Federal Taxes on Ebay Sales?

[Big Al]

Just got an IRS notice that I owe taxes and fees for Ebay sales. Ends up Paypal sent in a 1099 form on me and I owe a decent about of taxes on sales. Seems they classified it as a small business? I have unloaded a good bit of guitars recently but it was not for profit...well I may have made a profit on one or two. Money went to pay various things and I did roll the money over to make a few guitar purchased but in my mind, I did not do this as a business.

Has anyone else gone through this or anyone have suggestions? I am stunned right now and do not know what to do next.

Thanks!

[MetalDaze]

Wow. Ballpark how much you sold?

I would think that eBay would be sending you that 1099 too so it wouldn't be a surprise from the tax man.

[straycat]

I'm sure if you sell a lot it could be considered income.Maybe there is a dollar amount that has to be reached who knows?
You need to go to their FAQ section or read their rules of use.

[xenophobe]

Wow.... that is fucking bogus.

[contilon]

Hopefully you have receipts or can get some for when you bought them. Worst case, you would have to pay taxes on profit, not the total sale.

[Big Al]

Found that if sales are over $20,000 or 200 transactions, they send a 1099.

[Rich#6]

yep. I believe you can take the original cost of what you sold and fees against the 1099 so hopefully you don't own much after that.

[artonsafari]

That mean if you're selling the stuff at a loss the government is gonna cut you a check?

[pianoguyy]

I believe you can take the original cost of what you sold and fees against the 1099

Of course the cost of doing business (buying price and other expenses) can be deducted from the final sales price.
Although, a business may need to amortize the buying price.

That mean if you're selling the stuff at a loss the government is gonna cut you a check?

If he is a business, then yes, that is how it works.
Although, they won't actually write a check, they will let the losses carry over year after year, lessening next year's tax burden.

Just got an IRS notice that I owe... anyone have suggestions?

Take your letter to your accountant (I, of course, assume that you are using an actual accountant, and not H&R BLOCK or TaxAct software). They will know how to proceed based on your individual situation. Hell, I don't even know if you have a job, so how are we going to truly answer the question.

But yes, go to your accountant. The IRS (and state and local) has rules. They know the rules and can do what they do to minimize the damage, if there is any damage. The money you pay them to file for you, is not just a once and done fee. It covers you for any audits that may occur. And should cover periodic meetings to discuss changes in your tax situation.
Its very possible that you owe (sucks to actually pay taxes to support the government payouts), and here is the kicker:

You may end up owing more. The feds sent you a letter, but depending on the rules of your state and local, you may owe them too. You may have to hand in sales tax. You may have to pay a fine for not having a business license. You're doing this out of your house, you may not be allowed to run a business (thier definition of a business, not yours) in your area. Your landlord could evict you. Your bank could close your accounts because you have a personal account and you are using it for business, which means all of your auto-pay utilities will bounce.
And then of course, your wife wants an increase in alimony and child support because you are now making more money.


When you hear businesses saying that they pay 60-70% in taxes, its not just the income tax. Its all of that other junk I just listed.

Sure, probably not gonna happen. But you need to be prepared in case it does.

[Rich#6]

Dude you seriously need to stop going so doom and gloom into this shit.
[QUOTEAlthough, a business may need to amortize the buying price. ][/QUOTE]Do you want to give examples? In a business lowering the value of an inventory item or amortization/depreciation is still a fucking expense that is allowable.

[pianoguyy]

Had he known about the rules of ebay/paypal before hand, he wouldn't be caught off guard now.
What you call 'gloom and doom', I call knowing the possibilities. He didn't know the possibilities, now look where he is. If you want to tell him that he isn't going to owe anything and that he can go blow his wad on hookers and cocaine, you are doing a disservice to your clients. Are you seriously going to tell him that there is no possibility that he may also owe state taxes? He's already in shock with one large bill. Shouldn't he know that there could be others!



Think of these things like speeding down the highway. Millions speed everyday. You may not get caught. You may get caught and be left go with a warning. You may be given a ticket. You may have been speeding in a 'safety corridor' and fines are doubled. You could have been going so fast that its not a minor speeding infraction, and you could be charged with a felony. You could even get a minor ticket but decide not to pay it, which then becomes a major issue.
These are not the paranoid delusions of a psychopath. Its the law.




As to your 'show me examples' statement. I really hope that you are being facetious. You're a minister of money, you should know about depreciation and other basic terms.
Either way, that type of discussion can get too technical for what is needed on this particular thread. He just needs to know that its possible that there will be more bills coming, and he shouldn't go on a spending spree just yet.

[lepard]

Treat this just like casino winnings, offset it with same or more "cost" so net sum is zero extra taxes.

[DonP]

I predict ebay is going to take a huge hit and classifieds like craigslist will do better due to this. Because not only do you have ebay and paypal fees, but now taxes too. Just not worth it.