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I will be on the eBay Selling Coach’s internet radio show on Friday, January 16 to talk about taxes for eBay sellers. The show airs at 1:00 PM, Eastern Time.

Click here for details on how to listen or call in with your questions. The show will be recorded as a podcast, so if you miss it, you can listen as soon as the podcast is uploaded.

*** If you missed the live call, you can listen to the recording here. ***

Related Posts:

• PayPal and Ebay Must Report to the IRS
• List of Tax Deductions for Online Biz Owners
• The IRS and eBay: Tax Season Is Here

Credit card processors will be required to file Form 1099 for each merchant that has at least $10,000 in gross sales and 200 transactions.

Companies have until 2011 to comply with this new law.

The purpose of this new law is to raise revenue for the housing recovery package and to close the tax gap that exists.  The IRS estimates that it loses billions of dollars in tax revenue from small businesses who under-report (or don’t report) income.

While I’m worried that this new law will cause the cost of business for small and online business owners to go up (in the form of higher eBay fees, higher PayPal fees, etc.), I also think that all small business owners should pay their fair share of taxes (I pay my taxes, why shouldn’t all small business owners?).

So here are some tips to help online business owners comply with the new tax law, without paying too much to Uncle Sam:

• Treat your business like a business.  Register a business name, hire an accountant, keep good records.  The more you can do to treat your business like a business, the less likely the IRS will reclassify your business as a hobby.
• Keep separate accounts and records – have separate eBay, PayPal and checking accounts for your personal and business activities.
• Report your income!  Even if you don’t receive a 1099 from eBay, PayPal or the other companies that will be required to file one, you should still report all of your profits from your online business.
• Learn what’s deductible and what’s not deductible – you’d be surprised how many people do not deduct business expenses because they don’t know they can.
• Don’t be afraid of the home office deduction, and other deductions that have been labeled as a red flag.  Being a small business owner is a red flag, but that doesn’t mean you should go out of business, or worse, not report your income!

To read more about the new IRS rules, and how they affect online business owners, please visit Online Sellers Face New IRS Rules in today’s WSJ.

Related Posts:

• The IRS and eBay: Tax Season Is Here
• Do You Pay Taxes On eBay Income?
• Tax and Accounting Solutions for eBay Sellers

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
               
AuctionBytes.com
                April 03,  2005

It’s
that time of year – April 15 is looming. As if I wasn’t already
thinking about it, the Associated Press ran an article about eBay
sellers and whether they were required to report eBay income on their
taxes.

How do you know if you are required to report eBay income in your
taxes? Barbara Weltman, publisher of the "Big Ideas for Small Business"
newsletter and author of several books, including, "J.K. Lasser’s Small
Business Taxes 2005," said the rule as the tax law states it is that
you have to report all income from whatever source derived.

However, an eBay sale may not be income. She explained that if you
purchased a designer dress for $1,000 and sold it on eBay for $200,
that is a loss.

Whether your eBay selling is a hobby, and the frequency of your
sales, doesn’t matter, Weltman said. Whether it is income or not is
what matters.

Weltman said eBay sellers who do not report their income are missing
out on opportunities. It’s the right thing to do, and the law, but in
addition to helping you sleep at night, reporting income allows you to
report expenses, like Internet access fees and all expenses related to
eBay selling. There may be an opportunity to take a home office
deduction, she said. And, if you show a profit, you can put money in a
retirement plan.

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
us with a subpoena for a specific individual before we would provide
any data. I don’t believe this is something that would be typically
done for a routine audit, though it theoretically could happen." He
said this is true for both eBay and PayPal.

Where do you learn how to report eBay income on your taxes? Weltman
suggested IRS Publication 334, "Tax Guide for Small Business" (http://www.irs.gov/pub/irs-pdf/p334.pdf). She said her newsletter

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):
http://www.irs.gov/businesses/small/industries/index.html

"Taxes Part One: Do I Have to Report My Auction Earnings?" By Mike Batsimm
http://auctionbytes.com/cab/abu/y201/m03/abu0033/s03

"Taxes Part Two – How Do I Report My Auction Earnings?" By Mike Batsimm
http://www.auctionbytes.com/cab/abu/y201/m03/abu0034/s05

IRS Section for Small Businesses and Self-Employed
http://www.irs.gov/businesses/small/index.html

Is it a Business or a Hobby?
http://www.irs.gov/businesses/small/article/0,,id=99239,00.html

Publication 535 (2004), Business Expenses
http://www.irs.gov/publications/p535/index.html

Recordkeeping
http://www.irs.gov/businesses/small/article/0,,id=98575,00.html

IRS Forms and Instructions
http://www.irs.gov

Ernst & Young Tax Guide 2005
http://www.amazon.com/exec/obidos/ASIN/1593150199/auctionbytescom

eBay Radio Interview with Barbara Weltman, August 2003 (Scroll down)
http://www.wsradio.com/ebayradiobytopic/businessadvice.htm

eBay Radio Interview with Barbara Weltman, March 2005 (Scroll down)
http://www.wsradio.com/ebayradio/march2005.htm

UK Article: "Taxman has sights set on eBay traders"
http://business.timesonline.co.uk/article/0,,9559-1419932,00.html

"Australian Tax Office Investigates eBay PowerSellers"
http://www.auctionbytes.com/cab/abn/y04/m09/i16/s01

Related Posts:

• PayPal and Ebay Must Report to the IRS
• Do You Pay Taxes On eBay Income?
• The eBay Selling Coach is Grilling Me on Taxes

—————————————-

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/

Article Source: http://EzineArticles.com/?expert=Tim_Knox
http://EzineArticles.com/?Do-You-Pay-Taxes-On-eBay-Income?&id=40793

Related Posts:

• PayPal and Ebay Must Report to the IRS
• The IRS and eBay: Tax Season Is Here
• The eBay Selling Coach is Grilling Me on Taxes

I have been answering questions about eBay and taxes on my blog and on several eBay membership forums for a while now, but as the questions keep coming, I realize that eBay sellers need more help than I can provide on a blog/forum.

As a result, I am now offering the following services to help other eBay sellers with their financial and tax planning needs:

New Business Consulting

Tax Preparation

Tax Planning

Whether your eBay activity is a hobby or a full-time business, you need the best tax and financial advice available.  For more information about the services above, please email me at kristine@beacon-advisor.com.

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