Paying Taxes on Your eBay Sales
If you sell enough on eBay, you will have to pay taxes on those sales. As Ben Franklin knew, you can’t escape death and taxes. (Hey, it’s not a cliché; it’s accepted wisdom.) Whether in cyberspace or face-to-face life, never forget that Uncle Sam is always your business partner.
From 2011 on, the IRS receives a 1099-K form from PayPal that reflects the total transaction amounts for sellers who have completed over 200 transactions or who have had over $20,000 in transactions paid through their sites. You will have to include this income on your annual income tax filing, so filing your taxes may become a bit more complex. Check here for more information on this IRS form from payment processors.
You will have to file a schedule 1040-C, “Profit or Loss From Business.” Here you will have to post your income (and expenses) for your eBay business.
Be sure to keep track of all your eBay business expenses to offset your profits. If you live outside the United States, check the tax laws in that country so you don’t end up with a headache down the road.
As with offline transactions, knowledge is power. The more you know about buying and selling on eBay before you actually start doing it, the more savvy the impression you make — and the more satisfying your experience.
For in-depth details on taxes and bookkeeping, check out eBay Business All-in-One For Dummies.