Ebay Tax-Time Fun - Schedule C's

[pkveronese]

Hey guys,

I'm working on my taxes for 2006 and I'm wondering if I need to file a Schedule C or if I can claim eBay sales as additional income in a regular return. Any advice? The Schedule C seems like a lot more work, but would it help?

I don't do this full time (I put stuff on eBay to buy other comic stuff), but I want to do this right tax wise since I had a profit this year (mainly due to the sale of one high dollar book). Thanks for any help you can give guys!

[micmack]

Technicaly the IRS expects you too, but then you can use the postage and fees as a deduction.....

[FlyingDonut]

Schedule C. You can then deduct EVERYTHING you use for your business.

[ft88]

FD - I know you've done this for a while. Does it matter that you don't have a "licensed business"? or can you just treat it as a sole proprietership (even without a license)

 

Ed

 

PS don't forget to pay self employment tax either ~ 15.3% of net.

 

Another question for a high income earner.

 

Could he treat the sale as a cap gains rather than as income. Tax would be 28% but if the cost basis were high or tax bracket were above 28% then it could be worth it.

[FlyingDonut]

My tax guy says I just treat it as additoinal income, filed under my own Schedule C. We've talked about capital gains, but he says that would raise big honking flags for audits.

[ft88]

If its additional income then forget the self employment. Thanks for the info.

 

Ed

[pkveronese]

Do I have to have a business license to file a Sched C? I'm just a little confused (its seeming less and less worth it to sell comics to buy new comics ).

[FlyingDonut]

OK, I just pulled out my 2005 tax return.

 

My selling of collectibles is listed on my Schedule C (Profit of Loss from Business - Sole Propietorship). Within that, I show

 

Gross income (Gross receipts minus cost of goods sold)

 

Then I deduct car and truck expenses (gas is expensive!)

Travel

"Other" expenses (eBay fees, postage, website, CGC's blood money, table fees)

Business use of my house (Form 8829)

 

to get net income, which then goes on Line 12 of my tax return.

[pkveronese]

What would be the difference between showing the income as being generated via a hobby and filing a schedule C? I'm showing about 4K profit (that was used to buy other comics).

[justin]

Boy, I was a painting sub-contractor for 2004-5 and doing my taxes sucked. Now all I do is fill in my w-2 on turbotax.com and poof. refund! I HATE HATE HATE doing taxes.

[FlyingDonut]

What would be the difference between showing the income as being generated via a hobby and filing a schedule C? I'm showing about 4K profit (that was used to buy other comics).

 

You probably need to talk to your tax guy, but if you turned the money around to buy other stuff, it probably is still a "hobby". I would DEFINITELY talk to somebody who knows what they're talking about, however.

[whomerjay]

Do I have to have a business license to file a Sched C? I'm just a little confused (its seeming less and less worth it to sell comics to buy new comics ).

 

Disclaimer: The following is my opinion and should not be construed as professional advice:

 

You don't need a business license (although you should have an account with your state for paying sales tax collected on in-state sales). Your SS# on your Schedule C is for all purposes your business ID. If you hire employees, this creates numerous duties and filings and taxes and a Sole Proprietor business is not necessarily the best. For most of us, we are the one person in the business and we don't pay ourselves.

 

Your "net" is your profit and tax liability. It's important to know what you paid for a book (chances are you made a little on some books, may have lost on some) then subtract ALL expenses incurred in selling the book:

 

ebay/paypal fees and other commissions/fees

packing/shipping fees not compensated for

computer expenses

travel associated with buying or selling the book

losses from deadbeats

storage expenses (e.g., renting of a storage bin)

Your CGC membership and submission costs

Convention costs even if just a buyer on the prowl for books you might resell

 

these can add up to the point that many actually lose money and declare a loss. One deduction not worthwhile is claiming part of your home as an "office expense". You must have a dedicated office in your home and use it for business otherwise the deduction is not legit.

 

Personally, I think it is a good idea to continuously report your loss or gain every year. This helps establish you as a business not just a hobby and you are forced to track your inventory. Plus it serves to educate you about small business and taxes.

[Mr. Zipper]

OK, I just pulled out my 2005 tax return.

 

Business use of my house (Form 8829)

 

Perhaps this varies by state, but you have to be careful with this write-off. As a real estate agent, my wife does Schedule C. We were advised to avoid the house/home office write-off. It provides a minimal return, but can cause major tax issues when you sell your home.

[drice6900]

OK, I just pulled out my 2005 tax return.

 

Business use of my house (Form 8829)

 

Perhaps this varies by state, but you have to be careful with this write-off. As a real estate agent, my wife does Schedule C. We were advised to avoid the house/home office write-off. It provides a minimal return, but can cause major tax issues when you sell your home.

 

Agreed. It is also a major red flag for the IRS to watch for when considering an audit.

[pkveronese]

If I report it as additional income (on a regular return) as hobby income and expenses, if I spent more on the hobby than I made, its basically a wash, right? I should still report it, but it balances to zero then? I'm using turbotax and that's what its looking like right now.

[FlyingDonut]

OK, I just pulled out my 2005 tax return.

 

Business use of my house (Form 8829)

 

Perhaps this varies by state, but you have to be careful with this write-off. As a real estate agent, my wife does Schedule C. We were advised to avoid the house/home office write-off. It provides a minimal return, but can cause major tax issues when you sell your home.

 

True. I should couch this by saying we have no plans to move in the forseeable (15 years+) future.

[rjpb]

OK, I just pulled out my 2005 tax return.

 

Business use of my house (Form 8829)

 

Perhaps this varies by state, but you have to be careful with this write-off. As a real estate agent, my wife does Schedule C. We were advised to avoid the house/home office write-off. It provides a minimal return, but can cause major tax issues when you sell your home.

 

It will cause issues at the federal level. The federal capital gains exclusion on selling a home (if owner occupied in 2 of the last 5 years) is as much as half a million dollars for a married couple. If you have been claiming 10% of your home as a business expense,you will pay potentially 15% capital gains tax on that portion of profit.