Resellers Could Owe Big Time: If you resell items gathered from thrift stores and yard sales, watch out. If you don't carefully report the earnings from your business you could end up owing big bucks to the IRS.
Andrea Fabiana Orellana didn’t report more than $41,000 of income on about 1,800 eBay sales of during 2004 and 2005. Ultimately she ended up owing nearly $15,000 in taxes and penalties to the IRS. (More here.) If you’re reselling, you need to follow the IRS’s rules. These tips are straight from the IRS and have been reviewed by accountants and tax attorneys I work with.
1. Don't Fret Over Casual Sales
If your online auction sales are the Internet equivalent of an occasional garage sale, you generally don't need to report the income from these sales. If you paid more for the items than you sell them for, the sales are not reportable. Losses on personal-use property sold are not deductible.2. Businesses Must Pay Taxes- No Matter What
If your online "garage sale" develops into a business and/or you have recurring sales and are purchasing items for resale with the intention of making a profit; you’re probably running an "online auction business" (as the IRS calls it) and you need to start reporting your earnings.3. Report Earnings & Take Advantage of Deductions
If you are operating a viable online auction seller business you may be entitled to deduct business expenses. If you have an established business and you’re augmenting your sales/income with online auction sales, you are required to include the online auctions sales in your business income.4. When to Report Online Auction Sales
When you're running a business you must report sales of appreciated assets. Examples of appreciated assets often include art, antiques and collectibles. If you have online auction sales of property where the sales price is more than your cost or other basis, you will have a reportable IRS gain if you're running a business. These gains may be business income or capital gains.5. Watch out for Tax Schemes
Some promoters are targeting home-based businesses including online auction sellers for abusive tax schemes. If you get an e-mail from “The IRS” delete it; the IRS never e-mails taxpayers directly.Don’t Fret: This doesn’t mean you need to report the few hundred bucks you made at your last garage sale. If you’ve made reselling into a side business or your full time job, you must report your income to the IRS to avoid owing tax debt. If you are reselling casually, don't worry about reporting your earnings.
If you have any specific questions leave them in the comments or send me an e-mail, taxes (writing about them and marketing around them, anyway) are my full time job and I can give you the right answer to any of your tax questions.
great tips on the IRS!Hi..I’m Barb….I am from TTA & Santa’s Gift Shoppe. I am your newest follower. I hope you will get a chance to visit my blog @ santasgiftshoppe.blogspot.com
ReplyDelete& get inspired by something for your family/home. I hope you will follow me as well. Nice to meet ya new friend!!!
Hello! Interesting post. I buy things from garage sales and thrift stores and then resell them in an antique booth. Generally, the check I receive each month is no more than $200. Since starting this I have not done anything with taxes. Do I need to?
ReplyDeleteVanessa- for an amount that small I wouldn't worry about reporting the income, especially if that money is not deposited in your bank account.
ReplyDeleteInteresting post. I buy and resell, but I'm hit and miss..but I'm still not what I would call a "business". My husband on the other hand..who is an accountant keeps telling me we need to start reporting it.
ReplyDeleteI could only hope to have $41,000 in annual income from my little Etsy shop. Thanks for the info...if I do report, do I have to report quarterly or can it wait until I do my personal taxes?
ReplyDeleteJill @ JunkyVagabond
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ReplyDeleteTaxes are due by each and every small company owner in the US. Taxes are one of the largest expenditures of operating a retail store, while the actual amount you'll pay varies by state and business structure. The typical tax rate for small businesses is 19.8% of revenue. Taxes are not only one of the most significant payments, but also one of the highest corporate expenses. Small company owners that file their taxes incorrectly, incompletely, or late risk penalties or, in the worst situations, criminal prosecution. what is good news? Taxes for small businesses aren't as complicated as you would imagine. Your tax burden can be lawfully reduced with the assistance of a certified public accountant (CPA), preventing you from facing a big charge at year's end.
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