goes with it. It will answer a lot of your questions or maybe generate more. 

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf  

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf 

For collecting receipts, would bank statements be alone be substantial enough or would I have to go to the respective retailer's digital/physical receipt(s)?
Do I have to report month-month or in any other division other than a culminative year? You only do your taxes once a year but some sellers make quarterly payments based on projected revenues to avoid possible year end penalties for not paying enough tax during the year. 

     Everyone's situation is unique and if this is your first year filing and reporting business income you should talk to a tax accountant professional it will be money well spent. 

[viridians]

Thank you so much for your reply!  So to clarify, receipts alone are not sufficient?  I'm already beginning to form a proper book keeping process, but I'll definitely keep that in mind so that I can work on data presentation, proper formatting, and just being more careful with nuances.

[dbfolks166mt]

82% of sellers >$100,000 in revenue on eBay use cash basis accounting.  I appreciate your fastidious fact checking exercise.  And, we’re all glad to know that you are using an accounting method just in case you go public.  

     You have a source for that figure? The biggest issue with cash accounting is at the end of the year. Items you paid for in December of 2023 may not be an expense in 2023 depending on when your bank moved the cash to the CC company. If you sell an item in the last week of 2023 then it may not be revenue for 2023 depending on when the cash actually hits your checking account not when eBay "sends the payout". 

     I did accounting work for several years and always recommended accrual to my clients for it's simplicity in not having to track the cash flow. If you are selling 100's of little items it can become tedious to get the books to balance. 

[sin-n-dex]

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@viridians wrote:

I'm well aware that it's best to consult a tax professional.  But I just wanted to ask a few basic questions so I'm sure I'm not getting things astronomically wrong.  My current understanding with taxes is that during tax reporting season you need: total sales, fees and taxes, and other expenses such as shipping.  Subtracting fees, taxes, and shipping (+) expense yields net sales.  Afterwards net sales has expenditures and all other deductibles subtracted assuming expenses are appropriate and can be readily proven with a receipt.  This yields the final taxable amount of which my taxes are based on.  
Basically: (Total sales - fees and taxes - selling costs (given on eBay) - expenditures (stock, equipment, etc) = amount owed to the IRS
Some questions:
Just to be sure, I'm not required to report my loss and profit item by item to the IRS.  The reporting would be a synthesis of my yearly totals of total sales, fees and taxes, and other selling expenses, off-eBay costs, and finally the claimed amount I owe to the IRS. Correct?
For collecting receipts, would bank statements be alone be substantial enough or would I have to go to the respective retailer's digital/physical receipt(s)?
Do I have to report month-month or in any other division other than a culminative year?

Here's a screenshot of a sample my spreadsheet of my calculations for amounts to report before expenditures for the first few days I sold on eBay.   

Thanks so much in advance!!!

---

I don't do IRS tax forms because I live in Canada, but I am a bookkeeper by trade (in Canada).

What I do, is save to PDF every single payment screen and every single sales record into folders month by month, in the event of an audit. I use a spreadsheet to track everything so I have my totals for tax forms.

It might be overkill, but in my business the audit might not come from Revenue Canada, but the coin shop could get an audit that involves looking at what I'm doing for them. I keep records to make sure I will pass an audit and it will be easy for them to do.

C.

[nobody*s_perfect]

Take a look at IRS Schedule C and you will see that you are seriously overthinking this and making it more complicated than it needs to be.  There is a single line entry for your postage expenditures for the year, one single line for your total fees, etc.  You do not need to provide any receipts when you file your tax return; that's only in the very unlikely case that you are audited. Even then, the IRS has policies and procedures for estimating.