eBay

nycblue3 · ‎11-14-2022

Hello, this is my second year selling on eBay and tax season is approaching. I bought and resold last year and made a profit. This year, a lot of the items I sold were old tech goods I had laying around for years. I made over $1k this year so I hit the threshold. I don’t have all the receipts and some items were sold at a loss but overall I made a profit. I am worry about being audited. I may just pay the taxes on all of it. How would I determine the cost of goods?

For the items that I do have an e-receipt, let’s say I purchased it 4 years ago, used it and now I’ve sold it for a loss. Am I using the paid price on that receipt? What about items that I have inherited that I didn’t pay for?

I do have a spreadsheet of all the things I sold, eBay fees, cost of shipping and shipping material purchased.

Thank you for all the help.

onefootflipper · ‎11-14-2022

The safest cost of goods to use for old personal items on schedule C is fair market value, which your ebay sold price establishes very nicely. You made absolutely no money selling your old items. you lost money.

I am a full time seller so I obviously pay taxes but I do the above for the occasional old personal item that goes into inventory.

onefootflipper · ‎11-14-2022

Just going to add here that at least 3 people are likely to chime in and suggest you hire an accountant who will cost more than the entire theoretical tax in order to answer this basic question.

dbfolks166mt · ‎11-14-2022

I am going to assume the $1K you reference is your gross revenue, i.e. what you expect to see on the 1099 that eBay will send you. You definitely don't want to pay income tax on all of that. Your easy write-off's on your schedule C are of course the eBay fees, shipping costs, supplies (bubble wrap, paper, boxes, etc.) POV if you keep track of it. When it comes to the COGS for personal items you have had for awhile if it is a common type of item you can generally, as tigerofhappiness stated, determine the fair market value of the items with a little research on what items are selling for.

Given the low $ amount your odds of being audited are pretty low. Just keep the receipts you have and documentation on how you calculated the fair market value.

714ricki · ‎11-14-2022

No love for the accountant 😉

m60driver · ‎11-14-2022

First, your chances of getting audited are miniscule. Just report the cost of the goods you sold as the price you sold them for. The inherited goods are the value at inheritance so again, just use the price you sold them for. And as another noted, in the highly unlikely chance you do get audited that is when you pay for a CPA, regardless of Ebay sales. By the way, I have yet to hear of a small Ebay seller getting audited due to reporting Ebay income. The IRS is not a whale, they do not feed on plankton.

onefootflipper · ‎11-14-2022

@714ricki wrote:
No love for the accountant 😉

Accountants are great. However anyone capable of excelling at ebay sales and keeping their own records is also capable of filling out schedule C all on their own.

You also very well run the risk of getting an extremely risk averse accountant not at all used to the small time resellers business in which chicken scratch receipts and completely unverifiable records are the absolute norm.

luckythewinner · ‎11-14-2022

@onefootflipper wrote:
The safest cost of goods to use for old personal items on schedule C is fair market value, which your ebay sold price establishes very nicely. You made absolutely no money selling your old items. you lost money.

Really?

So if you throw away all your receipts, you pay no taxes on anything?

I guessing the IRS would not agree with that.

mam98031 · ‎11-14-2022

Here is some additional info that may help you and others.

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

mam98031 • Volunteer Community Member • Buyer/Seller since 1999

onefootflipper · ‎11-15-2022

@luckythewinner wrote:
@onefootflipper wrote:
The safest cost of goods to use for old personal items on schedule C is fair market value, which your ebay sold price establishes very nicely. You made absolutely no money selling your old items. you lost money.
Really?
So if you throw away all your receipts, you pay no taxes on anything?
I guessing the IRS would not agree with that.

Well you can take anything to an absurd length and turn it into absolutely something completely different. I in no way suggested doing that. I am sure there are 100 different ways to cook your books in a resale business pretending they were all personal items sold at a loss would be one of the dumbest ways to do it in my opinion.

lacemaker3 · ‎11-15-2022

@onefootflipper wrote:
The safest cost of goods to use for old personal items on schedule C is fair market value, which your ebay sold price establishes very nicely. ...

@onefootflipper, that used to be recommended practice, and it was accepted by the IRS for many sellers, AFAIK. In past years.

However, TaxAct does not recommend that at this time; they actually say that it is NOT advised to use fair market value at the time of sale. That is specifically referring to inherited items, but it's a similar situation to items that have been owned for a while with no receipts.

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

https://blog.taxact.com/ebay/

https://blog.taxact.com/ebay-seller-faqs-and-unique-scenarios/

...

...

...

For inherited items, you are required to use the Fair Market Value to establish the cost basis, but it's the fair market value at the time you inherited the item, not at the time of sale. This is from the same TaxAct link as the quote above:

lacemaker3 · ‎11-15-2022

@m60driver wrote:

... By the way, I have yet to hear of a small Ebay seller getting audited due to reporting Ebay income. The IRS is not a whale, they do not feed on plankton.

I have ... there's a frequent poster on these boards, who has said in the past that they have been audited multiple times, and they filed Schedule C. However, I believe they said that they never had to pay any additional tax, so I guess you would say they "won" the audits.

At the time, I wondered if that seller got audited frequently because they also said that they never reported any inventory from year to year. I was never audited, and I always reported a small amount of inventory, which was the total price of my active and unsold listings at the end of the year. But we never discussed it.