Like Tom, I'm not a tax professional. Unlike Tom, I'm also not a lawyer! But, I file enough tax forms to know that what this means is that you may have to file a schedule D if you sell on Ebay and treat it as a hobby. If you are a business, you will likely be filing business tax forms. If you haven't filled out a Schedule D, you can find an example at http://www.irs.gov. As Tom says, you will need to show dates of purchase, cost of purchase, date of sale, and price of sale. Price is the amount you receive less shipping expenses. You can try to charge off your packing expenses, but unless it is a large item with specific packing receipts, you are better off just counting the charges you can verify with receipts. You could also probably (see a tax professional if you have questions) keep good books and just report your profits as "other income" and skip the Sch D, but when the IRS crosswalks that 1099, it will be harder for them to correlate.
What this also tells me is that I might want to short EBAY. :) I think this will seriously impact their business. One more case of Big Brother closing the loopholes. Let's home Big Brother doesn't start monitoring sites like CR and inquiring about sales when you offer something to the list. Lou Deeter, Orlando FL USA
-----Original Message----- From: Thomas Adams <thomasthomasa@yahoo.com> To: classicrendezvous@bikelist.org; W PAUL PATZKOWSKY <oldtrikerider@q.com> Sent: Tue, May 4, 2010 5:35 pm Subject: [CR] eBay 1099s coming in 2011
Ahh, it looks like eBay is supposed to start sending 1099s for the 2011 tax year. If you sell on ebay, start saving information on how much you paid for items and how much ebay, paypal and the shipping service charged you in fees for your 2011 return.
http://ebay.about.com/
Thomas Adams
Manhattan, KS USA
From: Thomas Adams <thomasthomasa@yahoo.com> Subject: [CR] 1099, Income tax and eBay Re: Ebay - Another issue To: classicrendezvous@bikelist.org, "W PAUL PATZKOWSKY" <oldtrikerider@q.com> Date: Tuesday, May 4, 2010, 4:27 PM
Dear Paul:
DISCLAIMER: I am not a tax professional and this is not intended as tax advice for anyone in particular. Consult with a pro if you have questions.
I don't think you would get a 1099 from the IRS. The 1099 form is basically a report of money paid from the person who paid you, with a copy to the IRS. If that money does not subsequently show up on your tax return for the year, the IRS may come calling. Usual 1099s are from financial institutions for interest, dividends and cap gains, and from persons who hired you as an independent contractor. The dollar threshold used to be a round $600 for contractors and $10 for financial institutions for interest, dividends and such. Failing to send a 1099 if the IRS says you should will also get you in trouble with the IRS.
In the auction context, it would have to be eBay issuing the 1099s, if you sold above X dollars in a year. Then on your taxes you would deduct any transactional costs and the original cost of the item(s) to see if you made a profit, and owed tax. I don't know if the IRS has tried to require ebay to send 1099 forms to big sellers. Profit or loss from hobbies that are not a major source of income are usually not required to be on your tax return, on the assumption that most people lose money on hobbies. But if you sell several Herses of California Masi's in a year, it wouldn't surprise me if the IRS decided to ask what your profit was on the sale.
Tom Adams
Manhattan, KS USA
From: W PAUL PATZKOWSKY <oldtrikerider@q.com> Subject: Re: [CR] Ebay - Another issue To: classicrendezvous@bikelist.org Date: Tuesday, May 4, 2010, 3:39 PM
I've already sent a personal reply to Greg regarding the original question, basically covering some of the same points that others have addressed. I'm curious about something else, however. Has anyone ever recieved a 1099 or similar document from the IRS for Ebay sales?
Paul Patzkowsky
Longmont, Colorado