What is the best accounting software for eBay sellers?

Someone asked me this recently, and I have to say that QuickBooks is my favorite accounting software for most small businesses, including eBay sellers.  Here’s why…

• QuickBooks is one of the easiest programs to learn
• You can download data from eBay to QB using the Accounting Assistant
• As a tax preparer, I love it when my clients give me a QB file instead of a whole bunch of receipts or notes that I can’t decipher.

The initial cost is approximately $200 for QuickBooks Pro 2007 Small Business Financial Software. They offer upgrades each year, usually at a reduced rate.  I recommend upgrading every two to three years so you continue to receive support for your software.

I know it’s an expense for new businesses, but it’s definitely worth it to have instant access to your financial position and you will probably recoup the cost when it’s time to prepare your taxes, in the form of lower fees (the more organized your tax documents are the less time it takes to prepare your tax return) and more deductions (it’s very easy to miss deductions when you don’t keep good books – if you have a good bookkeeping system in place, you’re more likely to get all of the deductions & credits you are entitled to).

For more great eBay tax tips, please read our free special report, Tax Tips for eBay Sellers.

Tags: ebay accounting, ebay tax, accounting software, quickbooks

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Did You Pay All Your Taxes?

Sandra Block of USA TODAY says "If not, you’re part of the $300 billion gap that Congress wants to close.

If you’re self-employed, sell used items occasionally on eBay or own a home, now would be a good time to start keeping really good records. Your tax returns could receive more scrutiny, thanks to a growing push to narrow the "tax gap" — the billions of dollars in federal taxes that go uncollected every year.

Democrats and Republicans don’t agree on much, but they do share a desire to narrow the tax gap. That’s not surprising. The IRS estimates that the tax gap exceeds more than $300 billion a year. Collecting even half that amount would let Congress repeal the alternative minimum tax — a parallel tax system that increasingly threatens middle-income taxpayers — without raising taxes or cutting government programs.

Other taxpayers who could be affected by efforts to narrow the tax gap include:

•Online sellers. More than 200 million people buy and sell items on eBay. If you use eBay or another Internet auction site to sell old stuff that’s been piling up in your garage, you probably don’t have to worry about paying taxes on the proceeds. But if you earn extra income by selling items online, you’re supposed to pay taxes on your profits.

An IRS advisory committee recommended last year that online auction sites be required to file reports of sales transactions with the IRS. The committee also suggested requiring sellers to obtain a taxpayer identification number, which would let the government track the transactions.

A crackdown probably wouldn’t affect professional sellers. Nor would it affect people who sell used personal items on eBay for less than they originally paid for them. Proceeds from those sales, like money earned from a garage sale, aren’t taxable.

But it could cause headaches for people who occasionally buy items at yard sales and sell them online months later, Grant Thornton’s Schwarz says. To calculate their profits, those people would have to keep records of the amount they originally paid — known as the basis — for every item they sell. That kind of inventory accounting "is sophisticated even for people who do taxes for a living, much less a guy who is trying to make a little extra money," Schwarz says.

EBay spokeswoman Catherine England says the proposals reflect "a misunderstanding of how eBay’s business model works."

EBay doesn’t have records on transactions, because once a winning bid is posted, the sale takes place offline, she says. "We have no way to confirm whether or not that transaction actually happened," she says.

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Tags: ebay tax, income tax on ebay sales