Has anyone ever been audited for online comic sales??

[1Cool]

My mom keeps pestering me about keeping detailed documentation of my comic purchases/sales in case I get audited. I do an ok job of keeping track of purchase prices for future references but I'm terrible when it comes to keeping track of what I paid for issues. Has anyone ever been audited and had to document purchases/sales? I live 6 states away and Mom can still nag like the best of em

[DrWatson]

Never underestimate the power of the nag.

[Mac Man]

From what I understand, you to make over a certain amount of money before being required to report it to the IRS- somewhere around the $5k mark I believe. I asked about this last year when filing because I made around $1500-$2000 in eBay sales (old computer parts and army surplus- joys of downsizing before and after moving back east). Anyhow, it was a non-issue because I simply did not make enough to warrant reporting it.

 

Let's just hope my accountant didn't come from the same school as Wesley Snipes' tax man...

[Transplant]

From what I understand, you to make over a certain amount of money before being required to report it to the IRS- somewhere around the $5k mark I believe. I asked about this last year when filing because I made around $1500-$2000 in eBay sales (old computer parts and army surplus- joys of downsizing before and after moving back east). Anyhow, it was a non-issue because I simply did not make enough to warrant reporting it.

 

Let's just hope my accountant didn't come from the same school as Wesley Snipes' tax man...

Maybe if that's your only income. But if you have income that requires filing a return, you have to report all your income. That includes Ebay sales. Even not having enough to have to file doesn't save you from being audited. By the way, a sale is income even if you take a loss on it. The only difference is that, in hobbies, you can take a deduction for the expense (your cost in the books sold) equal to the amount of income that you realized. For hobbies, you can not write off net losses, unless the tax law has changed on this in the last several years. For that I'll defer to any tax pros we might have on here.

[ft88]

You are correct Transplant. All income is reportable. The only issue is how its reported. If you are a registered business there are more things you can deduct than if you do it as a hobby, bu that takes detailed accounting tracking. (things like home office use etc.) Otherwise as a hobby its just sale of items less cost of items sold is reportable income.

 

I am not a registered business and have not been audited after selling for 8 years on ebay nor have I heard any nightmare stories or anyone who has.

 

Common sense says if you aren't netting over $1000 you probably have nothing to worry about and if audited can you really not come up with $1000 in comic book expenses? (even if they aren't completely related to your sales....)

 

 

[1Cool]

It would be great to hear a couple stories from people who make a large sum in selling comics and have been audited (if there are any). I have a hard time understanding how an IRS agent could go through every purchase vs sale price for an entire year unless you do all your sales on e-bay and e-bay gave them all your info for the year. And when you consider than many purchases are bulk multi issue purchases and most flips are individual sales - how the heck can this all be factored in. I guess your total Paypal balance at the end of the year vs the beginning would be a good indicator if you only pay through Paypal and only receive payment through paypal, but who does that?? And what about the many times throughout the year that you take funds out of Paypal throughout the year to pay for other comics. Too many damn variables.

[joe_collector]

I have a hard time understanding how an IRS agent could go through every purchase vs sale price for an entire year unless you do all your sales on e-bay and e-bay gave them all your info for the year.

 

Big check/MO deposits, big wire transfers, big Paypal payments, etc. - I think $2K or more, are reported to the IRS/Revenue Canada. They are looking for the big fish, and believe me, when they hook one, get ready to pay through the nose.

 

So if you're nickel 'n diming, you probably don't have anything to worry about.

[Wally's Comics]

Here's a related question,

I spent over 10k in books this year...

 

Can this info help me and my taxes?

 

 

[KingOfRulers]

So, will the IRS start trying to collect if total sales for one year are above 5k or if I am getting that much from one sale? I am uncertain about that.

 

My best advice is deal in cash as much as possible.

[joe_collector]

So, will the IRS start trying to collect if total sales for one year are above 5k or if I am getting that much from one sale?

 

Who knows? There are no hard and fast rules.

 

I am just saying that it you cash a $2K check/MO/wire transfer/Paypal payment for a comic or comics, then red flags will be raised.

 

Other than that, no one knows.

[Stronguy]

Here's a related question,

I spent over 10k in books this year...

 

Can this info help me and my taxes?

 

 

 

You spent over $10k on just one book.

