Tax Preparation

[anicept]

Hello!  I'm trying to prepare for the earnings info that will be reported for 2022 Ebay earnings.  I want to be able to offset earnings with my business expenses - supplies I purchased for shipping, "free" shipping expenses, international expenses, etc.   Any suggestions would be helpful!  Thank you!

[ryanrobyn]

don't forget the items you purchased to sell and Ebay fees, gasoline , car expenses, use of your home

[dnasilver]

No one on here knows your overall finances. It would be best to consult with a CPA or Tax Attorney. If you have above average knowledge of the tax codes, you can always use a good tax software. Are your earnings earned or unearned? Lots of folks have no idea the difference. If you do not know the difference without researching, it would be best to consult a CPA or Tax Attorney

[maxine*j]

Are you filing as a sole proprietor?  If so, look at Schedule C to find the expenses you can claim:

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

Since no two people are in exactly the same tax situation, you really should consult a tax preparer at least once.  After that, you will have a "model" for the kinds of records to keep and how to use them to file your federal (and state, if applicable) returns.  Once you have that "model," you can keep track of things in a simple database and use an on-line tax program to file.

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[chapeau-noir]

@anicept- Get a copy of TurboTax for Home and Business and step through the software.  It's really pretty easy and will lay it all out for you, step by step, to fill in your Schedule C.  You can also download an app from TurboTax.

It's 4th grade math to do any of this - trust me on this, I can barely keep track of what's in my wallet and I can manage this.  Just step through it.

[nobody*s_perfect]

As noted in the other post, reading through the instructions for Schedule C should give you a good overview of what expenses  the IRS allows.  Basically, it's every penny you spend that you wouldn't have spent if you weren't selling stuff on eBay -- office supplies and equipment etc as well as direct expenses like postage and eBay fees.

Do you keep a mileage log in your car?  Better late than never; all you need is a little spiral notebook.  Every time you use the car for eBay business, note the start and end odometer reading, whether it's going to the Post Office or UPS Store, or making the rounds of yard sales and flea markets. The current deduction is over 50 cents per mile, so it adds up fast.

Your post mentioned "free shipping expenses."  But what you actually deduct is every penny that you spent on postage whether or not the listing offered the buyer "Free shipping".  The 1099-K will report on the total payment that eBay processed: whatever the buyer paid for the item, shipping, and handling.   

I'm not sure what "international expenses" would include, beyond the postage and eBay fees which you'd count for every transaction.

[monica-sells]

some sage advice from the poster here.....

all the pertinent information for the selling side of your expenses are available through the Seller Hub and its associated downloads.

Total Sales (Gross)

Final Value Fees

Transaction Fees

Promoted Listing Fees

Returns/Refunds

Shipping (If you use Ebay Labels)

All the expenses you need to assemble would be packaging material, tape, printer ink, mileage and frequency of visits to the Post Office or UPS etc.......as mentioned Schedule C has lines for those items.....

Best way is professional advice to get you on the right track first.....

[maxine*j]

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@chapeau-noir wrote:

...  It's 4th grade math to do any of this - trust me on this, I can barely keep track of what's in my wallet and I can manage this.  Just step through it.

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I know it seems that way to you, but OP also has to file a California state income tax return, there are FICA issues, and so on. 

I still think it is wise to use a professional at least once so that everything pertinent is considered and to learn which Ps and Qs to mind.  After that, yeah, in most cases for most sellers it's easy sailing with a "model" to refer to.

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[chapeau-noir]

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@maxine*j wrote:

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@chapeau-noir wrote:

...  It's 4th grade math to do any of this - trust me on this, I can barely keep track of what's in my wallet and I can manage this.  Just step through it.

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I know it seems that way to you, but OP also has to file a California state income tax return, there are FICA issues, and so on. 

I still think it is wise to use a professional at least once so that everything pertinent is considered and to learn which Ps and Qs to mind.  After that, yeah, in most cases for most sellers it's easy sailing with a "model" to refer to.

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That's a way to go, as well.  They don't need to be a CPA - a good bookkeeper with a tax speciality will do an excellent job. After that, you have a template, so to speak, to go on yourself after that.

Though I think TurboTax would have California's particular requirements.

Guess it depends on how comfortable the OP is on going on their own with research or just taking it to a reputable bookkeeper.  I'm just trying to disabuse the notion that one needs to spend hundreds of dollars on a CPA and requires college-level math to figure out - too much of that mythologizing here as it is.  It's totally within anyone's grasp who already successfully sells online, as that takes skills, as well.

[maxine*j]

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@chapeau-noir wrote:

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I'm just trying to disabuse the notion that one needs to spend hundreds of dollars on a CPA and requires college-level math to figure out - too much of that mythologizing here as it is.  It's totally within anyone's grasp who already successfully sells online, as that takes skills, as well.

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Oh, I agree with you there.  Very few sellers here need the costly services of a CPA or a Tax Accountant, or an IRS enrolled agent. 

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[caldreamer]

I strongly urge you to consult with CPA (until you understand how to handle business taxes).   CPA will help you to get every legal deductions and teach you about required bookkeeping when you have a business.  

California requires you to have "business license" to sell things online (you can get that from the city where you live).   Also you need to file "both" FEDERAL income tax and STATE sales tax forms.     Because EBAY collects "sales tax" and acts a "facilitator" (you won't have to pay any sales tax but you still have to report income to California and file Sales Tax in June).

[slippinjimmy]

The most important document you need from eBay is a Transaction Report for the full year.

It will include:

Gross Sales

Tax collected by eBay

Tax collected by Seller (not really a thing anymore)

Refunds given to buyers (full, partial)

eBay fees

Shipping (label purchased from eBay)

All other expenses you need to track your self.

I concur with others, a bookkeeper who specializes in small businesses is sufficient, a sole proprietorship is not really very complex and the deductions that are available are relatively simple and obvious. 

You could buy a book about small business accounting which would pretty much cover all the issues that 90% of sole proprietors need at minimal cost.

Transaction Report is available here: https://www.ebay.com/sh/fin/report

[mam98031]

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

[baydistributionllc]

I spreadsheet my bank statements and give things codes that sort them into a P&L I give to my accountant.

Theres what ebay puts on the 1099 then theres what ebay actually put in my account. So the first expense is the difference in those two numbers.

ebay tells the government your sales and doesn’t take off the expenses like shipping and taxes. I don’t itemize or even try to figure all that out. I just call it ebay expense.

[mam98031]

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@baydistributionllc wrote:

I spreadsheet my bank statements and give things codes that sort them into a P&L I give to my accountant.

Theres what ebay puts on the 1099 then theres what ebay actually put in my account. So the first expense is the difference in those two numbers.

ebay tells the government your sales and doesn’t take off the expenses like shipping and taxes. I don’t itemize or even try to figure all that out. I just call it ebay expense.

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Ebay does NOT report "sales" because the 1099K is not suppose to report "sales".  IRS designed the 1099K, not Ebay.  The 1099K has ALWAYS report your Gross Receipts.  That is the total amount of money that went into your MP [or PP] account BEFORE any adjustments at all.  That is Gross Receipts.

So if that is the way you handled reporting your expenses, then do you get your inventory you sell for free?  In your method above you don't seem to consider the cost of the products you sell as the way you calculate your expenses does not include this information.

By not itemizing, you are only hurting yourself.