Newbie to eBay 1099

[marks-racing]

This year I received my first 1099 from ebay and I am completely lost. I'm hoping for a little friendly advice.

The 1099 shows my GROSS sales. 

I'm assuming it's up to me to deduct my shipping lables, ebay fees, expenses.

Also, (and this is the BIG question): I've been selling things that I've collected over the past 40 years. I do not have a record of what I've paid for these items. I could just give it my best guess. Then, would I deduct this amount off of my gross?

So, this is what I am guessing (Example)

$20,000 gross minus (Shipping lables, Fees, Expenses, Cost of sold items) = Net

Would that be correct.

Any advice would be greatly appreciated.

Thank you in advance.

Mark

[lonebuck-books]

Yes, the 1099 gives you the gross amount including all shipping costs.  It is up to you to keep records of your expenses.  So yes, your calculation of Gross- expenses = Net.  eBay gives you gross amount, you need to provide the expenses as eBay doesn't know those other than fees and shipping.  Because you sold over $20K of items that you didn't buy for resale thus have no receipts for, your best bet is to talk to an accountant on how to proceed and how to determine a legitimate and defendable cost basis for the items sold.  You really can't just 'guess'.  There has to be some sort of defendable proof as to why you used that amount as a cost if you ever get audited.  

Nobody in an eBay forum can give you legal tax advice, myself included.  If you want good legal advice, you are going to need to pony up some cash and pay an accountant to help you out.

Edited to add I find it curious that you have over 11,000 sales under your belt and are just now trying to figure this out.  Either there is more to the story or you had an amazing first year of selling!

[jrkirk]

Yes, and there are many expenses that potentially can be deducted from the gross sales to arrive at your bottom line profit number, and those expenses vary with each buyer so eBay has no way to know what many of those expenses are for you. We use an excel spreadsheet to record those expenses throughout the year, but there are many ways this can be done. Many sellers drive to find items, or ship packages, so mileage for some is significant. Do you have to buy shipping supplies? Some sellers do, some don't, etc. Having some professional accounting assistance, at least in the beginning, is something to consider.

[lacemaker3]

eBay has partnered with TaxAct to make tax advice available to sellers:

https://community.ebay.com/t5/Announcements/eBay-partners-with-TaxAct-for-another-tax-season/ba-p/34...

The have a page with links to a lot of articles that have the information you need. You don't have to use their software, you just need to scroll past the ads, and you can find links to helpful information below:

https://www.taxact.com/partner/ebay25

This page specifically explains how to figure out your cost basis for the items you sold, and what documentation you need to keep for this. So here's the answer to your question:

https://www.taxact.com/tax-information/ebay-seller-faqs-and-unique-scenarios

[fern*wood]

Your record keeping and reporting should basically not change. 

[dbfolks166mt]

     There are a lot of resources available to help you with your taxes. If you are using a software program like Turbo Tax or H&R Block they usually have support available. lacemaker3 mentioned Tax Act. You can also call the IRS at 1-800-829-1040 24 hours a day. There are also the IRS online help documents. You will be filling out a Schedule C so the following is probably a good reference to start with. There are a LOT of deductions to your gross revenue that will greatly reduce your tax liability. 

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

[kensgiftshop]

You do the same as you should have been doing in the past, report any income and deduct any expenses.

[caldreamer]

You must file taxes as a "business" if you want to deduct "business expenses".   You are correct that IRS requires that you report "gross amount" (and then you deduct all expenses).   If you store merchandise in your home you can also deduct "home office expenses" (percentage of your rent and utilities).  You only pay taxes on "net amount" after all expenses deducted.  

EBAY has "easy to read" 1-page report that shows YTD totals for (orders, refunds, EBAY fees, shipping expense).   Go to Payments, Reports, REPORTS (NEW) and select LAST YEAR.

You need to keep track of other expenses.   You should create an Excel spreadsheet for your inventory and assign inventory# to all your items.   CPA requires that you provide "cost of goods" for inventory you have listed on JANUARY 1 (beginning inventory) and DECEMBER 31 (ending inventory).   You keep the same spreadsheet forever and just keep "adding and subtracting" when you sell merchandise and add new merchandise.

If you have never filed "business taxes" before I strongly suggest you have a CPA this first time.   CPA can help explain bookkeeping that is required to run a business.

[marks-racing]

Thanks for the feedback.

So in summary - would this be correct for my situation? see below:

Gross 2023 sales: $24,000

Refunds: -$500

Fees: -$3,500

Shipping labels: -$3,000

My cost of items sold: -$10,000

New profit for 2023 (which I am responsible for taxes): $7,000

[soh.maryl]

". . . and those expenses vary with each SELLER".  Made that adjustment for you because stating that expenses vary with each buyer may be confusing to some.  

[nobody*s_perfect]

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@marks-racing wrote:

Thanks for the feedback.

So in summary - would this be correct for my situation? see below:

Gross 2023 sales: $24,000...

New profit for 2023 (which I am responsible for taxes): $7,000

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Take a look at Schedule C and its instructions. There are other expenses which you can deduct, such as packaging materials and mileage to get to the Post Office or when purchasing stock.