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Old 01-28-2011, 03:16 PM   #51 (permalink)
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Well I had my business run from my house for over 10 years. At first it was a spare bedroom. I made a lot of money, and itemized my deductions. NEVER did I get audited. As long as you're not cheating, there should not be an issue. The IRS doesn't know it's a bedroom, they just ask for square footage.

I don't consider a failing business a tax shelter. Just because you don't agree with it, does not make it wrong. Can you show me instances of fact in your opinion, or is it just that?

My CPA tells me the biggest red flag is actually CELL PHONE write offs....People claim the entire phone as business, when in fact, it's not.

Actually the pass through entities in general are red flags. Anytime you are letting the taxpayer writeoff expenses, you open the door for abuse.

A lot of people don't know this but the IRS runs preliminary audits on EVERY SINGLE return they receive (which is why they encourage efiles. it makes their job easier). They run queries ensuring that for the SSNs submitted on your personal return that all the 1099s/W2s/etc that were submitted by employers and financial institutions for the SSNs on the tax return have been accounted for. They also look to make sure there aren't duplicate SSNs on mulitple returns. That kind of comparison happens on EVERY return submitted.

Like I mentioned earlier they look at percentages for red flags. If your wife runs an AVON shop out of your house, they look at other similar buinsesses in your area (which is why you have to submit a type of business you have via the business code on the Schedule C). If you are claiming $1,000 a month in utilities when similar companies claim $200 a month you can easily get flagged. Don't be extravagent or try to get creative and you'll be fine. If you can justify a home office and it's used EXCLUSIVELY for your business you have nothing to hide. It's based on square footage in relation to your total house and if you operate something like an in-home daycare it's dependent on hours open as well.
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Old 01-28-2011, 03:43 PM   #52 (permalink)
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raiderguy10:

How long is it usually for an audit to happen? One CPA I know said if you haven't heard anything in 18 months, chances are no audit. Another one told me they can happen at any time. I want to know how QUICKLY an audit can occur after filing your taxes. Could it be as little as 3 months? Just curious from what you've seen or heard.
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Old 01-28-2011, 03:46 PM   #53 (permalink)
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I've had clients receive a letter from the IRS stating they forgot to claim (ie give me) a 1099 to report within a week of filing their returns. It just depends though. They have the timetables listed in the statute of limitations so if they find a flag on this years return they will probably look at your prior returns to see what happened in the past. I'd say if you report consistent types of numbers from year to year and you haven't heard by the next tax year you are probably OK unless you give the IRS a reason to look at prior years.
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Old 01-28-2011, 03:47 PM   #54 (permalink)
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raiderguy10:

How long is it usually for an audit to happen? One CPA I know said if you haven't heard anything in 18 months, chances are no audit. Another one told me they can happen at any time. I want to know how QUICKLY an audit can occur after filing your taxes. Could it be as little as 3 months? Just curious from what you've seen or heard.
Someone sounds a little paranoid?

On when you know if you are near 20k or 200, Paypal sends you a message that states for uninterrupted service you need to provide your SSN since you are nearing your financial limits. Adding your SSN removes the message.
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Old 01-31-2011, 08:48 AM   #55 (permalink)
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Being curious does not make me paranoid. Being SELF EMPLOYED making over "x" amount of money does. Healthy paranoia is good - keeps me honest.

