eBay

mr.smithers0527 · ‎06-21-2022

Hello, I am curious about how the taxes work on Ebay, I started in November of last year and do this full time as my job, I am wondering about taxes next year and if anyone knows how it works, I know about the new $600 rule but I am wondering when ebay sends me a 1099-k form is it going to show the total of everything I have sold including the price of item, taxes and shipping paid? And then how do the returns work? Do they subtract the total amount of money I refunded people on the total on the form? Or do I have to figure out the total I have refunded people and write it off? Just curious how it all works, I would really appreciate any feedback on this, Thank you so much!

Alex

luckythewinner · ‎06-22-2022

I started in November of last year and do this full time as my job, I am wondering about taxes next year

It is really no different that your taxes for Nov and Dec last year. You report your gross income and deduct your expenses on your Schedule C.

I know about the new $600 rule but I am wondering when ebay sends me a 1099-k form is it going to show the total of everything I have sold including the price of item, taxes and shipping paid?

eBay has a whole page explaining what the 1099-K includes. If you go to the top of any eBay page, click "Help & Contact", and type 1099 into the search box, you will find it:

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

It will tell you that it includes all of the payments processed by Managed Payments including any shipping charges but not including sales taxes collected and remitted by eBay. It will also remind you that refunds and returns are not deducted; that is your job on your schedule C.

And then how do the returns work? Do they subtract the total amount of money I refunded people on the total on the form? Or do I have to figure out the total I have refunded people and write it off?

You mentioned "the return" and "the form" in the same sentence. They are different things. eBay files the form showing total payment processed. You are the one who files the return where you deducts returns and refunds as "Returns & Allowances" on line 2 of Part I.

You should be familiar with all this when you reported your business income from Nov and Dec of last year on the return you filed in April. Even if you did not get a 1099-K, you still needed to include that income on your schedule C.

Also be aware that you may need to pay estimated quarterly taxes or face a penalty if you do not. I think the first payment was due in April and the next one is due in July.

monroe67 · ‎06-22-2022

"You cannot subtract both gas and mileage."

True. Mileage, stated as a dollar amount per mile, is intended to cover the cost of gasoline, oil, wear on tires, etc., etc.

maxine*j · ‎06-22-2022

Since no two people are in exactly the same situation vis-à-vis income tax, I strongly recommend that you consult with a tax professional. Random advice, no matter how well-meaning or even accurate so far as it goes, is not what you need, given your current level of understanding.

One good, thoughtful consultation may be all you need, and after that you can do your own record-keeping and tax preparation / filing with that proper guidance.

If you see the sense in using a properly-trained auto mechanic, plumber, electrician, roofer, et al, you shouldn't balk at using a tax professional.

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maxine*j · ‎06-22-2022

@nobody*s_perfect wrote:
@caldreamer wrote: ... IRS requires you to show $$ amount for beginning and ending inventory on hand (January 1 and December 31)....
I'm pretty sure that only applies to taxpayers with inventory value in the millions.

No. Most people here probably use Schedule C, where beginning and ending inventory is part of the Cost of Good Sold calculation. The accounting method used, which is also specified on Schedule C, may affect this and/ or how how inventory / inventory value is figured.

No two taxpayers are in pecisely the same situation but you don't, by any means, need inventory in the millions to have to do beginning and ending inventory.

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km181177 · ‎06-22-2022

How do you account for items you sell that are just things you have around the house. For instance, I will sell old jewelry or old knick knack. I did not personally pay anything for them, so do I just put my cost at 0 even though they have value?

maxine*j · ‎06-23-2022

@km181177 wrote:
How do you account for items you sell that are just things you have around the house. For instance, I will sell old jewelry or old knick knack. I did not personally pay anything for them, so do I just put my cost at 0 even though they have value?

I cannot give tax advice because -- as I've said twice now -- no two taxpayers are in the same situation so I could tell you something that is accurate but not applicable to you.

Anyhow, I know a bit but I'm not a tax professional, accountant, auditor, or even a bookkeeper so you should not want to take advice from me even if I offered it.

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luckythewinner · ‎06-23-2022

@caldreamer wrote:
IRS requires you to show $$ amount for beginning and ending inventory on hand (January 1 and December 31).

They require you to show it, but IMHO most eBay sellers do not need to account for inventory.

I always report $0 and $0.

Per IRS Publication 334, small businesses with sales under $26 million can opt to treat inventory as inventory as non-incidental materials and supplies.

This means you do not need to account for inventory on your tax return, and can simply deduct the cost of goods sold as an expense in the year that you sold it.

luckythewinner · ‎06-23-2022

@km181177 wrote:
How do you account for items you sell that are just things you have around the house. For instance, I will sell old jewelry or old knick knack. I did not personally pay anything for them, so do I just put my cost at 0 even though they have value?

Value and cost are not the same thing. The basic goal of retail is to have the cost be less than the value, so that there is a profit to be made.

Generally speaking, if you did not pay anything for an item then your cost is $0.

The IRS generally frowns upon people who deduct expenses they did not incur 🙂

stephenmorgan · ‎06-23-2022

Selling for someone else taxes would be figured on the part that you kept for yourself.

From the sales price of the item you would deducted all expenses involves in selling the item. Since you sold item for someone else you would deduct what you paid them and you would only be subject to taxes on you part you kept, the commission. Make a receipt for what you paid them and keep it with you business documents.

If you sell a lot of stuff for other people and distribute money to them then you may need to issue them a 1099.

You may wish to talk to a professional to help you get started in the right direction of good records management.

Taxes are much simpler with good records.