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Is Selling On Ebay Just A Hobby Or A Real Business
: I made extra money
selling things on eBay last The IRS rules are clear: you must
year. These were items I pay taxes on all personal and
picked up at yardsales mostly. My business income and that includes
husband says I am responsible for money you make selling on eBay.
paying income tax on the money I
made, but I disagree. This is In its most basic sense, the IRS
just my hobby, not a business. rules mean that if you buy a vase
What do you think? at a garage sale for $10 and sell
-- Gladys A. it on eBay (or elsewhere) for $20
you made a $10 profit and
A: With so many people selling on therefore must report it as
eBay these days this is a income and pay Uncle Sam his fair
question I get all the time. To share.
many eBay sellers the thought of
running an actual business is In reality, if you are a casual
about as appealing as getting seller who only sells a few items
negative feedback, so they go out on eBay every now and then it's
of their way to convince doubtful the IRS is going to lose
themselves that selling on eBay much sleep over the few bucks you
is really "just a hobby" and make.
therefore, should not be
susceptible to income tax laws. However, if you consistently sell
on eBay the IRS may deem your
While you might think selling on activities to be business
eBay is just a hobby and the oriented and you will be required
extra money you're making is not to file a Schedule C and claim
reportable as income, depending the income.
on the circumstances, the IRS
just might disagree with you. The IRS uses a number of factors
to determine if a hobby is really yardsales.
a business. These factors
include: Then again, maybe you would...
:o)
1. Do you carry on the activity
in a business-like manner? 3. If you depend on income from
your eBay activities for your
If you conduct your eBay livelihood?
activities in a business-like
manner, i.e. you keep business If so, it's a business, not a
records, track profit and loss, hobby.
keep a separate checking account,
etc. then whether you think so or There are a number of other
not, your hobby is really a factors the IRS uses to determine
business. if a hobby is really a business,
but that covers the basics.
2. Do you spend considerable time
working on your hobby? You can learn more at the IRS
website at www.irs.gov.
If you put considerable time and
effort into your eBay sales, the What's eBay's take on all this?
IRS may contend that you do so
for profit and not fun. It seems eBay is vehemently opposed to
the folks at the IRS don't anything tax related (especially
believe in doing things strictly the forced collection of sales
for pleasure. My guess is, tax, which is a whole 'nother
neither do you. If you weren't issue). It's understandable that
making money selling on eBay I eBay is not a fan of the IRS
doubt you'd bother getting up at since trying to enforce tax rules
4 a.m. to hit all those on buyers and sellers would
undoubtedly be detrimental to the On the bright side, if you do
way eBay does business. sell on eBay as a business you
can deduct a number of business
eBay does not does not issue 1099 expenses, including the cost of
tax forms to sellers, nor does it inventory, listing fees,
report seller's sales figures to shipping, envelopes, packing
the IRS. eBay considers itself a materials, etc. You might also be
faciliator, i.e. they provide a able to deduct things like the
marketplace in which buyers and purchase of a computer for
sellers come together to do business use, office space (even
business. if it's a home office), office
supplies, and more.
However, since eBay is not
directly involved in the I'm not accountant (nor do I play
transactions that take place one on TV), so please do not take
between buyers and sellers, it any of this as tax advice or
would be impossible for eBay to legal opinion. Talk to your
report sales figures. accountant if there's any doubt
Furthermore, eBay does not track as to whether you should or
if a seller actually gets paid by should not be paying taxes on
the buyer, so they have no idea your eBay earnings.
how much money actually changes
hands, making it impossible for Here's to your success!
eBay to issue accurate 1099s to
sellers. Tim Knox
About the Author:
Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim serves as the president and CEO of three successful technology companies and is the founder of DropshipWholesale.net, an online organization dedicated to the success of online and eBay entrepreneurs.
Related Links:
http://www.prosperityandprofits.com
http://www.smallbusinessqa.com
http://www.dropshipwholesale.net
Read more articles by: Tim Knox
Article Source: www.iSnare.com
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