IRS send me a letter, please help

[jessica7393]

I forgot to report my income tax in year 2014. IRS sent me a letter today saying I own them $8,xxx. in 2014, I received about $20,xxx on paypal in 2014

My incomes were coming from..

1. I never reached the $20,000 before but in 2014 year I sold many of my used brandname bags, and I never kept any receipts. (I sold my used brandname bags ~ $6000 in 2014 most of them were balenciaga bags that made in year 2007.

2. I sold many coach bags that I purchased from outlet before 2010. (I have been banned from coach since 2010, so I stopped selling and buying but I still have many coach bags  left that I was too lazy to get rid of them. Later on, I started to sell them again in 2013 and reached $2x,xxx in 2014) I just sold them to get my invest money back not making a lot of profit from them as mostly of my coach bags were the old model.

Some that I bought online I still keep the emails but some I purchased for the store back in year 2006-- I never kept any receipts. but I still remembered the price that I purchased from the sale price. 

I feel really regret that I neglected to check for the tax. Will IRS request me to show them all the receipts?

[papermoneyforme]

I strongly suggest you go and talk to a tax accountant as you could be in serious trouble.

[smenkveld]

Without receipts and records there isn’t anything you can do except pay them how ever much they ask for, that's what happens when you try to scam the tax man

[terprov]

Well, you either pay what they say your owe or you get your receipt in order.  If you don't have the receipts from the bags, can you look back and pull your old CC receipts out to find them.  CC's company do keep records of those.  I once asked for something over 10 years and they gave me the forms, I had to pay some for them to be reprinted but it was worth it.  Now go back to what you paid for ebay and paypal fees, they should have them too.  You might get alot of flake from Customer service but you will find someone if you keep calling that will help you.  I know this is alittle LATE, but can you sort of remember mileage for what you went to buy this bags from and back to you house.  You can take that off too.  Do you remember eating out, CC bills should show that too, that is deductible.  Girl, get your stuff ready because you have to prove you do not owe that much to them or like I said, just pay the amount.  I personally would fight it and get all the information I could about the year you bought them.  Just remembering is not going to get the IRS off your back.  Even if you have made only 10,000 that year you should have file on it with your taxes, Schedule C is super easy, and turbo tax ask you all the questions.  You better get going or they will possibly go back even farther to see what you made off ebay.  Ebay will give all your information out and I mean everything and I know they can go back 7 years if they think there is fraud, even though everyone will tell you 3 years.  They get a hair about you and will make you life miserable.  Call them and tell them you will bring receipts with you, get going with that now

[starroute-us]

If you bought items online you would have PP history of purchases,

Get a CPA asap as mentioned.

[*marlane*]

Paragraphs are a good thing.  I even got dizzy reading the last post.

[threshold.sales.group]

Bad news, but don't panic or get too worried. Go see a small business tax accountant and they'll get things straightened out.

Most of your expenses (shipping & ebay / pp fees, internet) will be able to be reconstructed, so you'll end up owing a much lower $ and you'll file an amended return based on those. Right now they're (IRS is) doing a return for you and just using the entire 1099 as income. Make sure you file your 2015 taxes or file an extension. 

[adkhighker]

Just because you grossed $20,000 or whatever, it doesn't mean you made that much in profit, so you'll need to contact the IRS and tell them what you PAID for the items you sold, so they can figure out how PROFIT you made on those items. They tax you on your profit, not on your gross sales amount.

Because you don't have any receipts (proof of purchase), the IRS will give you some grief over that, but they will probably just end up taxing you according to what they think you owe them. They may slap you with a fine, hopefully a small one. I don't think they'll be out to fry you or anything like that because they have much bigger fish to fry than you.

It would do you good to call a tax accountant in your area right away, someone like H&R Block who will be able guide you and set your mind at ease. 

[impalajohnny]

Get as many reciepts as you can and make up a ledger for the rest trying to be as accurate as possible. Yard salers and such often have to reconstruct records as best as they can from memory when they run into an unexpected tax obligation.

[threshold.sales.group]

Also, the immediate priority s/b to make sure you file your 2015 taxes corretly.   That way your 2014 issue isn't compounded by not filing business taxes for 2015.  Those should be easier to do and will allow your tax advisor to make a case to the IRS for what 2014 should have looiked like. 

[jessica7393]

Thank you for all your responses.

I think I have 50% of the receipts that record online but what I worry about is about the coach bags that I bought in year 2006-2009. The IRS began to collect tax on ebay seller since 2011. So could the be a reason I told them  why I did not keep the receipts. 

Thank you

[thevintagesilvershop]

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@jessica7393 wrote:

Thank you for all your responses.

I think I have 50% of the receipts that record online but what I worry about is about the coach bags that I bought in year 2006-2009. The IRS began to collect tax on ebay seller since 2011. So could the be a reason I told them  why I did not keep the receipts. 

Thank you

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The IRS has been collecting taxes from eBay sellers since 1995. If you've been selling on eBay for a long time and have never submitted this info to the IRS, you may have a bigger problem than you realize. You need to talk to an accountant. 

[posting*master]

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@jessica7393 wrote:

... The IRS began to collect tax on ebay seller since 2011. So could the be a reason I told them  why I did not keep the receipts. ..

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Yikes, don't say that to the tax man. Any profit ever made on eBay was taxble right back to the very first sale ever made.  Don't give the IRS a reason to go back and audit you for past years.  

[the*dog*ate*my*tablecloth]

This should be bumped as a warning for the sellers who come here and assume they only have to pay taxes if they get a 1099 from Paypal.

I thought they could only go back 3 years? Is it 7?

[usmc*usnmom]

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Audit-FAQs

How far back can the IRS go to audit my return?
Generally, the IRS can include returns filed within the last three years in an audit.  Additional years can be added if a substantial error is identified.  Generally, if a substantial error is identified, the IRS will not go back more than the last six years.

The IRS tries to audit tax returns as soon as possible after they are filed.  Accordingly most audits will be of returns filed within the last two years.

If an audit is not resolved, you may be asked to extend the statute of limitations for assessment tax.  The statute of limitations limits the time allowed to assess additional tax.  The statute of limitations is generally three years after a return is due or was filed, whichever is later.  There is also a statute of limitations for making refunds. Extending the statute will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit. It also allows the IRS time to complete the audit and provides time to process the audit results.

You do not have to agree to extend the statute of limitations date.  However, if you do not agree, the auditor will be forced to make a determination based upon the information provided