Do you earn money from eBay sales? If so, you must report this income to the government. Failure to file taxes can result in fines and penalties. Therefore, it’s important to give Uncle Sam his cut. Here’s how to do it in five easy steps.
Step 1: Calculate your sales. How much did you earn from eBay sales for the tax year you are filing on? Calculate a running tally by checking your sales receipts. Then, transmit this information to an excel spreadsheet or use a helpful computer program like Easy Auctions Tracker. Easy Auctions Tracker automatically collects sales information from eBay for you. It’s the perfect program for a procrastinator or disorganized person. Once you’ve completed your spreadsheet, print a copy to attach to your taxes and save a file on your computer.
Step 2: Check for deductions. You can file deductions on your eBay sales if your eBay activity is considered a business and not a hobby. Who decides what category your eBay sales fall under? Uncle Sam determines it of course! If make a profit using eBay 3 out 5 years, then your eBay activity is classified as a business. As a result, you can deduct your total income of the items and activities that it takes to run a business. For eBay sellers, these deductions include: eBay fees, Paypal fees, supplies, advertising, mileage, telephone usage, bank charges, and products purchased for resale.
Step 3: Complete a Schedule C (or Schedule C-EZ). This form is officially titled ‘A Profit or Loss From Business‘. This form is similar to a 1040 except it is customized to reflect the profits and expenses of a business. If you have completed the prior two steps, this process should be a snap. Make sure to do it accurately. By filling out your Schedule C properly, Uncle Sam will have a complete picture of your eBay sales. If you have a lot of expenses, this will definitely work in your favor. After completing your Schedule C, save (or make) a copy. Print a copy also to attach with your 1040.
Step 4: Attach your tax forms. Staple your Schedule C and spreadsheet to the back of your 1040 (personal tax form). Then, use the following check system. Check for copies, complete signatures and correct mailing addresses. Don’t make any simple errors on your tax forms that will get it returned on a technicality.
Step 5: File your taxes early. Don’t wait until April 15th to mail it off. Why? If you’re reading this article, it’s probably the first time you’ve ever filed a Schedule C. As a result, you want to allow time for errors or additional questions from the U.S. government. By filing early, you will decrease the level of stress you will experience if something goes wrong.
By using these five steps, you should successfully be able to file taxes on your eBay sales. If you make less than $10,000 a year in sales, it will help you avoid the use of a professional tax preparer. For more information, visit the web page eBiz Tax Tips. This site will further clarify any questions.