IRS urged to go after eBay sellers

[trillium]

Found this link today:

http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/02/24/MNGMPOAK5C1.DTL

An excerpt:
As part of his proposed federal budget for 2008, President Bush made what many believe is the first step to more vigorously collect taxes on online sales. Although vaguely worded, the proposal would require "brokers," or middlemen, to collect taxpayer identification numbers from clients and report their sales of personal property to the IRS on a 1099 form if sales surpass 100 transactions or more than $5,000 annually.

[safari]

Re: IRS urged to go after eBay sellers

A lot of items people sell on eBay cost them more when they originally bought them, so this cannot be considered as income. For example, you have a book that you bought 10 years ago for $20 and now sell it for $5. How are you going to prove to IRS that you didn't make any money on that sale? I don't have any receipts for all the junk that I am selling on eBay and doubt that others do.

[Snoopy2645]

Re: IRS urged to go after eBay sellers

Well if they do this more people will just go to garage sales & flea market type things that are on every corner now wont they??

[cicy33]

Re: IRS urged to go after eBay sellers

I think that if this happens what will really happen is that ebay will become a place to buy things only from sellers with large amounts of inventory or selling new stuff. The small sellers will eventually quit trying. oh well, back to going to yard sales for me! Ebay used to be a great place to pick up stuff used and it has slowly started really going downhill the past couple of years. Though I do think that if you resell something you already owned and previously used it is not taxable?? Not sure though.

[MonkeyMama]

Re: IRS urged to go after eBay sellers

I think this is a good thing. It is my pet peeve when people make money but feel above reporting, it, we all pay more then as a result.

Just because your income is reported does not mean it is taxable. If you have a business and you have income you get to report your expenses against it.

If they do this, the IRS will have to make clear to the population though that depreciated property sold years later is not taxable, but buying things at wholesale prices for purpose of reselling most definitely is taxable, if you generate more than a few hundred a year. That is most certainly a business and taxable revenue.

For your safety, take pictures of everything you sell. That gives you some record and proof...

Re: IRS urged to go after eBay sellers

I have always claimed my eBay income, since 1999 every year without fail. Some years, quite a few actually it was my only income.

[disneysteve]

Re: IRS urged to go after eBay sellers

I really don't think the IRS is interested in folks selling off their kids' outgrown clothes or no longer needed toys. The report I heard was clear that their focus is the people who make their living on ebay generating a significant amount in sales.

As monkeymama pointed out, just because you report income doesn't mean it is taxable, so that would save the casual seller getting rid of household items.

Personally, I've been on ebay for 10 years and have always reported my income, taken my deductions and paid my taxes, so I'm not concerned at all. But hundreds of thousands of ebayers don't do things the legitimate way. Its about time they start.

[thebetterlifenow]

Re: IRS urged to go after eBay sellers

I just wish the IRS would find better things to do with their time. The Fair Tax looks better every day.

[safari]

Re: IRS urged to go after eBay sellers

Steve, how do you calculate the amount of taxable income generated from your eBay sales? Do you take the closing price of an item and then subtract the cost that you originally paid for it, as well as the Ebay and PayPal fees? Do you keep the receipts for all the stuff that you sell on eBay, in case there is an audit? What about the stuff you purchase at garage sales and then sell it on eBay? You won't have any receipts for that, so IRS will have to believe your word without any documentation to prove it. Also, what about the personal stuff that you sell, which depreciated, so you sell it for a fraction of the price that you paid for it originally. Do you consider this a loss and subtract it from your income?

[disneysteve]

Re: IRS urged to go after eBay sellers

I just wish the IRS would find better things to do with their time.

Isn't this their job? Even with a flat tax, ebay income would need to be reported. The problem currently is people are making thousands or tens of thousands of dollars selling on ebay and not reporting that income.

[disneysteve]

Re: IRS urged to go after eBay sellers

Steve, how do you calculate the amount of taxable income generated from your eBay sales?

I'd have to check last year's tax forms for the specifics (Schedule C, I believe) but it is basically as you described. I list total sales as my income, then deduct all expenses including cost of merchandise, auction and paypal fees, postage, business supplies (tape, labels, bubble wrap, etc.)... What's left is my taxable income.

As for values of items bought, I keep a written log of everything I buy to resell. No, I don't have receipts from yard sales, auctions and flea markets, but I do keep a detailed log of purchases. My accountant says that would be considered adequate documentation. Could I fudge the numbers? Sure. Just one of dozens of ways any of us could cheat on our taxes if we chose to. I just choose not to.

[nanamom]

Re: IRS urged to go after eBay sellers

I would have no problem reporting my income on ebay sales or on garage sales for that matter. However I don't think I have ever sold for a profit so if I took the loss I had less the lack of profit I would actually pay less taxes because I would be reporting a loss.

[disneysteve]

Re: IRS urged to go after eBay sellers

I don't think I have ever sold for a profit so if I took the loss I had less the lack of profit I would actually pay less taxes because I would be reporting a loss.

It doesn't work that way, otherwise we'd all sell off our personal belongings for pennies and take big tax deductions. If you aren't making a profit in a certain period of time, it isn't considered a business so expenses and losses aren't deductible. Again, these aren't the people the IRS is trying to go after.

[Fern]

Re: IRS urged to go after eBay sellers

Maybe i'd feel better about reporting such income to the IRS if the federal govt spent my $$ wisely. There's too much waste and inefficiencies, and no one seems to be held accountable. Why can't they run the govt. like a business that's regularly audited??

[disneysteve]

Re: IRS urged to go after eBay sellers

Maybe i'd feel better about reporting such income to the IRS if the federal govt spent my $$ wisely.

Unfortunately (or fortunately, depending on your point of view), we don't get to pick and choose which laws we want to observe.

As it stands, the law says that all income is reportable. It may not all be taxable but you are legally obligated to report it. I'm no more a fan of the IRS than anyone else, but in this situation, I have to say I think they have every right to expect people who are making their living selling on ebay to pay their fair share of income taxes. Otherwise, it creates an unfair playing field for those of us on ebay who do run our businesses legally and legitimately. How can I compete with someone who can afford to sell the same item for 20% less because he isn't paying taxes on his earnings?