Tracking Business Expenses Paid with Personal Funds
September 17, 2007
If you’re like me, you don’t always have your business checkbook or business credit card with you when you’re buying items for the business.
So you end up using your personal checking account or personal credit cards to buy office supplies, postage, or other business expenses.
Unfortunately, it’s easy to forget about these business expenses when you’re calculating your profit/loss or preparing your tax return, which can cost you money at tax time.
To keep track of business expenses paid from personal funds, I’ve created a simple worksheet which I attach to a 9×13 envelope.
I write the date, description and amount of each purchase/expense on this worksheet, then place the receipt in the envelope.
This envelope then goes in my business tax/bookkeeping folder.
When it’s time to prepare my taxes, I pull these folders out and include these expenses on my tax return. This way I never miss a tax deduction!
Download business_expense_worksheet.pdf
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New eBay Forum
September 12, 2007
I recently ran across a new eBay forum, called eBay Coach Free Forum. I’m always looking for good forums, eBay or about online business, so if you know of any, please share!
Free Special Report – Tax Tips for eBay Sellers
September 12, 2007
Don’t forget your third quarter tax estimate!
September 11, 2007
If you have your own business, then you’re probably aware that the third quarter tax estimate is due very soon (Sept 17).
If you just started your business, you may not be aware of how tax estimates work.
Basically, in the United States, we operate on a pay-as-you-go tax
system. That means you pay taxes as you earn income throughout the
year.
If you are an employee, you pay taxes through withholding. If you
are self employed, you pay taxes by making estimated tax payments.
The general rule is that you must make estimated tax
payments if you expect to owe at least $1,000 in tax for the current
tax year, after subtracting your withholding and tax credits, AND if
you expect your withholding and tax credits to be less than the
smaller of:
- 90% of the tax liability on your current year
tax return, or - 100% of the tax liability on your prior year’s
tax return
Generally, you will estimate your tax liability for
the entire year and divide that amount by four to determine your
quarterly estimated tax payments.
The due dates for quarterly estimated tax payments are April 15,
June 15, September 15 and January 15. If the 15th falls on a weekend
or a holiday, the due date is the next business day.
It’s important to send the right amount in at the right time to avoid interest and penalties.
For help estimating your quarterly estimated tax payments, check out How to Pay Estimated Taxes, or contact Kristine for tax planning/estimates today.
The IRS and eBay: Tax Season Is Here
September 8, 2007
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Ok – it’s not tax season yet, but I ran across Ina’s article, and wanted to share it, so here it is… ————————— The IRS and eBay: Tax Season is Here By Ina Steiner |
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It’s How do you know if you are required to report eBay income in your However, an eBay sale may not be income. She explained that if you Whether your eBay selling is a hobby, and the frequency of your Weltman said eBay sellers who do not report their income are missing Some people are concerned that eBay is cooperating with the IRS, making it easier for the IRS to come after Powersellers. eBay spokesperson Chris Donlay said, "The IRS would need to provide Where do you learn how to report eBay income on your taxes? Weltman and book, "JK Lasser’s Small Business Taxes 2005" (http://www.amazon.com/exec/obidos/ASIN/0471683825/auctionbytescom) can also help. If you have questions, talk to a tax professional. Additional resources are listed below. IRS Industry/Profession pages (IRS said they will be adding a section on online auctions): "Taxes Part One: Do I Have to Report My Auction Earnings?" By Mike Batsimm "Taxes Part Two – How Do I Report My Auction Earnings?" By Mike Batsimm IRS Section for Small Businesses and Self-Employed Is it a Business or a Hobby? Publication 535 (2004), Business Expenses Recordkeeping IRS Forms and Instructions Ernst & Young Tax Guide 2005 eBay Radio Interview with Barbara Weltman, August 2003 (Scroll down) eBay Radio Interview with Barbara Weltman, March 2005 (Scroll down) UK Article: "Taxman has sights set on eBay traders" "Australian Tax Office Investigates eBay PowerSellers" |
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| About the author: |
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Ina Steiner is Editor of AuctionBytes.com and |
Do You Pay Taxes On eBay Income?
September 5, 2007
Another great article on eBay and taxes from Tim Knox…
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Do You Pay Taxes On eBay Income?
By Tim Knox
Q: I read your last column about paying income tax on eBay sales if you are doing it as a business, but as someone who only sells on eBay occasionally I’m still confused if the IRS rules apply to me. Can you tell me more?
– Norman L.
A: Last week’s column on whether you were required to report income earned from eBay sales to the IRS sparked a number of additional questions and comments from eBay sellers who were hoping that I could somehow validate that their eBay activities were mere hobbies instead of actual businesses and therefore not susceptible to IRS taxation.
Several folks argued that just because their little eBay hobby generated a little cash, that didn’t make it a full blown business. It seems they consider the income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I’ve always been amused by folks who try to impress me with talk about their "little side business" but when the subject turns to taxes they suddenly refer to it as "my little hobby."
All kidding aside, the conclusion that I came to after reading each email was always the same: while you may think selling on eBay is just a fun pastime and the money you’re making is not reportable as income, depending on the circumstances, the IRS would probably disagree with you.
It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise, folks. If you’re going to come to the dance you have to pay the fiddler.
The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on Ebay.
In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 profit and therefore must report it as income and pay Uncle Sam his fair share.
In reality, if you are a casual seller who only sells a few items on eBay every now and then it’s doubtful the IRS is going to let loose an army of agents to collect taxes on the few bucks you make. However, if you consistently sell on eBay the IRS may deem your activities to be business oriented and you will be required to file a Schedule C and claim the income.
As mentioned last week, the IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business.
These factors include: – Do you carry on the hobby in a business-like manner? – Do you spend considerable time working on the hobby? – Do you depend on income from your hobby for your livelihood?
If the answer to any or all of these question is yes, you’re running a business, not carrying on a hobby, and you are responsible for paying taxes on your income.
What’s eBay’s take on all this? Naturally eBay is vehemently opposed to anything that might rock the eBay boat. eBay does not does not issue 1099 tax forms to sellers, nor does it report seller’s sales figures to the IRS.
Ebay considers itself merely to be a facilitator, meaning that they provide a marketplace in which buyers and sellers come together to do business.
Furthermore, under it’s current system it would be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actually gets paid by the buyer, so eBay has no idea how much money – if any – actually changes hands at the end of each transaction.
On the bright side, if you do sell on eBay as a business you can deduct a number of business expenses, including the cost of inventory, listing fees, shipping, envelopes, packing materials, etc.
You might also be able to deduct things like the purchase of a computer for business use, office space (even if it’s a home office), office supplies, and more.
Talk to your accountant if there’s any doubt as to whether you should or should not be paying taxes on your eBay earnings.
Here’s to your success!
Tim Knox
Entrepreneur, Author, Speaker, Radio Host
Check Out Tim’s New Radio Show! =>http://www.timknoxshow.com
Preorder Tim’s New Book =>Everything I Know About Business I Learned From My Mama
http://www.timknox.com/amazon/
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http://EzineArticles.com/?Do-You-Pay-Taxes-On-eBay-Income?&id=40793
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