and for the record: I don't cheat on taxes, and don't suggest anyone else does.
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Old 02-02-2011, 01:33 PM   #56 (permalink)
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I brought this topic up with a LCS owner and he was not worried about it since most of his sales are out of state. So, does anyone know if this is still true, that we are not responsible for taxes on out of state sales?
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Old 02-02-2011, 01:48 PM   #57 (permalink)
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I brought this topic up with a LCS owner and he was not worried about it since most of his sales are out of state. So, does anyone know if this is still true, that we are not responsible for taxes on out of state sales?
Actually yes, I do. Your LCS is correct to a point. The best/easiest way to think of sales tax is to look at the "end user." If I live in PA, I charge sales tax to my local PA customers. If I live in PA, and I buy an item from NY THEORETICALLY I am supposed to track all my internet/out of state purchases and remit sales tax to my state every quarter. Now, realistically that doesn't happen. But theoretically, wherever the last destination of the final product is, is the point in time it is to be taxed. So while your LCS is correct they don't have to collect/pay sales tax on their buyers behalf for out of state sales they are supposed to be tracking their purchases that they open and are supposed to remit state sales tax on those purchases (which I'm assuming they aren't doing because 90% of the country doesn't).
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Old 02-02-2011, 01:49 PM   #58 (permalink)
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Technically if someone is buying from your LCS online, they are "responsible" to pay sales tax to their home state upon purchase. So the LCS isn't responsible, the buyer of the product is.
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Old 02-02-2011, 02:21 PM   #59 (permalink)
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Can't seem to find where paypal has total in and total out for 2010 on my account. Or do I just need to whip out a calculater?

NOWHERE close to the topic at hand, just curious
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Old 02-02-2011, 04:02 PM   #60 (permalink)
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Technically if someone is buying from your LCS online, they are "responsible" to pay sales tax to their home state upon purchase. So the LCS isn't responsible, the buyer of the product is.
So, with my paypal payments, if I do go over the 200/20000 this year, and have to report it. If I can prove that 90% of the payments are from out of state, I will not be responsible for taxes owe on that amount? Just taxes on any in-state sales?
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Old 02-02-2011, 04:07 PM   #61 (permalink)
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So, with my paypal payments, if I do go over the 200/20000 this year, and have to report it. If I can prove that 90% of the payments are from out of state, I will not be responsible for taxes owe on that amount? Just taxes on any in-state sales?
No, we are talking two separate types of taxes. The In-State sales scenario is for sales tax. The 200/20,000 is for federal taxes.
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Old 02-02-2011, 04:13 PM   #62 (permalink)
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No, we are talking two separate types of taxes. The In-State sales scenario is for sales tax. The 200/20,000 is for federal taxes.
Thanks for the info.
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Old 02-28-2011, 12:01 PM   #63 (permalink)
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This same question came up on another forum and someone posted this:

So if you do 1,000 sales but gross under $20,000 NO TAX REPORTING no 1099-K. Now what if your a big seller in amounts not volume. Say you took in 100 or so payments of $500-2000... selling say like many all their high end merchandise they dont want or selling a car or two for a friend on eBay or selling their old Baseball Card Collection or say like an example If I want to sell my Hummel collection of say 50 pieces worth $300-500/each but paid more then that but want to liquidate as need cash - would over $20,000 but the 'AND' 200 transactions does not apply if I got LESS THEN 200 payments.... also does PAYMENTS I send when I buy things on eBay count as trsnsactions or only incoming payments???

Any help appreciated!
As I don't and can't prove on the loss I need to liquidate and bring in cash to get a 1099 for some $30-50k when its all stuff sold at loss just personal things or few expensive items just a $3000 car or something and few sales over the year like a Treadmill etc... I hope they can see people might in one year do things like this they say AVERAGE person has $4000 to $5000 in goods in house to sell on all those eBay infomercials and books on how many START eBay... now would people now whos FIRST YEAR ON EBAY who sell that $3500 treadmill for $800 that $25000 car for $14000 and things like that get a 1099 ... this is another BIG type of ebayer who uses to unload several dozen expensive items like one time then hardly ever use ebay again - doing ebay for now 12 YEARS I know many people like this.... Does the under 200 PAYMENTS but over $20,000 mean you won't be sent a 1099???

Huge question that is clear in general STATEMENT but expalined lacks they say 1000 sales but $19000 you wont but dosent say $32,800 sales or so but 120 transactions You don't qualify...

Anyone....help?

I am fine with taxes but the impossible way to prove I don't want a 1099 when I know and by my real means claim whatever is relative and only I know what paid but no proof and can't 1099 antique dealers bought furniture from years ago that would want to sell as really could use this year a $30,000 emergency fund by selling all my stuff...

