mam98031 • Volunteer Community Member • Buyer/Seller since 1999
Simply-the-best-for-you Volunteer Community Mentor
@buyselljack2016 wrote:This year is no different than any other year. You file to report your eBay income and deduct the same as years past.
To me it sounds like they didn't claim the income in previous years, otherwise this issue they have would have come up before.
@12345jamesstamps wrote:So deductions are subtracted from profits.
Bear in mind it's best to show a profit from selling.
I was told you can like break even for 3 years in a row...but it's best you eventually show a profit after so many years...per my accountant...I don't dare even try to do our taxes.
There are deductions which can be easy without receipts...eBay monthly fee, wifi monthly fee and so on.
We do have information on our yearly9monthly) debit card or credit card statement per month online of certain expenses that might help...hopefully you do have your banking and credit card online to do this.
Any purchases on eBay will show up in purchases for the year.
Good luck
@12345jamesstamps It's only best to show a profit if you're a business. If you're a casual seller, you will most likely want & actually have, a loss (by virtue of the fact that you paid much more for the item when you bought it, than what you're selling it for). The 3 year thing is for BUSINESSES & it's not really true anyway. The IRS will look closely at a business that has not made a profit for >3 years, but you simply have to prove that you actively engaged in attempting to make a profit per their rules. I have musician friends who have taken a loss for a decade or more but they keep really good records & can prove they are actively engaged in attempting to make a profit.
Lastly, doing a Schedule C is not hard, many people here do their own taxes.
@sunnyrecoon wrote:Good for all of you you keep track of every transaction and receipt. I have no means to do that. I sold so many items because I went for bulk deals in the past few years that was cash only, and still go through and resell as individual items even today. When I say it is impossible, I mean it is. Unfortunately none of the answers answered my concern and question. Thanks for nothing.
Wow, there's no such thing as a paper & pen where you live? You don't need fancy software (sure helps though), you can keep a handwritten ledger. It's certainly not impossible, pretty much everyone here does it.
Also, if you're buying to sell, you're not a casual seller. I thought based on your OP you were just selling old stuff around the house. If you've bought to resell, then you're a business whether you act like one or not.
There is NO REQUIREMENT to keep track of everything by the item, you simply need to keep track in aggregate. The IRS does not require you to keep track of every single item, just totals. But no, you can't just guess at your deductions LOL. You're in a mess right now, I'd see a tax specialist. You are apparently a business & haven't been filing your business taxes, which btw, you're also required to withhold SS & FICA from. If you buy to sell, the IRS will not see you as a "casual seller". Find yourself a good tax accountant. But NONE of the recordkeeping is "impossible", millions of people do it every day. Some DO choose to keep track of every item, others choose to keep track in aggregate, like I do. It's the numbers that matter, not the item.
@12345jamesstamps wrote:'many people here do their taxes'...I assume you do also.
Sorry, but I prefer a tax accountant who can tell me me what to do...same tax accountants for years...LOL
'What is a casual seller?' please tell me...am I one? I don't know. I have an accountant.
Sorry...but I am not a business...and my tax accountant told me you shouldn't show no profit for 3 years in selling.
And having a problem with taxes when I was so young...IRS will get back to you in about 3 years with a problem with your taxes...not in one year or two years...
You can file your taxes and all is fine...and then 3 years down the road you get that letter...
@12345jamesstamps A casual seller, to me, is someone who is just selling their own stuff that they have around the house. If you buy for resale, you are not a casual seller, you're going to be seen as a business. A casual seller has the goal of getting rid of stuff (generally at a loss). A business has the goal of making a profit. A casual seller is selling a dress they bought for personal use 10 years ago for $100 & now they're selling it for $20 (so a loss), or a diamante porcelain piece or whatever, the point is, it was their own item that they purchased retail & they are selling it at a loss. If you're attempting to make a profit regularly, then you're a business.
Your tax accountant is wrong on several notes. Maybe not 'wrong', but they aren't giving you the full story. It's good practice to not have a loss as a business for more than 3 years, they are right about that. It can raise a red flag to the IRS, but it is absolutely NOT prohibited & if you show proper documentation that you are working hard at becoming profitable, you can in fact take a loss for 20 years & it won't matter. Lots of people do it & lots of big corps do it when they are first starting out.
I'm confused by you saying you aren't a business, but your accountant is telling you not to take a loss for >3 years. If you're not a business, why would it matter? It wouldn't make any difference! The 3 year thing is for businesses. Are you sure they're not filing a Schedule C for you? Sure sounds like you're a business to me. It may only be (likely is) a Sole Propietership, but it's still a business. Also, your tax accountant saying that they can go back 3 years. Again, that's true, but it's also true that they can also go back your ENTIRE LIFE if they suspect you are being fraudulent. We have every single tax return that both of us have ever filed for that reason.
Nothing wrong with having a tax accountant if you feel you need it, I'm just pointing out that the hard part is the recordkeeping, which you're already doing. Filling out a Sched. C takes all of 15 minutes. I don't personally see the point in paying someone to do that, but if it makes you happy, go for it 🙂
I'm not a tax expert, but you wouldn't file a Schedule C, unless you're a business. Are you filing a Sched C? It sure sounds like you are. It's literally called Profit/Loss from a Business.
I want to clarify one thing & ran out of time to edit. There are some shades of gray. For example if a person is selling their entire record collection of 200 albums that they purchased over the years at retail prices & let's say that sell 195 of them at a typical loss, but they get lucky & 5 are more collectible & they happen to make a profit on those 5. I wouldn't say that classifies them as a business, as the intent was not to make a profit off selling them. I'm not sure what the IRS would say about that though. I can guess that while they wouldn't call you a business, you are technically supposed to call that income & you should report it. I doubt they'll come after you for making $50 bucks though.
I would just add that Casual Sellers, sellers that sell off an on through a year, but not regularly. If they purchase items to resell here or elsewhere. That is a little business.
@mam98031 wrote:I would just add that Casual Sellers, sellers that sell off an on through a year, but not regularly. If they purchase items to resell here or elsewhere. That is a little business.
Yeah I think that's part of the gray area too & intent figures heavily. Even if you sell every single day, b/c you've hoarded or are a shopaholic or inherited it & your intent is to get rid of it before you die, so you're selling at a loss, I'd still argue that you're a casual seller. But I agree with you in general. There are definitely variables. The IRS is going to look at your intent. If your intent is to make a profit, that's typically a business & 100% agree if you're buying to resell, that's a surefire notice to the IRS that you are (or should be filing as) a business.
