Making money on EBAY

[KTP]

Hey, so taxes on ebay sales brings up a good question. My wife has a large (I mean LARGE) collection of legos we plan to sell on ebay since we will be moving to a sailboat in a few years. They have been packed up in boxes for many years anyway, so are not doing anyone any good. Just checking 100 or so of the sets in completed auctions on ebay I estimate she would gross about $4000 to $6000 total. She started collecting these sets over 25 years ago, so how does she prove a cost basis in them? Some sets still have a price tag on the box, for example a knight's castle set from the 1980s has a sticker of $19.95 but will probably sell for $80 on ebay. Most of the sets do not have a price and we have no clue how much she paid for them ~25 years ago.

Does the IRS really care about this small stuff?

Edit: Can we add in storage costs for 25 years for the $19.95 set? :-)

[disneysteve]

Originally Posted by KTP

Some sets still have a price tag on the box, for example a knight's castle set from the 1980s has a sticker of $19.95 but will probably sell for $80 on ebay.

Does the IRS really care about this small stuff?

The short answer is yes, the IRS cares about all of your income. If you sell something for a profit, they expect to get their cut.

Will you get caught if you don't report it? Not likely unless you get audited. If they are reviewing your bank statements in an audit and see an extra $6,000 in undocumented income, that could certainly create a problem.

I run my ebay sales legitimately. I report my income. I deduct my expenses. I collect and submit sales tax. But I realize that the vast majority of ebayers probably do not do that.

[KTP]

I sell some things on ebay in my business and also report profits, deduct costs, collect and send in sales tax. I didn't want to mingle our personal possessions into my ebay business account and so she was going to use hers (she has a 100% positive over 300 feedback like I do, but hers is all from buying small stuff).

When selling personal possessions, would you subtract from the profit of one item the loss on another item? Ie, if we sell a set from the 1980s for a $80 profit, but we sell a mindstorms set we bought in the late 1990s for a $80 loss (realistic...a $200 mindstorms set goes for about $100) would we then have a net gain of $0? Or for personal possessions can you not realize losses to offset gains?

I really wish they would just grant everyone a $10k a year exemption for yard sales, ebay sales, etc...

[disneysteve]

Originally Posted by RedThunderBird

Steve I wanted you to know that , uncirculated Disney currency even if modern issues do command a premium over face value....... if by any chance you come across some , this information can be of use to you , and to all of those who sell , and buy paper currency .

Actually, I've sold Disney dollars on ebay numerous times. I've gotten 3-4 times face value for them.

[jeffrey]

It's also important to remember that if you are going to be doing this as a money maker, you can qualify for a at home business. If you dedicate a room in your house to the business and use it exclusively for it, then you have a lot of tax right offs that would mean you would have to clear quite a bit to actually pay taxes.

For example, if the room was 15% of your total living area, 15% of your mortgage/rent, 15% of your gas bill, 15% of your electricity bill, 15% of your water bill, etc (anything that is essential to keep the house running) could be deducted from any profits you make.

[disneysteve]

Also, jeffrey, your computer and internet access fees. During the years when I was selling on ebay heavily, I wrote off a portion of the cost of the computer and monthly ISP fee.

[wnlbutterfly]

If you are worried about the tax man, you could put ebay income on the "other income" line and declare it.

If you are just selling to unload some clutter, then I wouldn't worry about it, just like a yard sale. They have bigger fish to fry.

BUT I agree, if you have a massive sale and pull in thousands, I would declare that. You would have to estimate your cost in them. Just like coin hobbists, when they sell a coin and if it is more than what they paid, they are suppose to include that gain on their taxes.

Unless you are doing it as a business (conducting it as a business, there are some guidelines at IRS about that), then you do NOT include any losses on your taxes. Again, if your hobby has a loss (which most do), you do not report that loss. But if you are doing a schedule C for a business as PowerSeller for ebay, and had a loss then it would be reported.

Business use of home, schedule C, and can only be used if you have a profit (it deducts after everything else has already been subtracted off). And if you write off your computer and internet, be sure it is only a percentage because IRS is watching that one closely. If you email or even play games on your computer, then it isn't 100% business use.

[KTP]

I think it is called barter and trade, and yes, I think you are supposed to report it. I guess if you swap an item of the same value for another item the net taxable income would be zero.

[davrobins]

ebay is actually a really good way of making money. I made my fair share on there myself.