Income tax and Ebay

[GoodBuyGirl]

I was just wondering if anyone who sales on ebay claimes it on their taxes.
If so do you have to keep track or does ebay send a tax form at the end of the year?

[moneybags]

I sell on Ebay, & claim it on my taxes. It is the law, which I feel the need to follow. Ebay does not send you anything, you have to keep track of it yourself. If you get audited, Ebay will give the IRS whatever info they want.

[InDebtInDC]

There was a thread posted earlier about this topic. Search the forums.

In general, you treat it just like any other type of buying and selling, and report taxable income the same way.

[disneysteve]

I also sell on ebay and handle it all legally, collecting and submitting sales tax in my state and reporting my income for tax purposes. You need to track everything on your own.

[safari]

I also sell on ebay and handle it all legally, collecting and submitting sales tax in my state and reporting my income for tax purposes. You need to track everything on your own.

Steve, how do you handle selling the old stuff where you're not making any income, but just cleaning your house by selling the things you bought years ago? Without a receipt showing the original purchase price, how would you prove to the IRS that you sold that item at a loss? Also, if you sell an old old item at $50 loss and then sell a collectible item for $50 over the original purchase price, is that considered a wash, meaning your income is 0?

[disneysteve]

Steve, how do you handle selling the old stuff where you're not making any income, but just cleaning your house by selling the things you bought years ago?

Good question. I only report the business transactions. I don't report the personal transactions. Kind of like how nobody reports money earned at a yard sale.

Truly, I have to keep them separate. Part of the business return is listing your beginning and ending merchandise inventory for the year. If I included sales of personal items that weren't part of that inventory, it would screw up the numbers.

I'm not positive if that is the strictly proper way to do things, but I do have records of all sales, business and personal, so if anyone ever questions my accounting, I can document everything to the penny.

[moneybags]

I'm not positive if that is the strictly proper way to do things, but I do have records of all sales, business and personal, so if anyone ever questions my accounting, I can document everything to the penny.

I treat my sales the same way. Selling personal belongings is not income, selling something I bought to resell is.

[disneysteve]

Steve, how do you handle selling the old stuff where you're not making any income, but just cleaning your house by selling the things you bought years ago?

I only report the business transactions. I don't report the personal transactions.

I just spoke to my accountant and asked him this question. He confirmed what I said. Personal transactions where you are reselling household items at a loss don't need to be reported.

If, however, you sell some household item and make a profit on it, that would technically be reportable. And it isn't as farfetched as you might think. Perhaps you have some old toys that are now collectible. Or you collect something like Hummel figurines or porcelain bells or whatever. You bought them for personal enjoyment and are now selling them and some have appreciated in value over the years. Properly, you would have to report those transactions as taxable events.

[safari]

I have this question then. When you're selling household items at a loss, can you deduct those losses from the income you're generating from the business transactions?

Also, how are you going to prove to the IRS that some transactions are personal? If you use the same eBay account for personal and business transactions, it's pretty much impossible to differentiate between those. If IRS audits your eBay sales records, they will see a list of items you sold and the amounts you received. How would they know that an item that was sold for $100 on eBay originally cost $150 and you actually took a loss on it, as opposed to buying it for $50 and selling for $100. It's impossible to prove without the original receipt, and nobody is keeping the receipts for every item they have in the house. There is a lot of gray area as it comes to eBay sales.

[disneysteve]

I have this question then. When you're selling household items at a loss, can you deduct those losses from the income you're generating from the business transactions?

Nope. You can't mix business and personal stuff. And you can't claim the losses from personal items. Nice try, though.

[safari]

Nope. You can't mix business and personal stuff. And you can't claim the losses from personal items. Nice try, though.

You said in your previous post that if you sell a personal item for more than it was originally worth, that income is technically reportable. Which begs the question -- if you have to report the income from a sale of a personal item, then why shouldn't you be allowed to use the loss from another item to offset that income? That just doesn't seem fair.

[disneysteve]

You said in your previous post that if you sell a personal item for more than it was originally worth, that income is technically reportable. Which begs the question -- if you have to report the income from a sale of a personal item, then why shouldn't you be allowed to use the loss from another item to offset that income? That just doesn't seem fair.

I'm not the IRS, but I assume the reasoning is that your home is not a business. If everyone could deduct losses on everything you purchase - clothing, furniture, toys, games, videos, automobiles, etc., that would be insane. However, if you buy a painting for $1,000 and 5 years later sell it for $10,000, the IRS will want a cut of that.

[GoodBuyGirl]

So what would be the difference from selling on ebay and having a garage sale. I've never known of anyone who pays taxes on garage sale profits.

[disneysteve]

So what would be the difference from selling on ebay and having a garage sale. I've never known of anyone who pays taxes on garage sale profits.

No difference if you are selling personal items for less than you paid.

The only real, and potentially significant, difference is that with ebay, there is a record of the sales that can be obtained by IRS. Not so with your garage sale.

[sweeps]

So what would be the difference from selling on ebay and having a garage sale. I've never known of anyone who pays taxes on garage sale profits.

Because few people make a profit on the stuff they're selling at garage sales. No one's going to pay you $50 for a shirt you paid $40 for at the store.