I had some $190K in 1099-G from gambling and was easy to show losses over that one year but STATE tax still made me pay even though clear loss FEDERAL $0 but still while I lost some $40k gambling I had to pay state tax on $190K - I am afraid PayPal if over $20k but less then 200 would be as hard to prove as gambling winnings when you need to deduct loses....

Hope this helps and asks same questions others that this relates to are wondering?

Good luck to 2011, a decade later from the best of ebay to its first year being the most hated in this new decade China will take over and dominate ebay as they can sell producs cheaper, sell very rogue from China as hard to even know and they arent paying taxes they take PayPAl china and have their Alibabi...EBAY US and the US Goverment IRS have destroyed eBay which was at once the Golden paradise of a true equal opportunity Capitilisim where a housewife could start a small business.... as easily and same benefits/costs as a big business powerseller - today Sellers are treated as royalty or easily disregarded, account suspensions on 10 year powersellers after a single complaint, YET YET the biggest no no of SHILL BIDDING years ago today is done so much and never do I see any action taken AGAINST!!! I know real Auction world this is ILLEGAL in USA period, yet ebay is lax on shill bidding now it seems as I know dozens who do it and never get problems. In 1999 I recall getting 2 warnings/punishments on times I did to not sell an item - today its an epidemic you see so many people with 0 or 1 feedback buying HIGH price and not paying!

Well IRS question I hope to get answer on and share my thoughts/experience with 1099-G on and issues it brought - this another complicated issue like others mentioned about eBay.

sorry to rant!
All Veterans share this feelings I have.

SO , $35,000 or $40-50-60,000 payments BUT under 200 transactions would as it sounds MEAN YOU DONT Meet Criteria????

Best wishes to all!
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I am curious how these kinds of scenarios would work out. Going by his story of the gambling losses I assume the IRS would just ask for the tax payment regardless of any proof presented, if they felt so inclined.
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Old 02-28-2011, 12:15 PM   #64 (permalink)
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I am curious how these kinds of scenarios would work out. Going by his story of the gambling losses I assume the IRS would just ask for the tax payment regardless of any proof presented, if they felt so inclined.
Sorry I couldn't follow the ramblings you posted.

Bottom line people- PAY YOUR FREAKING TAXES
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Old 02-28-2011, 12:24 PM   #65 (permalink)
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Sorry I couldn't follow the ramblings you posted.

Bottom line people- PAY YOUR FREAKING TAXES

or just make sure you are under the $20,000 mark for the year.

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Old 02-28-2011, 12:47 PM   #66 (permalink)
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or just make sure you are under the $20,000 mark for the year.

Still have to pay the taxes.
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Old 02-28-2011, 01:16 PM   #67 (permalink)
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Still have to pay the taxes.
Sure.

But here is my issue:

If I sell $20,000 worth of stuff for other people and I am only getting a 10% commision ($2,000). How can I explain that to the IRS/PAYPAL/etc.????

I have read over alot of stuff having to do with this whole 200/$20,000 issue and have yet to find a clear answer on how to deal with this.

If I am only getting $2,000 there is no way I should be taxed on the $20,000.

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Old 02-28-2011, 01:19 PM   #68 (permalink)
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Sure.

But here is my issue:

If I sell $20,000 worth of stuff for other people and I am only getting a 10% commision ($2,000). How can I explain that to the IRS/PAYPAL/etc.????

I have read over alot of stuff having to do with this whole 200/$20,000 issue and have yet to find a clear answer on how to deal with this.

If I am only getting $2,000 there is no way I should be taxed on the $20,000.


$20,000 Gross Income
($18,000) Distributions to Customers (Expensed)
$2,000 Net Income = Amount you pay taxes on
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Old 02-28-2011, 01:32 PM   #69 (permalink)
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$20,000 Gross Income
($18,000) Distributions to Customers (Expensed)
$2,000 Net Income = Amount you pay taxes on
Ah...So then I would just claim the $2,000 as part of my income via a 1099 form from PAYPAL? and that's it?

But if I made less than $20,000 and PAYPAL doesn't send me a 1099....how in the heck do I plug it into my 1040 then??

