Today’s post is a guest post by Jennifer Dunn from Outright. The end of the year will be here soon and you will have to start thinking about taxes. If this is your first year selling or if you have been selling and never did taxes for your eBay business, this is a great article for you to read.
eBay Taxes: A Guide for 1st Timers
By: Jennifer Dunn, Outright.com
There’s a lot that’s “sexy” about owning your own eBay store. Some get into it because they hate answering to a boss. Others start online selling because they want to supplement their income and love the wheeling and dealing aspects of reselling.
If there’s one aspect of owning your own store that’s never inspired someone to make the jump, it’s doing your own taxes. Can you imagine jumping into a new venture hoping to make more work for yourself than necessary?
Unfortunately, when it comes to taxes, you are making your life a little more difficult by starting your own store. If this is your first year in the online selling business, you may not know what to expect. Here are a few pointers to keep in mind as you navigate the tax landscape for the first time.
All eBay Stores are Businesses
Yes, all of them, including yours. This is a huge misconception many have about their eBay store or any online store if they see it as a “side venture” or “hobby.” You can consider it a hobby all you want; you can even tell your friends and family it’s just a fun little hobby you have.
The IRS doesn’t care what you think – to them, you own a business, and you owe money to them for it. If you make over $400 in income in a year – no matter where that income comes from – you are required to let the IRS know. The sooner you realize this the better, as you can treat it as seriously as you should. With a professional mentality you’re more likely to do everything right the first time, and get as much out of your taxes as you possibly can.
If you’re disorganized, it’s time to fix that. You’re not the first disorganized person to open a business and you certainly won’t be the last; but if you let your disorganization get out of hand, your business is sunk. You have to keep every piece of paperwork (physical or not) and you have to know where everything is.
Why? Because it all comes back up at some point. All those receipts you saved from your eBay conference visit can go towards deductions on your April taxes. All those sales you made in your home state last month require that you file sales tax. If you can’t find any of this paperwork, you’re going to be in for a giant headache and a world of hurt with fees.
Things Change, but Don’t Fret
New tax forms pop up from time to time, and rules will change out of the blue. It will drive you crazy, especially after you get a routine going. You’ll think the world is ending and nothing will be the same ever again.
Don’t fret! Two things are sure: you’ll adapt to the changes because things aren’t as bad as they seem, and you can always fix a goof. Earlier this year online sellers were fretting over the 1099K and it turned out to be totally harmless. And if you goof, you can always send in a corrected copy of your tax return after you realize the mistake, often without penalty. However, try to do it right the first time to avoid any headaches or ulcers.
Taxes are All Around You
Seriously, it’s time to get on a routine. Not only do you have April taxes to deal with (which are more complicated than ever now) you also have sales tax and quarterly estimated taxes to deal with. If you don’t get on top of these at some point they’re going to constantly hang over your head, driving you nuts. However, if you get on a routine (ask a tax professional if you need one) everything should be fine.
Learn how to sell on eBay and/or Amazon
The Complete eBay Marketing System by Skip McGrath
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