Seller tax question.

[inhawaii]

The 1099 you get from PayPal.  What does that total represent? 

Is that BEFORE or AFTER ebay fees, paypal fees and shipping fees?

Thank you for your help.

[slippinjimmy]

It's the total amount of incoming payments that were processed on your behalf by PayPal.

It is the gross amount received without any deductions.

It does not have anything to do with fees, shipping costs or refunds.

[mcdougle4248]

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@inhawaii wrote:

The 1099 you get from PayPal.  What does that total represent? 

Is that BEFORE or AFTER ebay fees, paypal fees and shipping fees?

Thank you for your help.

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Before eBay fees, paypal fees and shipping fees.

[inhawaii]

Thank you very much.

2018 was the first year i started selling seriously on ebay and the first year  i got a 1099 from paypal and the first year i'll be declaring some income. 

I'm going to talk to an accountant, but from what i read online, there's  something about filling out a "schedule A"?

Any advice for this newbie?

[penguins_dont_fly]

@inhawaii 

To claim anything but standard deductions, you will be filing a 1040-A (not EZ) ... also known as Schedule A (1040)

For reporting income and deductions on a sole proprietorship, you will need to file a Schedule C with it.

https://www.irs.gov/forms-pubs/about-schedule-c-form-1040

Use this schedule to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if:

• your primary purpose for engaging in the activity is for income or profit, and
• you are involved in the activity with continuity and regularity. 

Common expenses include:

Cost of Goods Sold

Shipping Cost

Shipping Supplies

Office Supplies

Mileage

Those are just the basics .... I suggest that you talk to a tax professional

(Remember that any fees paid to an accountant or tax preparer are a deductible business expense on next year's return)

[nobody*s_perfect]

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@inhawaii wrote: ... the first year i'll be declaring some income. ...I'm going to talk to an accountant, but from what i read online, there's  something about filling out a "schedule A"? ...

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Ouch, you may find yourself having some interesting conversations with the IRS about quarterly reporting and about past years' sales if you didn't report them. If you make a profit on your eBay sales, then that is considered reportable income.  

Anyway, this year you'll be filing a Schedule C, so take a look at that form and its instructions to get a clearer idea of how the IRS looks at this. I strongly recommend that you get professional help with your return this year. Here's the IRS basic Help page for "online auction sellers":

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Tax-Tips-for-Online-Auction-Sellers

[inhawaii]

Penguin: Thank you soooooooo much!  You have no idea how helpful that was. 

I have done absolutely no record-keeping for 2018. I'll see what my tax person says as far as how to figure everything out. 

I want to do it right for 2019. I was thinking if i use my paypal card for ONLY ebay stuff/expenses and nothing else, that may help me a lot next year. 

What about stock i already have (and paid for)  from 2018 and prior that gets sold in 2019?  SO CONFUSING! 

[inhawaii]

Thank you too nobody*s!

[purtynailz]

I had god luck with godaddy bookkeeping. $99 for a year. It will populate all your paypal,ebay transactions including shipping ebay fees paypal fees .It will also go back and get last 2018 transactions. Sales might not match your paypal 1099 if you received funds that were not ebay related. This is 3rd year I have used this and it was very helpful. with over 4000 ebay transactions for 2018 don't have to go and figure fees from every monthly statement. I could probably do my own taxes. I know it seems expensive but feel a tax professional is worth hisher insight .

[penguins_dont_fly]

I use godaddy too 😉 I just renewed yesterday ... they have a 25% off deal going right now.

I upload COGS once a month from my sales spreadsheet and I manually enter cash transactions, but I mostly use my PayPal Debit Card and my dedicated checking account for expenses.

Go Daddy picks up all transactions from the linked accounts and both my eBay and Etsy transactions 🙂

#note# my background is in inventory control and cost accounting ... I would really like to find a "small business" ERP with double entry accounting capability and an ability to track cash accounts ... that doesn't cost as much as I make LOL  ... I can dream.

But I am seriously considering switching to QuickBooks for Small Business (Etsy sellers get a discount). But every time I think about it, I'm already deep into the year and too lazy to redo what I've already done... next year maybe 🙂

[luckythewinner]

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@inhawaii wrote:

I have done absolutely no record-keeping for 2018. I'll see what my tax person says as far as how to figure everything out. 

I want to do it right for 2019. I was thinking if i use my paypal card for ONLY ebay stuff/expenses and nothing else, that may help me a lot next year. 

What about stock i already have (and paid for)  from 2018 and prior that gets sold in 2019?  SO CONFUSING! 

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When you talk to an accountant or tax preparer, ask them to explain the advantages of running your business on a cash basis and accounting for inventory as non-incidental material or supplies. You can do this if you qualify as a "small business taxpayer" as set out in IRS Publication 334.

https://www.irs.gov/pub/irs-pdf/p334.pdf

"If you are a small business taxpayer, you can choose not to keep an inventory, but you must still use a method of accounting for inventory that clearly reflects income. If you choose not to keep an inventory, you won’t be treated as failing to clearly reflect income if your method of accounting for inventory treats inventory as non-incidental material or supplies."

"You qualify as a small business taxpayer if you (a) have average annual gross receipts of $25 million or less for the 3 prior tax years, and (b) are not a tax shelter (as defined in section 448(d)(3)). If your business has not been in existence for all of the 3-tax-year period used in figuring average gross receipts, base your average on the period it has existed."

"Treating inventory as non-incidental material or supplies. If you account for inventories as materials and supplies that are not incidental, you deduct the amounts paid to acquire or produce the inventoriable items treated as materials and supplies in the year in which they are first used or consumed in your operations."

All of the above boils down to this:

If you sell less than $25 million, you can use cash-basis accounting and treat your inventory as non-incidental supplies. The business cannot deduct the cost of inventory in the year it was bought; it may only deduct the cost of inventory in the year it was sold. (Of course, you will still need adequate documentation of the cost of your inventory in order to safely deduct it.)

This page has a pretty good summary:

http://loopholelewy.com/loopholelewy/01-tax-basics-for-startups/accounting-methods-04-nonincidental-...

[castlemagicmemories]

It's before.  You subtract those expenses.

[the*dog*ate*my*tablecloth]

It also depends on how much inventory you carry. I carry a lot so I have to use COGS whereas many sellers who keep a very low rolling inventory can apparently expense the year of purchase (that's what I read, I never have low inventory so I've never personally tried).

[7606dennis]

I would advise seriously that consult your accountant or tax adviser on tax matters rather than rely heavily on advice from this discussion board. 

[castlemagicmemories]

That's a good suggestion.