Schedule C - When Your Business "Started"

[wanderingwolfdog]

I've almost completed my taxes for this year but this one is vexing to me.

I have had an account on eBay for a long time, of course, but I have not used it as a business until 2023. When the reporting requirements changed earlier on, I prepared to file a Schedule C if I made profits on eBay. But I did not "start a business" in any prior years I have been on eBay.

I know the reason the IRS does this is to estimate quarterly payments for those who expect to owe over $1000 in taxes at the beginning of the year, and affect a penalty if they were missed.

I did not start 2023 with a "business" on eBay, and did not expect to owe over $1000 in taxes, because I was a W2 employee and only had a small amount of listings and an even smaller amount of "expected" sales. I began to use eBay as a business halfway through the year.

Almost all of my eBay sales in 2023 were in the second half of the year, after I left my W2 job and decided to pursue eBay as a small business. I hit my free listing per month threshold and purchased a store subscription, for example, on October 1st. From July onwards, I was slowly building up to "launch" my business by adding listings, etc.

So, did my business start this year? Or am I absurdly required to state it "started" in 2013 when I joined eBay to buy things and sell less in gross dollars than the $600 reporting threshold per year, for years?

I did not make enough to qualify for a 1099-K this year for what it's worth, due to the temporary relaxation of the reporting thresholds for 2023, if that makes a difference. Obviously I am reporting my income as though I did receive one (gross minus shipping labels, eBay fees, and refunds).

[monica-sells]

I would highly suggest a professional opinion on this question...

There is no difference in reporting income responsibilities (business, personal)

that being said

IF I were to venture a "guess", the 'business' started when you began keeping track of Cost of Goods and buying stuff intentionally to resell. Again, this is not to differentiate for tax purposes, but as far as a starting dat for a 'business', that's all I can contribute.

[adkhighker]

Don't take my word for it, I'm not an accountant, but I don't think you need to worry about going back all those years when you weren't doing it as a business venture. There are millions of people who in prevous years bought on eBay and sold their stuff for a profit at their neighborhood garage sales and I doubt the IRS gives a second thought about that. If your business started in 2023, that's all I think you would need to say on the schedule C. What do you think will happen if you tell the IRS on the schedule C that the year you started in business was 2013, even though it wasn't? Why open a can of worms like that. A very long time ago, the year that I started claiming my purchases and sales as a business was the first year that I did it as a business, which was the same year I applied for my state sales tax number. Best, though to do what monica-sells said, just to be sure.

[stainlessenginecovers]

2023 as that is when you 'started' as a 'business'

Starting as a 'business' means you attempted to 'buy and then sell things' to make a profit. 

[tobaccocardyahoo]

There is no firm answer because if you sold anything and sold it for a profit at any time and exceeded the IRS set limit for reporting a profit you needed a Schedule C or to report a Capital Gain. That limit applies whether a 1099k was issued or not.

If it was a hobby, your expenses might not be deductible, so wanting to avoid being a business might not be a proper goal.

[wanderingwolfdog]

Thanks all. I was able to work it out.

[mam98031]

From the first sale on Ebay, any income earned was reportable to the IRS.  Whether you define yourself as a business or not.  Many sellers don't consider themselves a business yet they sell all the time on Ebay others just sell every now and again, still the money they are paid here is reportable to the IRS.

Now that doesn't mean your income tax liability will increase as there are deductions and income levels.  But it all still needs to be reported.  IRS does NOT have a minimum threshold for reporting income.  There is one threshold regarding taxes and that is with Self Employment taxes.  If you have less than $400 of income, self employment taxes are not due.

The Schedule C is a pretty friendly form to fill out.  Between what appears on the form itself and the supporting booklet, it is pretty informative.  I would also suggest  you check the following links.

https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-10...

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.irs.gov/businesses/gig-economy-tax-center

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html

https://www.irs.gov/pub/taxpros/fs-2022-41.pdf