Ebay - Sole Proprietor?

[Wayne02]

For people who have "ebay businesses", are you structured as a sole proprietor, or as one of the corporation structures?

I've always wondered how that works in regards to taxes if someone is, "self employed", or a sole proprietor with a, "small business". I believe that sole proprietor files on the personal tax form (1040 or the like)?

If so, where does the proof of income come from sans the traditional W2 form received when employed by a company?????

[Ken Scharabok]

I'm probably not typical. I have retirement income, farm income and expenses and eBay business and expenses. I file a 1040 with farm and small busines schedules. As a farmer I have a tax exemption from some state sales tax on certain items. As a business (and I have a business license and state tax exemption number) I do not have to pay state sales taxes on items bought for incorporation into an end it or for resale.

I suspect you would use a 1040 and the schedule for small businesses. On reporting expenses, report everything associated with your eBay sales for which you have a receipt. For example, my receipt for my eBay commissions is my credit card statements against which they bill monthly. On PayPal, I print out a month transaction statement, which has their monthly charges as part of it.

If in doubt, and you have a receipt, deduct it, but be very careful on claiming any home office or vehicle expenses as that is one of the particular audit areas.

If you have a computer, can you depreciate it against your eBay business, your monthly access fees and supplies? Yes, if it is used solely for your eBay business. If you use it for other purposes, then you need to make an estimate of usage and prorate.

[Wayne02]

Thanks Ken,

I know this is probably a simple question, and I probably should look at the 1040 form, but having worked for the man my whole life I always get the W2 form that is asked for on the 1040 form as proof of income. I was just wondering the other day what is the mechanism that is used for proof of income when a person doesn't work for a company? I guess I have it in my mind that some sort of "W2" is required on the tax forms?

For example, say a sole proprietor accepts several forms of payment for his product/services.
Cash
Money order
Personal check
pay pal
Possibly credit cards etc.

Said sole proprietor uses some sort of small business software (maybe quicken or something) or just uses a self-made excel spreadsheet to track this income (as well as all the other categories). The software has the ability to subtotal and total all the various pieces of income and probably will generate all kinds of "reports". Is it one of these reports that is turned in with the 1040 in lieu of the W2 as the mechanism of proof of income?

Thanks

[Ken Scharabok]

As long as you report the income I doubt the IRS cares about in what form it was received. However, will note some forms of payment, such as PayPal or credit card directly, may have deductible expenses associated with them.

Personally I print out a copy of the eBay sales notice. To it gets attached the postal receipt, either from PayPal or the Post Office. At the end of the month I add up all sales amounts, and that is the amount of eBay gross income for that period.

On the sales total, I separate out sales within TN, on which I have to pass along the 9.25% state sales tax to them quarterly. Essentially Non-TN sales, TN sales and total sales.

[morrowsmowers]

Ebay does offer software that will import all of your ebay profits and expenses into Quickbooks. But, you will have to know how to work with Quickbooks to be able to input your inventory and its costs, etc. that would not be part of the data from ebay.

Ken in Glassboro, NJ

[RedneckPete]

Originally Posted by Ken Scharabok

If you have a computer, can you depreciate it against your eBay business, your monthly access fees and supplies? Yes, if it is used solely for your eBay business. If you use it for other purposes, then you need to make an estimate of usage and prorate.

I'm in Canada and tax laws may be different, but think it out before you adopt this approach. I NEED a computer for my business, my personal use is incidental, and as such my computer and Internet is a complete write off. If I am ever challenged on this, I will recover the oldest computer I can find, will set it up in a corner of my garage and will say it is my "personal" computer. I will then purchase a top of the line computer for my "company" and set it up in my home office. Short of peeking through my windows, who is to say which one I use????

Pete

[Andy]

Originally Posted by Wayne02

Is it one of these reports that is turned in with the 1040 in lieu of the W2 as the mechanism of proof of income?

A sole proprietor would file a Schedule C to the 1040. You just report your gross income and expenses; generally, no report or other supporting documentation needs to be filed with the return. However, in case you're audited in the future, you do need to keep the income report, as well as any other records you have of income (I don't do eBay, do they have some kind of yearly statement?)

[Ken Scharabok]

While you can get some monthly/annual reports out of eBay, I prefer to do it manually. I only have about 100-120 sales a month and I need to back out of them sales of personal items, as they are not considered to be commercial income for income tax reporting purposes.

[comfortablynumb]

taxes?
business?
corporation?

seriously?

ebay is gorilla economy.... what big bro dont know dont concern him.

taxes... lol

[texican]

What 'numb said...

I think the words 'business' in a traditional sense, and an 'ebay business' have two way different meanings. I didn't take any business courses in school, but I think one of the reasons for creating a corporation is to protect assets, in case something goes bad wrong... no one wants to lose everything, when their business goes gad.

I'd think the vast majority of ebay businesses are people unloading assets (some might call it junk) out of their attics. Some folks, like Ken have a real business, creating stuff (blacksmithing tools that I wish I had), maintaining a store, with all the attendant business type activities.

Taxes? what taxes? It is refreshing to find people that actually want to pay something to the IRS...

[comfortablynumb]

I dunno how the rest of the sheep in the USA live, but unless you pay me with a check, that money or traded goods "do not exist" and the transaction "never took place".

they tax me to death with sales tax and real estate taxes, I'll be dammed if I'm going to "report to them" every stray dime and dollar I make.

one does not humor tyrants. Rule one of free living.

[Ken Scharabok]

Well, not paying legitimate taxes due is between you, your conscience and the IRS - and perhaps your state's Department of Revenue.

[comfortablynumb]

well I'd have to actually be making money to pay taxes on...

and that just never happens.