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unblock Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 08:49 AM
Original message
question about the irs decision to go after ebay sellers
let's say i buy something at an actual store for $105. turns out it's the wrong size or whatever, but it's unopened, brand new, but the store won't take returns.

so i sell it on ebay for $100. a $5 loss.

ebay then reports $100 of income.


now, if i have a schedule c business, then i have $100 expense and $90 income for a $10 loss. easy enough.

but if i don't, the $100 is a schedule a miscellaneous deduction -- hobby expense, permitted only to the extent it exceeds 2% of my agi. assuming that means, for practical consideration, that the expense is disallowed.

that means that i have to pay taxes on the $100 income, even though it represents a loss? i'd lose more to the irs than i did to the market!

the thing that puzzles me is that the $105 is not a "hobby expense", it's the COST BASIS of a sold item, but i don't see a place to put that unless it's an investment.


so is this what the irs is actually after??
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Missy M Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:18 AM
Response to Original message
1. That is a good question.....
what do you base the cost of goods sold on, if you are selling household goods bought years ago. If you specifically buy goods to resell on ebay that's easy but it's not if you are selling your household items you no longer use at whatever price you can manage to get. It's like a garage sale.
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TreasonousBastard Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:20 AM
Response to Original message
2. Probably close...
the IRS has always been buggy about flea market and sidewalk vendor types, and this is pretty much the same thing from their point of view.

I don't know the fine points about taxes on casual sales, but if you're on eBay in a big way, it's time to get legitimate. There's people making big bucks there, and tough shit if they have to register or incorporate and pay taxes like a real business.

And, I'm curious how many of the retailers who use eBay are reporting their income from there...



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napi21 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:27 AM
Response to Reply #2
4. Any retailer who is also selling on Ebay and NOT reporting those
sales is an IDIOT! There's way too much of a paper trail to try to hide THAT!

I know a number of small businesses who never report their CASH sales, and they've been getting aways with that for years. The $$ are fairly small, andthere is NO paper trail, so it works for them, but when you involve the internet, Ebay, Paypal, and most likely YOUR bank account when you withdraw the money from Paypal, and the Post Office, the tracability of those sales & income is WAY TOO EASY!!!!!
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napi21 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:21 AM
Response to Original message
3. I seriously doubt you are the type of person the IRS is going after.
There are MILLIONS of people selling things on Ebay, and most of them are selling their own things that they either don't need, want or can't use anymore. It really is like having a yard sale and the IRS isn't going to go after you for THAT either.

The people they are looking for are those LIKE ME, who buy inventory for resale on Ebay, and really DO have an income that they don't report. I started selling on Ebay 7 years ago, and I knew THEN that I better fill out a schedule C each year, even though in the end we were usually talking about a loss or at best a very small profit. It just wasn't worth the risk of facing the IRS coming after ME after a few years and THEM guessing how much $$ they think I made! There are however many people who sell faiirly high ticket items on Ebay all the time and never report ANY OF IT! I also understand that there are lots of things being sold on Ebay that are stolen! Some items fromhouse robberies, and some merchandise just stolen from a retailer. It's those people the IRS is digging for, and to be quite honest, I hope they get them!
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jwirr Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:27 AM
Response to Reply #3
5. Or those who sell a classical car for BIG money. There are things
sold on ebay that make megabucks and I would guess that is what they are after. They would be wasting taxpayers money looking into my little sales.
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napi21 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:29 AM
Response to Reply #5
6. Not only wasting taxpayer $$, but they simply don't have the staffing
to be able to go after millions of little sellers!
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unblock Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:51 AM
Response to Reply #3
8. they might not be "going after" garage sellers like me
but if they require ebay to report it, then i have to account for it somehow.

it seems odd that there's no way to report proceeds from a net loss sale.
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Subdivisions Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 09:35 AM
Response to Original message
7. Legitimate eBayers should be filing a Form 1099 (or similar,
depending on their business classification). If they aren't, they could be in big trouble and may be required to pay back-taxes. Tax laws require that you report ALL of your income from ALL sources.

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napi21 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Feb-25-07 10:07 AM
Response to Original message
9. Check this article. There's a few decent tidbits of info in it.
http://www.wired.com/news/ebiz/0,1272,67035,00.html

"When you're working on the internet, it's kind of a gray issue," said Bart Fooden, a certified public accountant in Woodbury, New York, who advises small businesses and individuals. "The big issue is whether you're doing it as a business or not."

The IRS can apply a list of nine indicators that might prove whether someone's online auctions amount to a business. These indicators include evidence that the taxpayer depends on the income, acts in a businesslike manner, or puts enough time and effort into the activity to suggest a profit motive.

Fooden said the difference between a hobby and a business can often be the seller's intent. If someone is selling the junk that's collecting dust in a garage or basement, then that person probably is getting less than he paid for it -- no profit here. But if someone is buying goods in bulk from a wholesaler and hoping to make a couple extra bucks reselling each one, then that person could have just started a profitable business, Fooden said.

snip

EBay spokesman Chris Donlay said the company does not report individual sales to the tax authorities. EBay urges users, in the site's educational materials and seminars, to learn about tax issues.

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