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Old 10-08-2012, 10:54 AM   #1 (permalink)
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Question Paypal tax question...

I was going to ask my CPA, but this is much quicker...

Just a quick question:

If I receive $40,000 in payments in a year, but send out $20,000 in payments. Am I only taxed on the $20,000 difference?

If it's being taxed as a 'business', would the $20,000 in payments sent be considered expenses?

This is in the case that the $20,000 were purchases that were re-sold for $40,000, therefore leaving the gross profit at $20,000. Is the amount being taxed the $20,000 or the entire $40,000? The $20,000 would at least be considered write-offs as business expenses either way, correct?


Please only post if you're intent is to help by answering the question.

Thanks in advance for the help!
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Old 10-08-2012, 11:10 AM   #2 (permalink)
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You are essentially right. Just to expand though your 1099 from paypal will be for the full $40,000. Then it will be your job to show the expenses of $20,000.
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Old 10-08-2012, 11:16 AM   #3 (permalink)
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You are essentially right. Just to expand though your 1099 from paypal will be for the full $40,000. Then it will be your job to show the expenses of $20,000.
Thank you. That is what I was thinking.

If I print my Paypal yearly summary, it shows my 'payments sent'. If I solely use my Paypal account for business, that total should essentially deduct from the total gross income, correct?
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Old 10-08-2012, 11:21 AM   #4 (permalink)
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You're taxed on what you made minus what you paid. When tax time comes around, you'll be adding a Schedule C to your 1040. That will be used to report the 1099 you get from PayPal (assuming you have over 200 transactions), and is considered your income.

You'll add ALL your business income to line 1, and you'll report your cost for the stuff you sold on line 4 (cost of goods sold). At this point, I'd start tallying up what you paid in supplies, shipping, postage, mileage to and from various locations in the course of business, etc., as those can all be used to offset the value that will end up on line 1.

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf


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Thank you. That is what I was thinking.

If I print my Paypal yearly summary, it shows my 'payments sent'. If I solely use my Paypal account for business, that total should essentially deduct from the total gross income, correct?
If whatever you bought was purchased with the intent to sell, yes, this is 100% correct.

Last edited by tajikey; 10-08-2012 at 11:24 AM.
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Old 10-08-2012, 11:29 AM   #5 (permalink)
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If you use a room in your home exclusively as a 'home office' you may also be able to deduct a portion of utilities, mortgage, insurance, etc....but that gets tricky.

My wife works from home and has a area that is strictly for work. I intend to calculate our incurred taxes with and without considering this area a 'home office' and see which works better. This can be challenging because how you choose will have consequences when you sell your home.
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Old 10-08-2012, 11:35 AM   #6 (permalink)
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If you use a room in your home exclusively as a 'home office' you may also be able to deduct a portion of utilities, mortgage, insurance, etc....but that gets tricky.

My wife works from home and has a area that is strictly for work. I intend to calculate our incurred taxes with and without considering this area a 'home office' and see which works better. This can be challenging because how you choose will have consequences when you sell your home.
This rarely makes an impact unless either:

A) The room you use is a considerable amount of your home. Take the square footage of the room divided by the square footage of the house to determine the percent of use

Or

B) Your utilities are dramatically higher due to the home office. You only get to write off the percentage in "A," after all.
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Old 10-08-2012, 11:35 AM   #7 (permalink)
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Yeah - do what you said in the first place - go to a CPA.
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Old 10-08-2012, 11:57 AM   #8 (permalink)
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This one wan't enough?
Question about eBay/Paypal tax!

Or this one?
TAXES!

Go to a professional tax professional / thread.

Or take the advice of a sportscard community and when you get hit with penalties, interest and maybe fines please post again so I can get a good chuckle.
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Old 10-08-2012, 11:57 AM   #9 (permalink)
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Yeah - do what you said in the first place - go to a CPA.
Why? TurboTax Business Edition will do what he needs for probably less than half the price.
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Old 10-08-2012, 12:01 PM   #10 (permalink)
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Quote:
Originally Posted by tajikey View Post
Why? TurboTax Business Edition will do what he needs for probably less than half the price.
If you understand how to do taxes.
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Old 10-08-2012, 12:17 PM   #11 (permalink)
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Why? TurboTax Business Edition will do what he needs for probably less than half the price.
And at half the accuracy for most of the population that doesn’t understand IRC code to begin with.

And considering 95% of this board hasn't been reporting their income correctly for the past forever it behooves them to get it accounted for correctly going forward.
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Old 10-08-2012, 12:21 PM   #12 (permalink)
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And at half the accuracy for most of the population that doesn’t understand IRC code to begin with.

And considering 95% of this board hasn't been reporting their income correctly for the past forever it behooves them to get it accounted for correctly going forward.

Cuz those 12-15 thousand new IRS agents are looking for money people!
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Old 10-08-2012, 12:23 PM   #13 (permalink)
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Cuz those 12-15 thousand new IRS agents are looking for money people!
Damn straight they are.

I deal with the IRS on a weekly basis (I actually am a CPA - just not currently in Public Accounting anymore as I moved to industry - but I keep my license active)

They are coming and people are not going to be prepared.
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Old 10-08-2012, 12:31 PM   #14 (permalink)
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Quote:
Originally Posted by tajikey View Post
This rarely makes an impact unless either:

A) The room you use is a considerable amount of your home. Take the square footage of the room divided by the square footage of the house to determine the percent of use

Or

B) Your utilities are dramatically higher due to the home office. You only get to write off the percentage in "A," after all.
To you & Matt:

I live in a studio apartment, my desk/office area takes up about half of my living space (being completely honest haha, very small place only one room and a bathroom/kitchen). I will ask my CPA if any portion of my rent can be deducted.


I was thinking of creating a thread here to host a master list of possible deductions for Paypal-related businesses? I know this a card message board, but I think the majority of us on here do take part in selling on eBay, so this does concern us all. Learning and sharing information can never hurt, we can all learn new things through forum discussions.



I know my CPA can answer these questions, however, it is nice to discuss/share information with others in similar situations from the business-side viewpoint.

Last edited by paul06901; 10-08-2012 at 12:33 PM.
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Old 10-08-2012, 12:41 PM   #15 (permalink)
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IRS PayPal questions!? Help Us!!

This thread will cover your questions.
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Old 10-08-2012, 11:46 PM   #16 (permalink)
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Quote:
Originally Posted by paul06901 View Post
If it's being taxed as a 'business', would the $20,000 in payments sent be considered expenses?
Be sure you keep and copy all receipts from purchases in order to be able to prove all items bought were resold. Anything bought for a PC, gift, or whatever doesn't count in what you can subtract as an expense. An Excel spreadsheet showing each item's bought and sold prices along with the amount earned (or lost), along with the receipts for the purchases should cover you pretty well, but definitely talk to a tax professional.
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