Any tax advice for a newbie?

[Timmay]

Since it is related to this thread, can anyone tell me where to find a monthly or yearly total of paypal fees paid. I remember it is a PITA from last year, but this year I can't find it at all.

 

business.paypal.com

[shadroch]

I don't know about you, but many of my books are worth less than what paid for them 10—15 years ago. In the rare instance when I sell a comic for a profit, in order to offset that profit I will turn around and sell one or two books that I know I'm going to have to take a loss on. You can't deduct a loss on collectibles, so try not to record too large of a loss in any calendar year.

 

If you're one of the few collectors who has seen his collection appreciate in value long-term, good for you! You're making money on something most people lose money on.

 

 

Very few dealers lose money selling comics. Stores, yes. Dealers no.

[1Cool]

I don't know about you, but many of my books are worth less than what paid for them 10—15 years ago. In the rare instance when I sell a comic for a profit, in order to offset that profit I will turn around and sell one or two books that I know I'm going to have to take a loss on. You can't deduct a loss on collectibles, so try not to record too large of a loss in any calendar year.

 

If you're one of the few collectors who has seen his collection appreciate in value long-term, good for you! You're making money on something most people lose money on.

 

That's what you get for buying those junky Golden Age books

[NinjaSealed]

Since it is related to this thread, can anyone tell me where to find a monthly or yearly total of paypal fees paid. I remember it is a PITA from last year, but this year I can't find it at all.

 

business.paypal.com

 

You rock!

 

No matter what I googled or tried to click through links in paypal I couldn't get to that page. I remember going through the same headache last year finding this page.

 

Bookmarking it this time.

 

Thanks!

[wombat]

Be careful on the donations. There are lots of rules you need to follow. And one of the big ones is fair market value. You can't donate your drek and claim the original price as a deduction when no one would pay that amount today.

 

http://www.irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions

 

 

My accountant says if you donate new books, you can deduct the cover price. If you donate used books, its the fair market value. Any book listed in Overstreet has an assigned value. Use it. Just don't go crazy.

 

Define "new" vs "used" in this context.

[Jeffreykli]

Every time there is a tax thread, so much bad information gets thrown out. Things that seem like common sense are just wrong in the tax world. Seek professional tax help.

 

QFT

 

This is the best tax advice for a newbie.

 

+1000

 

This topic comes up every year, and I usually refrain from posting.

 

You have two choices; treat your comic buying/selling as a business or a hobby. You should talk to a professional about the differences between the two and whether you want to do one or the other, and then follow the advice. Either way, you need to document everything so you can support your position if audited.

[youmechooz]

Yeah andrew, get an accountant to handle this stuff. The accountant for my wife's store is who i ended up using. I just send him everything at the end of the month.

[shadroch]

Be careful on the donations. There are lots of rules you need to follow. And one of the big ones is fair market value. You can't donate your drek and claim the original price as a deduction when no one would pay that amount today.

 

http://www.irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions

 

 

My accountant says if you donate new books, you can deduct the cover price. If you donate used books, its the fair market value. Any book listed in Overstreet has an assigned value. Use it. Just don't go crazy.

 

Define "new" vs "used" in this context.

 

Define "this"

[wombat]

Be careful on the donations. There are lots of rules you need to follow. And one of the big ones is fair market value. You can't donate your drek and claim the original price as a deduction when no one would pay that amount today.

 

http://www.irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions

 

 

My accountant says if you donate new books, you can deduct the cover price. If you donate used books, its the fair market value. Any book listed in Overstreet has an assigned value. Use it. Just don't go crazy.

 

Define "new" vs "used" in this context.

 

Define "this"

 

Determining value of donations for tax deductions.

[1Cool]

Be careful on the donations. There are lots of rules you need to follow. And one of the big ones is fair market value. You can't donate your drek and claim the original price as a deduction when no one would pay that amount today.

 

http://www.irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions

 

 

My accountant says if you donate new books, you can deduct the cover price. If you donate used books, its the fair market value. Any book listed in Overstreet has an assigned value. Use it. Just don't go crazy.

 

Define "new" vs "used" in this context.

 

Define "this"

 

Determining value of donations for tax deductions.

 

I'd think he means new as in unsold books or books that are not yet shown in Overstreet. Used would have to be a book which has been sold to another party.

[kav]

I've heard enough deductions can arouse IRS interest.

[jimbo_707]

Very few dealers lose money selling comics. Stores, yes. Dealers no.

I'm not a dealer, just a collector. My impression is that most collectors lose money, and there are far more collectors than dealers.

 

I think a lot of people try to become dealers & then give up after a year or two of losing money. If you include those people, I don't think your statement holds true.