 

No, this can not help you unless you're doing something really screwy with comics. If you're just an average Joe it's just money you spent... until you sell it. Be sure an keep proof of how much you paid so you can count any profit as income.

[awe4one]

So, will the IRS start trying to collect if total sales for one year are above 5k or if I am getting that much from one sale?

 

Who knows? There are no hard and fast rules.

 

I am just saying that it you cash a $2K check/MO/wire transfer/Paypal payment for a comic or comics, then red flags will be raised.

 

Other than that, no one knows.

 

Please correct me if I'm wrong but I thought Paypal will not report to the IRS until your account balance exceeds $2000 (actually I thought it was $1K). Keep it below that level and you should be fine?

 

Jim

[Transplant]

So, will the IRS start trying to collect if total sales for one year are above 5k or if I am getting that much from one sale? I am uncertain about that.

 

My best advice is deal in cash as much as possible.

 

Ok folks. Please consult your own tax pro but I'm going to give a quick and dirty tax lesson. When you pay for a book, what you pay is your "basis" in the book. When you dispose of the book you create a tax event. If you give it away, you are limited to an annual gift amount each year without having to pay any tax. It used to be $10k/year but I think it's gone up ($12k?). Over that amount and you have to pay a gift tax. The amount of the gift is the fair market value of the book when you give it away. FMV can be determined from a # of sources, OSPG, GPA, etc.

 

Charitable contributions are different, no limit. This is a great way to take a write off. You can donate the books to a charity and take the FMV of the book as a write off. Lots of people will take the full OSPG value as the amount of the contribution. Technically, that's not really correct as you need the FMV not just book value. In other words, what could you get for it on the market. That said, most people have had little trouble writing off full OSPG value. This only affects you if you are itemizing your deductions on your taxes (i.e., not taking the standard deduction).

 

If you sell it, your net income is the amount that you realized minus your basis. That Amount Realized (AR) can be cash or trade (FMV of the items you took in trade) or services (FMV of someone painting your house for example). BASIS - AR = Net Income

 

See my post above discussing filing and income.

 

If you just buy books, you don't have a taxable event until you sell them. When you do, what you paid is your basis. If the books go up in value while you have them, no taxable event. Only when you sell or trade of get rid of the books is there a taxable event.

 

Hobbies are treated differently by the IRS. You can't write off net losses for hobbies. As I discussed above, only losses to the extent of net income can be deducted. I.e., you can make $0 after taxes but not -$150. I won't go into detail on what can be written off as a hobby expense to offset gains, but they include things such as supplies, Ebay fees, Paypal fees, travel to cons, Collector Society membership, etc.

 

Please, please, please. Don't not report. Especially if you do any serious amount of transactions. You wouldn't believe how hard the penalties can be. The IRS looks for differing types of proof to establish basis in an item. The more $$, the more proof they want. A lot of times, a detailed journal or spreadsheet might be enough. If you think they won't find out or won't audit you, you're probably right. It's when you're wrong that you are hurting.

[Sharkey]

If you do any amount of business buying and selling comics, consider legally setting yourself up as a retail business in your state, keep track of your comic purchases and sales, and report your income or loss as a real business. You can get a lot of benefits as a small business including being able to write off a portion of your home expenses if you have an office in your home that you use for the business, you can get bank loans, lines of credit, and other things that can benefit you as a consumer and business owner in the long run.

 

Yes, it requires you to keep records, do some paperwork, and spend a little extra money on the tax returns at the end of the year, but it keeps you legit and protected from legal problems (assuming you do it honestly, which you should!). It also forces you to look seriously about what you spend on comics and whether you are really making money or not. Believe me, once you factor in all the expenses (bags, boards, cgc fees, ebay fees, paypal fees, cost of the actual purchases, postage, mileage to and from the PO, travel to comic shops, conventions, looking at collections, etc) it adds up and you see how slim the margin can be. However, you can offset that by deductions on office space, utilities, and write-offs for the expenses incurred in running the business. It'll make you think a lot about whether you want to buy and sell $1 books vs $5 books vs $20, $100, or $1000+ books!

 

And it requires you to you keep records, so that if you ever do get audited, you've got the information they need. Although I have not yet been audited, I assume it's just a matter of time before my number gets called. If you're doing a lot of business through ebay and paypal, it's probably just a matter of time before your number gets called to. Be prepared. (thumbs u

[capt_comics]

Here's a related question,

I spent over 10k in books this year...