I am so scared and confused about all this I am considering quitting ebay selling right now. I don't have the $$ to go see a CPA or someone about this.

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Old 02-28-2011, 01:34 PM   #70 (permalink)
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Ah...So then I would just claim the $2,000 as part of my income via a 1099 form from PAYPAL? and that's it?

But if I made less than $20,000 and PAYPAL doesn't send me a 1099....how in the heck do I plug it into my 1040 then??

I am so scared and confused about all this I am considering quitting ebay selling right now. I don't have the $$ to go see a CPA or someone about this.

Same place as if you receive a 1099-K. Schedule C - Profit/Loss from a business. There is a place for gross receipts not reported on a 1099, and a place to input the 1099 as well.

You'd be surprised how cheap a CPA can be. I prepare returns for individuals cheaper than they can go to Walmart to get the Turbo Tax software.

You still claim all $20,000. You are allowed to take expense deductions. You claim both the income and expenses, and your net effect is the $2,000 net income - this is what will flow to the front page of your 1040.
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Old 02-28-2011, 01:56 PM   #71 (permalink)
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Bottom line people- PAY YOUR FREAKING TAXES
That's the most important thing. Even if eBay doesn't 1099 you, you are still responsible to pay taxes.

Let's say you don't get 1099'd for 2011, but you do for 2012, so in April of 2013 you send off all your documentation showing your $22,000 of sales in 2012 was only $3k to you.

Just by chance, you get audited.

Then the IRS asks why you didn't claim the $17k in sales from 2011.

Hopefully you have the receipts to prove that you only made $2k on that $17k, otherwise the IRS has you by the short and curlies.

I am fairly confident that I could go back and show I lost money prior to now, but from here forward, 1099 or not, I'd recommend paying taxes on anything you 'earn.'
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Old 02-28-2011, 02:14 PM   #72 (permalink)
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okay...I looked at the 2010 Schedule C that I thought would be used to file the claim on this income.

But since I am not an actual "buisness" I am just doing this as a part time thing, so the form said to put the income in on line 21 of the 1040...and when I looked at the instructions for Line 21, I didn't see an spot to put the "expensed" $18,000.

I am ready to curl up in the corner and bang my head against the wall.
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Old 02-28-2011, 02:17 PM   #73 (permalink)
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okay...I looked at the 2010 Schedule C that I thought would be used to file the claim on this income.

But since I am not an actual "buisness" I am just doing this as a part time thing, so the form said to put the income in on line 21 of the 1040...and when I looked at the instructions for Line 21, I didn't see an spot to put the "expensed" $18,000.

I am ready to curl up in the corner and bang my head against the wall.
Yes, you are a "business." You would be a sole proprietor. No paperwork or anything is needed to be a "business" as a sole proprietor. As long as your main goal is to make a profit, you are a business to the IRS. Line 21 is used for prizes, gambling winnings, jury duty, etc.

No need to bang your head. I think you are making it way harder than it is.
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Old 02-28-2011, 02:34 PM   #74 (permalink)
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Yes, you are a "business." You would be a sole proprietor. No paperwork or anything is needed to be a "business" as a sole proprietor. As long as your main goal is to make a profit, you are a business to the IRS. Line 21 is used for prizes, gambling winnings, jury duty, etc.
Aaaahhhh I got it now. Interesting.

Schedule C:

PART 1: Gross income would be $20,000

PART 2: Expenses would be $18,000

NET PROFIT: $2,000 which would be filled into line 12 on my 1040.

Maybe this isn't so bad....hhhmmmm

But I guess I am not sure what to do with previous years.
Should I go back and file an ammended return?
I didn't make a whole lot in those years, mostly just personal stuff sold.

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Old 02-28-2011, 03:41 PM   #75 (permalink)
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Aaaahhhh I got it now. Interesting.

Schedule C:

PART 1: Gross income would be $20,000

PART 2: Expenses would be $18,000

NET PROFIT: $2,000 which would be filled into line 12 on my 1040.

You should also expense anything else used in the business if it's not included in the 10%

P1 $20K
P2 18K+ if you paid for the shipping/supplies etc out of your cut.
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