 

Of course, dealers who take the time to travel & buy collections at wholesale prices shouldn't do too badly, but that's a major time commitment that most amateurs aren't willing to make.

 

That's what you get for buying those junky Golden Age books

Sad but true! If I had bought Silver Age Marvel keys 10—15 years ago, like some people advised me to do, I could sell them now & buy more of the GA books that I like.

[ft88]

How you manage inventory and incorporation is definitely a need for a tax guy. But lets say you buy 100 books for $1000. Then you sell 2 of them for $500. What is your inventory and or profit and loss?

 

One thing you can run by your tax accountant is to claim a margin. Say its 40%. So your profit on $500 is $200 and your inventory is now $800.

 

Pick bigger numbers you bought $100,000 and sold half for $50,000. Cost of Goods Sold is $30,000. Gross profit is $20,000. Deduct shipping, paypal fees, returns (if not already applied) boxes, paper, ink, home office, mileage, tolls, phone internet, CGC fees etc. Don't be greedy and follow the tax rules (you must keep track of all this stuff and apply it only if it applies) Either way that $20,000 turns to say $5000. You pay the marginal tax rate on this, max is ~40% (if you make over $400,000 in income)

 

Not that I don't believe you aren't making that but if you have a normal job/salary paying $90,000 a year, your marginal tax rate is 25%. Add state and local of 6-7% so on $50,000 in sales you owe $1600 in taxes all in.

 

Example purposes, your mileage may vary.

[01TheDude]

How you manage inventory and incorporation is definitely a need for a tax guy. But lets say you buy 100 books for $1000. Then you sell 2 of them for $500. What is your inventory and or profit and loss?

 

One thing you can run by your tax accountant is to claim a margin. Say its 40%. So your profit on $500 is $200 and your inventory is now $800.

 

Pick bigger numbers you bought $100,000 and sold half for $50,000. Cost of Goods Sold is $30,000. Gross profit is $20,000. Deduct shipping, paypal fees, returns (if not already applied) boxes, paper, ink, home office, mileage, tolls, phone internet, CGC fees etc. Don't be greedy and follow the tax rules (you must keep track of all this stuff and apply it only if it applies) Either way that $20,000 turns to say $5000. You pay the marginal tax rate on this, max is ~40% (if you make over $400,000 in income)

 

Not that I don't believe you aren't making that but if you have a normal job/salary paying $90,000 a year, your marginal tax rate is 25%. Add state and local of 6-7% so on $50,000 in sales you owe $1600 in taxes all in.

 

Example purposes, your mileage may vary.

 

some of your numbers seem incorrect in your example.

It seems like you are missing a step at inventory valuation perhaps. Like a store that buys something at wholesale and sells retail.

 

so in the books bought for 100K, selling half for 50K -- how is cost of goods sold not 50000? Only thing I can see is you are counting some books as more valuable (i.e. bought for 100K but the collection is valued/priced at 160K). Sell 50K of the inventory and you have 110K left in inventory, CGS of 30K and margin of 20K on those sales.

 

It is a little confusing also in the fact that we are not dealing with identical widgets but varying values even within the same issue based on grade.

 

 

[jsilverjanet]

I've heard enough deductions can arouse IRS interest.

 

arouse is such an interesting word you choose

[1Cool]

How you manage inventory and incorporation is definitely a need for a tax guy. But lets say you buy 100 books for $1000. Then you sell 2 of them for $500. What is your inventory and or profit and loss?

 

One thing you can run by your tax accountant is to claim a margin. Say its 40%. So your profit on $500 is $200 and your inventory is now $800.

 

Pick bigger numbers you bought $100,000 and sold half for $50,000. Cost of Goods Sold is $30,000. Gross profit is $20,000. Deduct shipping, paypal fees, returns (if not already applied) boxes, paper, ink, home office, mileage, tolls, phone internet, CGC fees etc. Don't be greedy and follow the tax rules (you must keep track of all this stuff and apply it only if it applies) Either way that $20,000 turns to say $5000. You pay the marginal tax rate on this, max is ~40% (if you make over $400,000 in income)

 

Not that I don't believe you aren't making that but if you have a normal job/salary paying $90,000 a year, your marginal tax rate is 25%. Add state and local of 6-7% so on $50,000 in sales you owe $1600 in taxes all in.

 

Example purposes, your mileage may vary.

 

some of your numbers seem incorrect in your example.

It seems like you are missing a step at inventory valuation perhaps. Like a store that buys something at wholesale and sells retail.

 

so in the books bought for 100K, selling half for 50K -- how is cost of goods sold not 50000? Only thing I can see is you are counting some books as more valuable (i.e. bought for 100K but the collection is valued/priced at 160K). Sell 50K of the inventory and you have 110K left in inventory, CGS of 30K and margin of 20K on those sales.

