i'm really confused as to what i need to do, for a while i sold on ebay here and there on the side just for a few extra bucks, now i make about 4-5x my regular job on ebay so i need to do something about it so the irs doesn't lock me up.
i'm not sure how to start a "business" and how to keep track of everything for claiming taxes, if it was as simple as keeping track of all my transfers of profit from paypal to my bank account and taking out a certain % of that, it would be fine, but i sell headlight bulbs on ebay that sell for different prices sometimes, buy it nows, bids, etc. so it would be a PAIN to determine the EXACT amount of profit per set of bulbs because of ebay fees and etc, so i use my paypal as a business account, i use it to buy products, to pay ebay fees and buy supplies, then i transfer out what i've estimated to be profit to my bank account. it would seem extremely difficult to determine the EXACT to the cent profit per each set reason being, i list 25 pair of bulbs per night per ebay name, only about 15 of all 75 actually sell, so that leaves alot of ebay fees for just listing the others.
i also sell some clothes and software, it's all the same though, very difficult to determine the exact #s with the way ebay fees and paypal fees are. does anyone else that uses paypal have this problem with claiming their income? i need some advice, please!
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Claiming taxes and setting up a corp or LLC
11 posts
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It is easy. Imagine that you have two cigar boxes in front of you.
One is the income box and the other is the expense or write-off box.
If you bought anything for resale, that is cost of goods (expense). PayPal fees, eBay fees, shipping, materials for shipping, car expenses.
The income box is any money that came in from selling. Doesn't matter what the product. I think that is Schedule C. Your social security number will work if you don't have 6 or 10 employees. Then the bottom line goes on your 1040. If you have outside employment with W-2, 1099, it all gets totaled there.
You can look at the forms on irs.gov
[PDF] 2004 Form 1040 (Schedule C)
File Format: PDF/Adobe Acrobat - View as HTML
... See Instructions for Schedule C (Form 1040). Name of proprietor ... Schedule C (Form 1040) 2004. For Paperwork Reduction Act Notice, see Form 1040 ...
http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
IRS Schedule C-EZ
Schedule C-EZ is used to report net profit from business. Download current and past year's version of IRS Schedule C-EZ for free.
http://www.savewealth.com/taxforms/irs/forms/1040sce/
The ABCs of Schedule Cs
... I want to continue to file my businesses taxes using the IRS' Schedule C? ... Schedule C-EZ, of their individual tax returns, the famous IRS form 1040. ...
http://www.entrepreneur.com/article/0,4621,319990,00.html
IRS Schedule C
Schedule C is used to report profit or loss from business. Download current and past year's version of IRS Schedule C for free.
http://www.savewealth.com/taxforms/irs/forms/1040sc/
It is easy. At least for me. But your accountant could give you more tips for write offs. You will only find the basics online. -
my basic thing is that with paypal, it seems harder because... do you just count EVERYTHING that comes into your paypal and then everything that goes out at expense? i'm just lost as to how to keep track of everything. what's the avg % that the irs will take for taxes?
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All depends on how many expenses you claim. The more you claimed, the lower the net profit. It depends on the net profit not the gross.
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nothing can be arounded to the nearest dollar right? all to the penny? i know i sound wonderful, i'm just overwelmed, i just woke up when i got my personal bank statement that said i have 30k in deposits last month... irs thinks i make 26k/year so that could pose a problem and i HAVE to do something soon. can i use paypal as my business account, have them send me paper statements for records?
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If you are really making money, then what you need to do is seperate yourself from the biz. I would first talk to an accountant about your situation, Accounting, Legal, and Insurance costs are not something you want to "cut corners" on. Any accountant should give you if not a free consultation only charge a few hundred bucks. They will most likely advise you to set up an C or S corporation depending on the way you plan to pay yourself, this is important because you do not want to pay taxes twice, (one for business income, and then again for personal). Once you have the business set up (which should only cost between $250 - 500 to incorporate unless you do it yourself. Once it is set up, open a business bank account. Swing all your paypal accounts to this account so you completely sever your personal account from it. You may even want to set up a different paypal under the new biz. From there, paypal will allow you to download all your invoices and it actually breaks out the fees that you pay. All these fees are considered expenses. When in paypal go to History, then download my history on the right handside. Also you can have paypal automatically send you monthly statements just like your bank would. You might want to look into purchasing quicken 2000 or whatever the latest and greatest out is, paypal will download right into your quicken software for you and it is VERY helpful.
Next step, if you are not already using selling manager pro in EBAY then 1) I am very sorry 2) Do it immediately
This is a must have if you are making any kind of money and selling in any kind of volume. This will allow you to set your costs right in ebay and actually give you sales reports to see how much profit you make after all the fees are removed. Not only that but it will inventory all your stock as well plus lots of other cool features. So you would just go to 'my account' then "seller account" and "view invoice" you can save all your invoices to disk or again to quicken and do it all right there.
If you are making the $$ that you say you are then you need to take this seriously because the IRS does not scr#w around at all, and it will catch up to you in the long run.
The way I do it is simple, I save everything, receipts invoices etc. etc. etc. and then give it to my accountant. Find one who will work with you, and it doesn't hurt if they are hot and single either.
Good Luck
Supibombombombombombombombombombombom -
No, no, no. If you are talking under 4-5K over your W-2, not a big deal. Yes you can use PayPal records as your source. Subtract purchases (do you have receipts or invoices?) You can do a C EZ if you like. Since you are talking last year, no need to incorporaate or anything just for eBay sales.
Yes you can round up or down. IRS uses that 50¢ rule. This is not going to be hard. First gather all your expenses and run a total. You have your W-2 from employer, so you only have to account for over and above that total. -
Art,
My advice was based on this:
now i make about 4-5x my regular job on ebay
If that is the case and he makes 26k, then I imagine we are talking well over 4-5k.
If he is making that kind of money, he needs to structure better.
However, I agree if it only a few thousand then by all means do not wast the time, I was under the impression that he was making some money though.
Supi -
no... i meant 4-5 X my actual 9-5 job income somewhere over 100k/yearly
i'll check out that seller assistant, i use turbo lister now...
i have 3 ebay accounts, one is my wife's, one's mine, the other is my aunt's that she lets me use. will that pose any problems? -
IRS doesn't care where it came from, only that you claim it.
You only need to worry about 2004 taxes now. Even if you go to an accountant for 2004 filing, you still have to gather all the invoices and expenses. If you earned 100K on eBay this year, then you want your cost of goods to reduce that figure. Go through your checkbook or PayPal and see what you purchased that was used in this business. Don't forget your eBay and PayPal fees.
You can open a checking account for business purposes to keep things separate. But not mandatory.
I use Quicken to do the checkbook. -
Agreed for your 2004 taxes you do not need to take all the steps I said, that advice was for going forward into the new year. However, Selling Manager Pro is something you should do ASAP. I promise you, that you will thank me for it.
Yes the business account is not mandatory, however I find it to be tremendously helpful. I also have a credit line and credit card in just the business name, and I use the business credit card for any expenses related to the biz. This way I do not have to comb through my personal one pulling out the biz transactions.
just food for thought.
Supi
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