TulipTools Internet Business Owners and Online Sellers Community

Quote:There’s no such thing as a good time to start thinking about taxes. But with six weeks to this year’s filing deadline, some Answer Desk readers are slogging through their returns. Michael in Maryland is wrestling with the knotty question: do I really have to report everything to the IRS – like the money I make by selling my old stuff on eBay?

I have a very simple question but one in which no one seems to have an answer. I made $2,600 profit on eBay selling old items last year. Do I need to report that income on my tax return? … Ebay does not send out 1099's, so I ask: how would the federal government know what I made selling items on Ebay? They would not. The other point some people have mentioned was it a business or a hobby selling items on Ebay? For me it was a hobby. I did not buy and resell items at a higher price. My tax accountant advised me not to report the extra income. I am interested to hear your thoughts on the issue and what the IRS thinks?

Quote:If you are like millions of other Americans, you made money peddling products on eBay last year. Many earned enough to enjoy a night on the town. Others collected enough to go on their dream vacation. Still others made a living selling widgets at the online auction site.

Sales tax is an area where eBay sellers are often "dumb like a fox," Joe Kennedy, author of "The Small Business Owner's Manual," told the E-Commerce Times. Some eBay vendors set up a mailing address in states like Nevada in order to avoid charging sales tax, he reported, while other vendors underreport or do not report sales taxes at all.

Quote:Running a business to make a profit -- even if it's a small, part-time business -- qualifies the taxpayer for write-offs not available to those who earn wages alone, said Francine Migdal, quality assurance manager at Intuit, the maker of TurboTax.

The catch: Including the so-called Schedule C -- on which taxpayers report a profit or loss from a business -- triples the time it takes to file an annual tax return, according to the Internal Revenue Service's estimates. Assembling records, learning about the rules and filing a 1040 take about 16 hours, according to the agency. But add in the forms required for a small business, and tax time requires more than a full workweek -- 48 hours, to be precise.

PAR FOR THE COURSE

That may be par for the course for people who run full-time businesses, but it can be befuddling for those who spend a few hours a week retailing on eBay. Indeed, TurboTax is so convinced that people like Schuessler will be flummoxed by the forms that it created a software program just for them...