 

It is a little confusing also in the fact that we are not dealing with identical widgets but varying values even within the same issue based on grade.

 

 

For his example I would assign a reasonable price to all of the books so that all the books purchased added up to $100,000. Its a pain when I buy big batches of books but I can't imagine how big a pain it would be if you buy large collections wholesale.

[01TheDude]

How you manage inventory and incorporation is definitely a need for a tax guy. But lets say you buy 100 books for $1000. Then you sell 2 of them for $500. What is your inventory and or profit and loss?

 

One thing you can run by your tax accountant is to claim a margin. Say its 40%. So your profit on $500 is $200 and your inventory is now $800.

 

Pick bigger numbers you bought $100,000 and sold half for $50,000. Cost of Goods Sold is $30,000. Gross profit is $20,000. Deduct shipping, paypal fees, returns (if not already applied) boxes, paper, ink, home office, mileage, tolls, phone internet, CGC fees etc. Don't be greedy and follow the tax rules (you must keep track of all this stuff and apply it only if it applies) Either way that $20,000 turns to say $5000. You pay the marginal tax rate on this, max is ~40% (if you make over $400,000 in income)

 

Not that I don't believe you aren't making that but if you have a normal job/salary paying $90,000 a year, your marginal tax rate is 25%. Add state and local of 6-7% so on $50,000 in sales you owe $1600 in taxes all in.

 

Example purposes, your mileage may vary.

 

some of your numbers seem incorrect in your example.

It seems like you are missing a step at inventory valuation perhaps. Like a store that buys something at wholesale and sells retail.

 

so in the books bought for 100K, selling half for 50K -- how is cost of goods sold not 50000? Only thing I can see is you are counting some books as more valuable (i.e. bought for 100K but the collection is valued/priced at 160K). Sell 50K of the inventory and you have 110K left in inventory, CGS of 30K and margin of 20K on those sales.

 

It is a little confusing also in the fact that we are not dealing with identical widgets but varying values even within the same issue based on grade.

 

 

For his example I would assign a reasonable price to all of the books so that all the books purchased added up to $100,000. Its a pain when I buy big batches of books but I can't imagine how big a pain it would be if you buy whole collections wholesale.

 

ok -- even if you were to do that-- his example confuses me as he says you bought 100K in books. Was that the price you paid or are we assuming you paid less?

 

that must be what he is saying (without saying it). You bought 100K worth and paid 60K.

 

ok-- now I understand his numbers.

[ft88]

Yes. Worth $100,000, bought for $60,000. Of the $100,000 you have only sold $50,000 of it.

 

Carry over inventory COGS for future years is $30,000. $30,000 COGS for sold items.

[GACollectibles]

I took a huge hit in taxes this year due to my comic book sales I've exceeded the limits for Paypal to send out the 1099 form so paying no taxes is not an option but do the veterans have any good tax advice for someone who is just starting to feel the pinch.

 

I do have a good tax preparer (in-laws own a HR Block so they do my taxes) but its crazy how much taxes I've got to pay for the extra comic money coming in. After fed tax, medicade, state and local tax I'm paying close to 45% in taxes on my profits. I get to write off mileage to the Cons and an assortment of other deductions (home office) but there has got to be a legal way to not give the Gov half my profits.

 

Welcome to the wonderful world of selling and talk to an accountant.

[W16227]

How you manage inventory and incorporation is definitely a need for a tax guy. But lets say you buy 100 books for $1000. Then you sell 2 of them for $500. What is your inventory and or profit and loss?

 

One thing you can run by your tax accountant is to claim a margin. Say its 40%. So your profit on $500 is $200 and your inventory is now $800.

 

 

 

 

Snipped some of this - but goes to what a lot have said - those who do not understand what FT is posting - then you need an accountant for this as a business.

 

 

Note - I think that FT made one quick error -

 

profit = 200 - sales 500 - so the inventory is now 700

 

generically (skipping a lot of line items)

 

starting inventory - ending inventory = cost of goods sold

 

gross sales - COGS = profit

 

500 - COGS = 200

 

COGS = 300

 

inventory reduction would be 300 (so ending inventory is 700 not 800)

 

 

 

Consistency is key - and the first example is a great way to show how some get in trouble. Inventory valuations and cost of goods sold methodology can get confusing - especially is someone tries to use different methods to get the best tax base.

 

FT example - he uses a margin base to get the profit/ inventory reduction.

 

 

Now - lets say the rest of the books for some reason are all "dollar" books.

 

 

You sell 50 of them for 50 - but now you try to value that inventory at $10 per book to try and take a loss - red flag because you shifted your inventory calculation basis from margin to cost/unit basis. Proper method would be to keep using the margin basis. BUT - you also need to know the proper margin to use - or you can end up with positive inventory accounting--- but no inventory.