Taxes

[legalnurseconsultant]

Does a seller have to claim their eBay earnings on 2020 taxes?

[fern*wood]

Yes, just the same as in all past years.

[rixstuff]

Yes but there is a threshold. Used to be $20k and 200 transactions but you will get a 1099 from paypal for less. I report it and let the tax lady use her formula as to whether I need to pay tax on it or not.  Usually not for fed taxes though. I just dont sell enough.

[luckythewinner]

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@rixstuff wrote:

Yes but there is a threshold. Used to be $20k and 200 transactions but you will get a 1099 from paypal for less. I report it and let the tax lady use her formula as to whether I need to pay tax on it or not.  Usually not for fed taxes though. I just dont sell enough.

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That is not a threshold for claiming income. 

That is merely a threshold for PayPal providing a 1099K for gross receipts. 

Taxpayers must still claim reportable income regadless of whether there is a 1099K or not. 

[nobody*s_perfect]

The threshold of 200 transactions/ $20K applies to PayPal's obligation to provide a 1099-K. It does not apply to the seller's obligation to report their eBay income.

However, you are taxed on your net income, so if you are selling used personal items (clothing, housewares, etc.) for less than you originally paid for them, then  you do not have any profit to report.

Here's a useful overview from a reputable source:

https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L...

[mr_lincoln]

@legalnurseconsultant   Yes.  Go to irs.gov and download a Schedule C form and Instructions.  You also get to report deductions to reduce the tax burden.  You can deduct:

1. Expenses such as: packaging materials, ink & paper for your printer, purchases of items for Resale, miles driven on your personal vehicle (54.5 cents I believe was the amount the gov allowed in 2019).  The mileage deduction would work like this, if you drove 10,000 miles to acquire inventory, pick up supplies, drop packages at the post office, etc. you multiply that by the .545 (cents) = $ 5,450.00 deducted that you don't pay taxes on.

2. Other deductions include the value of your inventory at the end of 2019, shipping paid out of pocket for labels, sales tax eBay collected and that is in the total gross amount PayPal and eBay has but has to be deducted from the gross to give you net value, etc.

[fern*wood]

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@legalnurseconsultant wrote:

Does a seller have to claim their eBay earnings on 2020 taxes?

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Since you are a long time seller, I'm curious as to what you feel is different about taxes for 2020?

@legalnurseconsultant 

[legalnurseconsultant]

Excellent information.  Thanks!

[mam98031]

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@rixstuff wrote:

Yes but there is a threshold. Used to be $20k and 200 transactions but you will get a 1099 from paypal for less. I report it and let the tax lady use her formula as to whether I need to pay tax on it or not.  Usually not for fed taxes though. I just dont sell enough.

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You sell enough and should be claiming your income on your tax returns every year.  If your CPA is advising you differently, then you need a different CPA.

Giving your accountant / tax lady the 1099K is just not enough.  Details are important and the amount represented on a 1099K is for Gross Receipts not Gross Sales or Income.  The two are vastly different.  If you are paying income taxes based on Gross Receipts, then you are overpaying taxes.

Even if you don't qualify to receive a 1099K you are still responsible for claiming your income on your IRS tax returns as others have clearly shared with you.  I don't know what magic you think your Tax Lady is providing for you, but it may serve you well to look closer.  You may be digging yourself into some problems with IRS.

[gracieallen01]

For travel expenses connected to ebay, make sure you keep a mileage log! 

For each the day, with beginning and ending mileage and reason.  The government gets a little peeved if you use the mileage for 'a trip to the post office' to also hit the grocery store, cleaners and grandmas house for dinner.

[mam98031]

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@gracieallen01 wrote:

For travel expenses connected to ebay, make sure you keep a mileage log! 

For each the day, with beginning and ending mileage and reason.  The government gets a little peeved if you use the mileage for 'a trip to the post office' to also hit the grocery store, cleaners and grandmas house for dinner.

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All you have to do is subtract those extra miles used to do personal things.  Just claim the mileage to and from the PO.  

We live rurally, so I rarely have a single thing to do when I head to town.  Just be honest and only claim the portion of the trip that was for business.

[gracieallen01]

Yes, there are a number of ways of doing it, including just calculating (reading the odometer) at the beginning and end of a trip, for a single trip to the post office and then recording how many trips a year, on the days you make one.  If one is ever audited, a mileage log is extremely useful.

[ten_o_nine]

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@legalnurseconsultant wrote:

Does a seller have to claim their eBay earnings on 2020 taxes?

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Not yet, let's take care of 2019 first.

[pink.fish.rule]

I get it, but they most likely mean the taxes they'll be submitting in 2020 (ie for 2019) = )

[rixstuff]

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@nobody*s_perfect wrote:

The threshold of 200 transactions/ $20K applies to PayPal's obligation to provide a 1099-K. It does not apply to the seller's obligation to report their eBay income.

However, you are taxed on your net income, so if you are selling used personal items (clothing, housewares, etc.) for less than you originally paid for them, then  you do not have any profit to report.

Here's a useful overview from a reputable source:

https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L...

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That's usually what my tax lady says. I'm selling used items at less than it cost me to acquire them and not filing profit loss claims.