A guide to reporting your taxes and Form 1099s

[howethegreat]

just a heads up, paypal released today the 2012 financial summaries which show the amount of payment received,fees,etc

[HoustonCPA]

HoustonCPA, once somebody establishes themselves as an unincorporated business on their federal taxes, won't the state soon find out and then ask the seller for sales tax from in-state sales? I am a registered sole proprietor in the state of Ohio so I collect and remit sales tax on all Ohio sales from eBay. I'd imagine though that many eBayers have not taken this step. Will the state ever catch up with these people and ask for back taxes from local sales where sales tax should have been collected?

The answer is that most likely they can and will. If the seller has a presence in a state, either registered as an incorporated business or just operating as a sole proprietorship, the seller should be collecting sales tax on in-state sales. Each state's rules are slightly different on when to collect sales tax, how to collect the taxes, and when to remit the taxes to the state; some states don't even have a sales tax. It is worth your time, if you have substantial sales, to Google your state along with the words "sales tax" and look for a link that takes you either to that state's Department of Taxation or Comptroller's Office. There is usually a registration required and a sales tax permit number to obtain before you can begin collecting sales tax. By living in a state and keeping your inventory in the state, that creates what states refer to as Nexus meaning that the state has the authority to tax your business and require you to meet other obligations such as collection of sales tax.

As more and more states face budget restrictions, they will look to ways to limit the amount of uncollected and unreported revenues that they have a legal right to. As everything becomes more streamlined and connected through technology, catching up to these liabilities should become easier.

It might be worth your while to contact one of the information hotlines on the sales tax website you look at to see if you may be required to collect sales tax. You can probably get away with asking generic questions so as not to have your name on file with the state.

wouldn't another possible deduction be gas money driving to post office to ship items, driving to store to get shipping supplies, etc. ?

In a way, yes. The IRS will allow you to take a mileage deduction for business trips. For 2012, the mileage deduction was 55.5 cents per mile. If you elect to take this deduction, you forego all other expenses associated with the vehicle such as gas, insurance, maintenance, etc. It is far easier to take this deduction than to keep track of your business miles vs. total miles and factor in the total cost of the vehicle (excluding your car payments) based on the percentage. The business mileage deduction for 2013 is 56.5 cents.

You can document your trips by keeping a travel log. The log should contain the date of the trip, the beginning and ending mileage from your odometer, and the business purpose of the trip. If you commingled your business trip along with a stop at the grocery store or to pick up your kids, the full trip doesn't technically count as a business trip.

[nera20]

great rundown

[brian12]

Sorry if this was mentioned already but when in January will you be able to see if you have a tax document from paypal?

[howethegreat]

Originally Posted by brian12

Sorry if this was mentioned already but when in January will you be able to see if you have a tax document from paypal?

around january 31st and if you want to see if you will be getting at 1099 from them you can check out 2012 financial report

[brian12]

Thank you for info yes report was handy im actually getting one but i am about 2k in the loss for the year. I havent had to do this before my first year so im not sure what to do.

[Joed25]

OP, Are you available for tax consulting by phone (I live in NJ). Thank you.

[brian12]

Do u have some advice for me?

[chrismiller81]

Great post! This needs a sticky!

[solt0131]

Another thing:

SAVE EVERY RECEIPT YOU GET FOR CARDS! When BO sends you a box, save the invoice, when you go to the LCS, get a receipt, when you buy cards at a card show - make a receipt. Go to the $1 store and get a receipt booklet, it will be the best $1 you ever spent, trust me.

[HoustonCPA]

OP, Are you available for tax consulting by phone (I live in NJ). Thank you.

Probably not. I work for a middle market public accounting firm and my consulting fees are around $170/hour. I would believe that most of y'all on here would be better suited to let a local CPA practice take care of your needs.

Do u have some advice for me?

You should start to receive 1099s (if any) the first week of February. If you have not received anything by the end of February, you will probably not be receiving one.

[Jester]

Originally Posted by HoustonCPA

Do sales that I conduct on Blowout and COMC count as taxable income?

Yes; any amounts, both monetary and other tangible property, that you receive in exchange for cards should be disclosed on your tax return.

