Income off garage sale items

[wallystreasureisland]

Hello Everyone!

I apologize in advance if this topic has  been discussed already, but it’s intended for those sellers who actually have a DBA license and use Schedule C when doing their taxes.  

How does (or should)  a seller report his “cost of goods” off garage sale items? 
Ex: I bought an item for 5.00 and sold it for 15.00 online. 

That 5.00 should be reported as “cost of goods sold”, shouldn’t it? 
We don’t get receipts from the garage sales, as most of us pay cash for the item(s). 
Is the IRS just going to take my word for it? 
Very curious as I will file for a DBA and report everything for 2022.

thanks in advance! 

[richard1rst]

You only need a receipt if you get audited. Now of course that is a gamble but the odds of it happening to a small seller (as opposed to the high income earners) is fairly small. So frankly I wouldn't worry about it until and unless you get audited. Then you can negotiate with the IRS.

I got audited once MANY years ago., Based on my tax professor's advice I came in with a copy of the IRS manual under my arm. I legitimately disagreed with the auditor, I put the book on the desk and asked him to show me where it said that. Well, he says it us well known. Then, again on my tax professors advice, I demanded to talk to a supervisor. See, no one wants to call a supervisor. So we came to a mutually agreeable position and that was the end of it.

A little chutzpah goes a long way. See, you are not really dealing with the IRS. You are dealing with an agent who does not want to let his supervisor think he can't do the job. So unless you are dealing with a super high value return they are actually easy to deal with.

[moo*cow*corner]

For me, I track purchases for resale using a cheap day planner for buying only. One of those ones that has a page or space for every day of the year. It lives in my car and when I buy, I simply write down the date, what the item is, the addresss of the garage sale (or general area) and how much I paid. Kind of a pain for great hauls, but it's what I do. I'll buy any cheap one I can find, even if it's a clearance item from last year or whatever. I ignore the printed dates/days if I need to....it's having an ongoing record that's more important.

I use this to also record miles driven, thrift store finds, and other things I buy for ebay, including packing and office supplies. Receipts are put in a business sized envelope tucked in a drawer of my desk. I plan to do a quarterly ledger sheet based from my book this year, and then I will only have 4 pieces of paper to add up for deductible expenses at tax time. I have tried spreadsheets, and I just hate them. I suck at them and data entry is a slog that I often procrastinate on, to my own detriment.

I've never been audited, but I have read that a record like that goes a long ways if you can show that you made an honest, good faith attempt to follow all the rules. And it helps if the numbers aren't too gargantuan (wink).

[bcs.bazaar]

If you make a good faith effort to honestly report your income and expenses, you shouldn't have too much to worry about being audited, or the IRS questioning your return. It has been my experience that the IRS is more concerned when people consistently show losses and have nothing to substantiate the expenses.  

As a previous poster stated, keeping a ledger showing date, location, item(s) purchased and price paid will go a long way in supporting your figures if the IRS does question it.

Hope this helps.

[this*old*attic]

The IRS will take any consistent system you set up for yourself. The key is consistency.

When I did this this full time, I would pull money from my ATM for yard sales AND deposit back what I didn’t spend. I’d keep both those receipts and make a simple list of what was purchased. 

My tax guy said that would suffice.

I’d follow the same system today, plus snap a cell phone pic.

[chapeau-noir]

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@wallystreasureisland wrote:

Hello Everyone!

I apologize in advance if this topic has  been discussed already, but it’s intended for those sellers who actually have a DBA license and use Schedule C when doing their taxes.  

How does (or should)  a seller report his “cost of goods” off garage sale items? 
Ex: I bought an item for 5.00 and sold it for 15.00 online. 

That 5.00 should be reported as “cost of goods sold”, shouldn’t it? 
We don’t get receipts from the garage sales, as most of us pay cash for the item(s). 
Is the IRS just going to take my word for it? 
Very curious as I will file for a DBA and report everything for 2022.

thanks in advance! 

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Start keeping records (if you haven't already) with item, acquisition cost (COG), date and place.  This is the 'good faith effort' given that most yard sales don't do receipts (and I wouldn't ask for one, anyway).  I'm a sole proprietor and when I cleared some small family estates, I used 'good faith' estimates as to how much those items would cost now by matching them with similar items as best I could.

I'm assuming you'll be filing as a sole proprietor or LLC as a DBA isn't a business structure but simply the acquisition and registration of a trade name - AFAIK, not every state even requires one.  Good luck going forward in this!

Ooops - tag @wallystreasureisland