How do you guys handle taxes? I used to trade stocks pretty regularly and there was a clear buy price and sell price and easy to calculate how much I gained or lost. Kind of hard to do that for collectibles. I’ve sold some of my childhood cards that I guess had a buy price of the original $4.99 pack back in the 90s? And I’ve bought a few cards last year that have sold this year but it was off offerup/craigslist and did not get a receipt. Would just an excel spreadsheet work of my buy prices/estimated cost or is the IRS going to frown on that?
I create a Monthly Spreadsheet each month throughout the year. Basically, I’ll just grab my total income each month and subtract all of my eBay Fees / PayPal Fees / Postage Fees… That’ll leave me with a rough “Monthly Profit”. From there, I’ll subtract any re-sale / business purchases that I make throughout that month (Shipping Supplies, Office Supplies, Cards…). After everything is said-and-done, that final number is my true Monthly Profit.
At the end of each year, when I go to file my taxes, I’ll simply print-out my Yearly Summary - just a spreadsheet that I created to add-up everything for each month (condense everything down). When I go to visit my Tax Person, he’ll input all the information and also ask about a few additional deductions that you’re allowed to claim (car milage for business purposes is a big one).
In regards to receipts for your purchases for re-sale… My Tax Person told me that a receipt for every little purchase is not necessary. After explaining the type of business I have - purchasing a lot of my product from Flea-Markets, Yard-Sales… He said that was understandable - and I could still have a deduction for those purchases even though there is no “proof”. However, any re-sale purchase that is made (where you can get a receipt); be sure to file the receipt just in-case.
I’m not sure what kind of sales you’re doing on eBay; it is kind of daunting having to file your taxes the first year. However, after that first year of filing, it’s a breeze. You know how to set-up a system for filing and you know a lot of the ins-and-outs. If you are the type of person who sells enough each year for PayPal to send-in that lovely 1099-K to the IRS, I would recommend sitting-down with a Tax Person and having them help you through the process each year - there are A LOT of deductions that you can make on your business - stuff that I would have never even thought about!
And something that I just learned a few days ago: that 1099-K Form that PayPal submits into the IRS; for Federal you need to have $20,000.00 AND 200 Transaction per year before PayPal will issue one of those forms. However, if you live in the lovely state of MA or VT, PayPal sends that form on a State-Level if you have more than $600.00 per year - no matter if that’s through one transaction or 600 - that’s something that just came into effect this year for MA and VT. The PayPal Rep. I spoke with believes this will become more common for other states as well within the next few years. But of course Taxachusetts had to lead the charge…
Additionally, that 1099-K Form can be very inaccurate - only taking into consideration your Gross Sales. So, if you sell something for $100.00 and then the buyer decides he doesn’t want the item anymore, you’ll get the item back and issue a refund. However, that form does not take that refund into consideration - it’ll still show that you “made” $100.00. So, be sure to keep that in-mind as well if you sell something of value and then have to issue a refund later-on.
Thanks for the reply oldskoolpokemon! You are always so helpful in your posts on this website. Yeah I am defintely a small fry probably will do less than $5,000 in sales for sure this year just wanted to see your process and how you would note the cost basis for all your products. Good to know a spreadsheet is acceptable - I’m sure I’m small enough that I wouldn’t be audited but it just worries me if they asked for proof of my cost basis…but good to know your tax person said that every little purchase doesn’t need a receipt, makes me feel better.
Thanks for this…I got one as a MA resident and I had no idea why I was getting it as I didn’t sell the 200/$20k limits. I shouldn’t have to pay much as I’m a broke college student but I almost always sell over $600 in a year so I’ll have to plan for that in my tax forms now.
$600.00 / Year is a pretty ridiculous amount - especially considering they removed the transaction criteria as well. Basically, anyone who sells more than $50.00 / Month (MA or VT) is now required to claim the income. Or, if you sell one “high-value” item from your personal collection for more than $600.00 - and that’s the only item you sell in the entire course of the year, you’ve got to claim the income. C’mon…
I knew it was only a matter of time before PayPal started working with the IRS - it’s been discussed for YEARS! Was a good run while it lasted - no more hiding from Uncle Sam though! LOL
My question was more so directed at the op.
If you get a W2 or a 1099K or similar authorized document, sure…but to go to the effort to make a spreadsheet for a personal collectible sold through craigslist and make an estimation that the card was bought for $4.99 in a pack back in 1998 seems a little ridiculous to me.
Agreed. That’s not really feasible. Even maintaining exactly what is paid for cards in general is chaos. I don’t know anyone doing that. It’s mostly people taking the gross revenue - total expenditures. And that should be done by everyone that is buying and selling with any frequency if only to keep the government out of your wallet if they do come after you. Would suck to get hit with an audit or large tax bill and not have the means to prove you didn’t actually make that much.