Hi, HoustonCPA. Appreciate you posting this. I'd like to add that due to consignment tax complexities, items you sell on COMC only count as potentially taxable income if you cash out your earnings. Until then you have exchanged cards for the right to future items / services from the site; that right may be converted into a cash amount, but isn't income until you cash out.

Thanks!
Jeremy

[Joed25]

Originally Posted by solt0131

Another thing:

SAVE EVERY RECEIPT YOU GET FOR CARDS! When BO sends you a box, save the invoice, when you go to the LCS, get a receipt, when you buy cards at a card show - make a receipt. Go to the $1 store and get a receipt booklet, it will be the best $1 you ever spent, trust me.

I buy a lot of private collections and of course I pay with cash. The seller would never trust me with a check bec they don't know me. If I would be audited what would I need to prove that I spent the money? It is hard to get reciepts from people that I am paying cash to. Could I keep my own records like write my own receipt or keep it in a note book? Would the IRS accept that? I do have the bank statements that show cash withdrawals, does that help? Thanks

[jlzinck]

All of this information is great.

But remember your deductions are only as good as the person doing your audit. If you do not keep INCREDIBLE records then 1 small slip up can result in all of your deductions being wiped out, resulting in taxes, penalties and interest.

Bottom line is if you get a 1099 from paypal it is WELL worth your money to get your taxes done professionally.

[BigEd]

Originally Posted by HoustonCPA

...You can document your trips by keeping a travel log. The log should contain the date of the trip, the beginning and ending mileage from your odometer, and the business purpose of the trip. If you commingled your business trip along with a stop at the grocery store or to pick up your kids, the full trip doesn't technically count as a business trip.

And keep that travel log as you go. Seriously, they don't mess around with the Standard Mileage Deduction. If you get audited, they'll want to see it and they'll expect it to look like you were keeping the log all year, not like you put it together in February before you filed your taxes.

Originally Posted by Joed25

I buy a lot of private collections and of course I pay with cash. The seller would never trust me with a check bec they don't know me. If I would be audited what would I need to prove that I spent the money? It is hard to get reciepts from people that I am paying cash to. Could I keep my own records like write my own receipt or keep it in a note book? Would the IRS accept that? I do have the bank statements that show cash withdrawals, does that help? Thanks

My 2 cents: Definitely hold on to the statements, but also make a list of how much you spent and what was in the lot. If you can get the person to fill out a receipt, that would be best, but I'm guessing most people who sell large collections don't want anyone from the IRS to track down the sale. I'd like to hear from the OP on this one as well.

[mkal411]

Originally Posted by howethegreat

just a heads up, paypal released today the 2012 financial summaries which show the amount of payment received,fees,etc

How do you get to the financial summary / financial statement once you're logged into PayPal?

I've clicked around a bit and can't seem to find it.

[howethegreat]

Originally Posted by mkal411

How do you get to the financial summary / financial statement once you're logged into PayPal?

I've clicked around a bit and can't seem to find it.

go to history-reports- 2012 financial summary it will take a little while for it to download but will be in a pdf

[mgugs46]

So if my Paypal shows an $8,000 LOSS for 2012, do I have to worry about anything?

[duwal]

I am still beyond confused!

[jlzinck]

Originally Posted by mgugs46

So if my Paypal shows an $8,000 LOSS for 2012, do I have to worry about anything?

Yes. If you get the 1099 you still have to file and have all your supporting docs

[mgugs46]

Originally Posted by jlzinck

Yes. If you get the 1099 you still have to file and have all your supporting docs

Wouldn't the PayPal breakdown PDF they provide be enough?

[jlzinck]

Originally Posted by mgugs46

Wouldn't the PayPal breakdown PDF they provide be enough?

Not necessarily.

Believe me man....if you get the 1099 pay to have your taxes done.

[nera20]

where would the 1099 form be?

[jlzinck]

Originally Posted by nera20

where would the 1099 form be?

It will be under "Tax Documents" in paypal.

[nera20]

Originally Posted by jlzinck

It will be under "Tax Documents" in paypal.

if it says you have no 2012 tax documents does that mean they aren't sending a 1099? I am filing anyways just to be safe but just curious