Doing taxes for 2021.

[inhawaii]

I hate this time of year!

I am a total idiot when it comes to taxes.

My first tax prep under managed payments.

Fees and postage have already been deducted from my payouts?

The only thing i need to deduct is:

Cost of merchandise.

Business expenses.

Is that correct?

What about my monthly store subscription?

Does that also automatically get deducted from my payouts? 

I'm hoping this post will also help others whop have the same question as me. 

Thanks in advance.

[shoprosella]

Your deductions and how you file your taxes would be the same as when you had PayPal.  Your ebay payouts have nothing to do with your taxes and the IRS does not care about payouts.  What they care about is your Gross sales and legal deductions.  You need to deduct fees and shipping fees from your gross sales.

[soh.maryl]

May I respectfully suggest that you invest some money in a professional tax consultant or preparer or whatever they are called? Quite often, they are aware of expenses you have had as a seller that had not occurred to you to claim.  Also, the amount they will save you often more than offset the cost of their services.

[powell-memorabilia]

There are different ways to approach it, but eBay has done a lot of the work for you. Every month, eBay provides the monthly statement, which shows the summary of your fees, payouts, what was held back from payouts because of how you choose your elections, store fees, etc. At that point, all you really need to do is reconcile the eBay payouts with the 1099 and the monthly statements that eBay provides.

One item that I almost forgot for 2021 taxes: for the first few months of the year eBay was still sending monthly invoices to sellers on manage payments. These invoices, I believe, included store fees, promoted listing fees, and other various charges.

[powell-memorabilia]

I don’t disagree that tax preparers can be a good choice for a lot of sellers. However, the responsibility is really on the seller to figure out taxes before ever going to a tax preparer. Too often, people just bring a stack of papers to a tax preparer, and hope for the best. The reality is that so many of these tax preparers are not very bright. They don’t understand tax law very well, andDon’t often look for the right tax deductions for their clients.  

The best use of a tax preparer is for a seller to do his taxes before ever going in, and then let the tax preparer find reasons why that seller can’t deduct some thing or find deductions that weren’t obvious to the seller.

[hawkwind5454]

I parrot the previous posters. Do not underplay your business expenses. your store subscription is a business expense. If you travel to swap meets or product shows, etc.... the gasoline you use to get to them is a business expense. As is any overnight lodging for these events. And Maryl is spot on with a professional's advice. Too many leave money lying on the table by not utilizing [all of] their business expense deductions. Also, a professional will make this so much less stressful for you. You will be prepared when you sit across from your tax preparer. 

[dbfolks166mt]

     You can also pull a single report for the entire year that is much easier than trying to pull together 12 monthly reports. I just pulled mine for 2021 from eBay as well as from several other third party financial service providers. 

[inhawaii]

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@dbfolks166mt wrote:

     You can also pull a single report for the entire year that is much easier than trying to pull together 12 monthly reports. I just pulled mine for 2021 from eBay as well as from several other third party financial service providers. 

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Since i haven't done monthly reports, would you mind talking me through this entire year report?

Much appreciated.

[lacemaker3]

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@inhawaii wrote:

I hate this time of year!

I am a total idiot when it comes to taxes.

My first tax prep under managed payments.

Fees and postage have already been deducted from my payouts?

The only thing i need to deduct is:

Cost of merchandise.

Business expenses.

Is that correct?

What about my monthly store subscription?

Does that also automatically get deducted from my payouts? 

I'm hoping this post will also help others whop have the same question as me. 

Thanks in advance.

---

Sorry, but you have some misunderstandings ... assuming you will be filing a Schedule C as a sole proprietor, this is what your tax preparer will need to know, and how it should be organized so they can prepare it quickly (and cost-effectively):

• Fees and postage have already been deducted from my payouts?
  • Fees, yes. Postage: yes if you purchased the labels through eBay.
  • But, that's not how you calculate your gross receipts, which is the starting point for your Schedule C Line 1.
  • You need to start with your 1099-K (if you got one) or the total that would have been on your 1099-K (if you had met the threshold). The 1099-K form reports your gross receipts, which is the total of the amounts you received from your buyers:
    • purchase price
    • shipping
    • ^^total^^ of all payments is your gross receipts
    • sales tax is not included (you didn't receive the sales tax)
• The only things i need to deduct is are:
  • Cost of merchandise. Yes
  • Business expenses. Yes, including:
    • Fees (can either be put under commissions and fees, or advertising expenses, doesn't really matter because they are included in the same sub-total line)
    • refunds to buyers
    • Shipping labels 
    • Packaging materials: boxes, bubble wrap, newsprint, packing tape
    • Office supplies: paper, printer ink
    • Business use of your car
    • etc. depending on your situation, there may be other deductions
  • Is that correct? No - there's more
  • What about my monthly store subscription? Yes, you can deduct these
    • Does that also automatically get deducted from my payouts?
    • Yes, all your fees are deducted from your payouts (or charged from your payment method if you don't have enough in pending/available funds),
    • but your fees need to be included in your gross receipts calculation, and then deducted on the Schedule C

[luckythewinner]

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@inhawaii wrote:

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Since i haven't done monthly reports, would you mind talking me through this entire year report?

---

I think you are confused about the difference between "subtraction" and "deduction". 

When Managed payments automatically subtracts the eBay fees from processed funds, this simply lowers the amount deposited in your account. That has nothing to do with deducting this expense on your tax form.  

You report your gross income on Schedule C (the amount the buyer paid you), not the net amount that was deposited in your account.

Let's say the buyer paid you $100 and eBay subtracted $10 for fees, $15 for a shipping label and $25 for your monthly store fee leaving you with a payout of $50. 

You would report $100 as Gross receipts on Schedule  (line 1), the $10 in fees as an expense for Commissions and fees (line 10), the $15 in shipping as an expense for Office expense (line 18), and also enter the store subscription as an expense (perhaps line 10? I've never paid one). 

After doing the math on the form per the instructions, you will find that your $50 in expenses will be totaled up on line 28 and subtracted from your income totaled on line 7 to arrive at $50 in Tentative profit on line 29. 

Note you need to be looking at the 2021 Schedule C, or my line numbers might not make sense: 

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

Most online tax prep software will ask you for these numbers and put them in the right place and do the math for you. 

As far as getting the report, here's what I do: 

In the seller hub, go to Payments > Reports and run a "Transaction reports" for January 1 to December 31 showing all transactions for the year.  

When it is ready, you will be able to download this report as a CSV and open it as a spreadsheet (I use OpenOffice, it is free). You will need to do some calculating in the spreadsheet to get the totals you need; come back here and ask again when you are ready. 

[luckythewinner]

(edit time expired) 

P.S. do not forget to deduct your cost of goods sold on line 4. Your cost of good sold comes from the "Cost of goods sold worksheet in part II of the Schedule C. 

[luxgoods]

Thanks for taking the time to post all this good information. Very helpful in these confusing times

[wrong66]

What if a seller strictly sells on commission? The cost of goods would actually be zero. How would one offset the gross amount in that case?

[nobody*s_perfect]

The "cost" would be whatever funds were turned over to the consignor.

[inhawaii]

Thank you!!!