|
|
|
Buying Fitness Equipment On eBay: Deals or Duds?
With tens of millions of registered members and more than 12,000 items listed, eBay is, without a doubt, the world's largest Internet marketplace. And you can buy just about anything there--from CDs, movies and vitamins to first edition books,...
Do You Pay Taxes On eBay Income?
Small Business Q&A with Tim Knox Q: I read your last column about paying income tax on eBay sales if you are doing it as a business, but as someone who only sells on eBay occasionally I'm still confused if the IRS rules apply to me. Can you tell me...
EBay Scams To Watch Out For Or You May Be Next!
There are many eBay scams out there to keep an eye out for when you are selling on eBay. This article will cover a few of the known and not so known scams to be aware of. Whether you’re a causal seller, or a professional seller on eBay, you need...
Learn To Make Money On eBay
So you want to sell stuff on eBay, but you have two minor
problems: you don't know how and you don't have stuff. Not a
problem. Keep reading for some tips to get you pointed in the
right direction to learn to make money on eBay.
Before you...
Your Rights As An Ebay Buyer.
When you buy things on eBay, you pay the seller before they send you anything. This means that you, as a buyer, are vulnerable to all sorts of problems. You might not get the items you have paid for, or they might be damaged or faulty. Luckily, you...
|
|
| |
|
|
|
|
|
|
Taxing Your eBay Profits
As a small business person-slash-advice columnist I dread the first quarter of the new year. Not because in my mind my own business fortunes start at zero again every January or because I have already dismissed every New Year’s resolution I made when the clock rang out the New Year.
No, the reason I dread the first quarter of the new year is that my email box floods with questions about business taxes and the IRS, my two least favorite subjects on earth. It’s not that I am opposed to paying my fair share of business taxes. It’s that I consider the IRS to be a little like Beetlejuice, the movie demon who appeared only after his name was called three times in a row. My fear is if I write too many IRS columns their dark agents may appear on my doorstep, ready to drag me away to an uncertain fate.
Oh well, one must do his duty no matter the consequences, so here we go….
Q: I am starting a small retail business. While talking to a potential supplier last week he asked for my EIN number. I had no idea what he was talking about, so I told him I would have to get back with him because I didn’t have the number handy. What is an EIN number and why do I need one? -- Robert P.
A: Robert, do you remember the old Johnny Rivers song “Secret Agent Man?” There was a line that said, “They’re giving you a number and taking away your name.” An EIN isn’t as cool as a secret agent number, but it works much the same way when it comes to your business’ relationship with the IRS. Instead of identifying your business by name, the IRS identifies your business by EIN.
EIN stands for Employer Identification Number and is also known as a federal tax ID number. The EIN is a nine-digit number that the IRS assigns to businesses and is used to identify taxpayers that are required to file various business tax returns.
Does your business need an EIN? According to the IRS the answer is yes if:
· Your business has employees
· Your business is a corporation or partnership
· You file returns for Employment, Excise, or Alcohol, Tobacco and Firearms tax
· You withhold taxes on income (other than wages) paid to a non-resident alien.
· Your business has a Keogh plan
· Your business involves trust, estate, real estate mortgage investment conduits, non-profit, farmers’ cooperatives, or plan administrators.
Applying for an EIN is a relatively painless task. You can apply online at the IRS website (irs.gov), apply by mail or telephone, or if you do business in a state that participates in the Federal Employer Identification Number project you can apply through you local IRS office (sorry,
Alabama is not one of them).
You will need an EIN number prior to filing business returns with the IRS, so make sure you give yourself plenty of time to obtain one. For more information on EINs and your business, consult your accountant.
And while we’re on the subject …
Q: I made extra money selling things on eBay last year. These were items I picked up at yardsales mostly. My husband says I am responsible for paying income tax on the money I made, but I disagree. This is just my hobby, not a business. What do you think? -- Gladys A.
A: With so many people selling on eBay these days this is a question I get quite a bit. In fact, I have plans for a future “eBay and taxes” column, but I believe your question is more, “is it a hobby or is it a business?”
Again, I went to the horse’s mouth (at least I think it was the mouth) for the answer. According to the IRS there are a number of factors that help determine if your hobby can be considered a business and thereby make you susceptible to the IRS tax rules governing business.
Do you carry on the activity in a business-like manner? If you conduct your eBay activities like a business, i.e. you keep business records, track your profit and loss, keep a separate checking account, etc. then whether you think so or not, your hobby is considered a business.
If you put considerable time and effort into your venture, the IRS may contend that you do so for profit and not fun. It seems the folks at the IRS don’t believe in doing things strictly for pleasure. My guess is, neither do you. If you weren’t making money selling on eBay I doubt you’d be bothering getting up at 4am to hit all those yardsales. Then again, maybe you would…
If you depend on income from your eBay activities for your livelihood, it’s a business, not a hobby.
There are a number of other factors the IRS considers to determine if a hobby is really a business, but in your case I think that covers the basics.
For detailed answers to any tax question you should consult a qualified accountant or tax attorney. God forbid you rely on a guy who is afraid to mumble the letters “IRS” three times in a row.
Here's to your success!
Tim Knox
About the Author
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
http://www.30dayblueprint.com
http://www.timknox.com
|
|
|
|
|
|