 

Can this info help me and my taxes?

 

 

 

Did you pay the state of NC sales tax on that?

 

[Mac Man]

all interesting food for thought. I don't deal in anywhere near the quantities necessary to get picked up on any radar, but still interesting.

[capt_comics]

If you do any amount of business buying and selling comics, consider legally setting yourself up as a retail business in your state, keep track of your comic purchases and sales, and report your income or loss as a real business. You can get a lot of benefits as a small business including being able to write off a portion of your home expenses if you have an office in your home that you use for the business, you can get bank loans, lines of credit, and other things that can benefit you as a consumer and business owner in the long run.

 

Yes, it requires you to keep records, do some paperwork, and spend a little extra money on the tax returns at the end of the year, but it keeps you legit and protected from legal problems (assuming you do it honestly, which you should!). It also forces you to look seriously about what you spend on comics and whether you are really making money or not. Believe me, once you factor in all the expenses (bags, boards, cgc fees, ebay fees, paypal fees, cost of the actual purchases, postage, mileage to and from the PO, travel to comic shops, conventions, looking at collections, etc) it adds up and you see how slim the margin can be. However, you can offset that by deductions on office space, utilities, and write-offs for the expenses incurred in running the business. It'll make you think a lot about whether you want to buy and sell $1 books vs $5 books vs $20, $100, or $1000+ books!

 

And it requires you to you keep records, so that if you ever do get audited, you've got the information they need. Although I have not yet been audited, I assume it's just a matter of time before my number gets called. If you're doing a lot of business through ebay and paypal, it's probably just a matter of time before your number gets called to. Be prepared. (thumbs u

 

Overall good ideas

 

I would watch the part about using your home as a business expense though. The IRS scrutinizes this deduction considerably.

 

[1Cool]

I have never heard about the $2,000 maximum before Paypal reports you to the IRS. My overall question is - I buy a mega collection of comics for $10,000 from e-bay and pay via Paypal (example only). I split it out and sell the set for $20,000 over the year. Of course I take out most of this throughout the year to buy other books and sell these books throughout the year for mostly gains. At the end of the year I have $10,000 in Paypal account plus $10,000 in inventory and $1,000 in profits taken out every month. If I'm audited, with the IRS have a detailed list of my transactions on Paypal and E-Bay and will sit down and add up the withdraws verses purchases. Its just a mind boggling amount of data for a heavy flipper for an entire year.

[Dale Roberts]

So, will the IRS start trying to collect if total sales for one year are above 5k or if I am getting that much from one sale? I am uncertain about that.

 

My best advice is deal in cash as much as possible.

 

All income should be reported. You are allowed a certain amount where it can be considered a hobby, but it is a small amount (under 1K).

[Dale Roberts]

If you do any amount of business buying and selling comics, consider legally setting yourself up as a retail business in your state, keep track of your comic purchases and sales, and report your income or loss as a real business. You can get a lot of benefits as a small business including being able to write off a portion of your home expenses if you have an office in your home that you use for the business, you can get bank loans, lines of credit, and other things that can benefit you as a consumer and business owner in the long run.

 

Yes, it requires you to keep records, do some paperwork, and spend a little extra money on the tax returns at the end of the year, but it keeps you legit and protected from legal problems (assuming you do it honestly, which you should!). It also forces you to look seriously about what you spend on comics and whether you are really making money or not. Believe me, once you factor in all the expenses (bags, boards, cgc fees, ebay fees, paypal fees, cost of the actual purchases, postage, mileage to and from the PO, travel to comic shops, conventions, looking at collections, etc) it adds up and you see how slim the margin can be. However, you can offset that by deductions on office space, utilities, and write-offs for the expenses incurred in running the business. It'll make you think a lot about whether you want to buy and sell $1 books vs $5 books vs $20, $100, or $1000+ books!

 

And it requires you to you keep records, so that if you ever do get audited, you've got the information they need. Although I have not yet been audited, I assume it's just a matter of time before my number gets called. If you're doing a lot of business through ebay and paypal, it's probably just a matter of time before your number gets called to. Be prepared. (thumbs u

 

Overall good ideas

 

I would watch the part about using your home as a business expense though. The IRS scrutinizes this deduction considerably.

 

My accountant says if you do this, you are almost guaranteed to get audited at some point.