Craigslist is available outside of the US
Yes, you must pay taxes on eBay & Craigslist sales
By the time you've gone through this article, you likely fall into one of two groups: either you occasionally sell your used goods on sites like eBay and Craigslist, or you make multiple sales a day to increase your income.
In both cases, it is possible that some of the money you earn will have to be declared for income tax, Especially if you fall into the latter group - but one-off sales can also count. No reporting could result in an IRS audit for tax fraud. How can you protect yourself against tax fraud this tax season? How do you stay ahead of tax fraud this tax season? Tax fraud is on the rise, and filing your taxes online is your target. What can you do to make sure you don't face tax fraud this year? Continue reading .
Here's a crash course on how to pay taxes on eBay and Craigslist sales and how to deal with it. This post was co-written US tax laws Concerns and may not apply if you live elsewhere.
Which turnover counts towards taxes?
As a rule of thumb, if you made a profit on a sale, it must be reported as income. Profit is defined as the difference between what you paid to buy something, any depreciation in value due to depreciation, and the price at which you sold it.
For example, if you bought a tablet or smartphone for $ 200 and sold it for $ 250 a week later, you've made a profit. However, if you bought a tablet or smartphone for $ 200 a few years ago and just sold it for $ 100, there is no profit.
The IRS has some guidelines for taxing goods sold online. Here are the most important points to know. However, we recommend reading the entire page if you can.
- When you're selling things you've owned for a while, such as: B. A Comic Book Collection 12 Tips To Selling Your Comic Book Collection Successfully 12 Tips To Selling Your Comic Book Collection Successfully Where Should You Sell Your Comics? Are you sure you are getting the best price? And find a good home for them? Here are some tips for successfully selling your comic book collection. Read More This is similar to a garage sale, except online.
- If you're selling something you've produced, such as handmade crafts and works of art 6 Ways To Sell Your Crafts And Make Money Online 6 Ways To Sell And Make Money On Your Crafts Online Want To Sell Your Crafts Online? Etsy shouldn't be your first choice. Here are the reasons, along with several alternative websites that may work better for you. Read More
- When you buy and resell online e.g. B. Gadgets on Craigslist How to Sell and Sell Used Gadgets on Craigslist Safely How to Sell Used Gadgets on Craigslist Safely and Profitably Selling used gadgets on Craigslist can be scary for your safety as well as your moneymaking prospects, but these tips will help you get the most of it. Read More
Basically, it comes down to whether your online sales are defined as A. business or a hobby - not according to your own definitions, but according to the guidelines of the IRS.
The main difference is that a business is for profit while a hobby is not, but the water can be a little cloudy here. Therefore, the IRS has asked several questions that can help clarify your stand:
- Does the time and effort invested in the activity indicate that they intend to make a profit?
- Does the taxpayer depend on income from the activity?
- Are there any losses, is it due to circumstances beyond the control of the taxpayer, or did they occur during the start-up phase of the business?
- Has the taxpayer changed the way they work to improve profitability?
- Do the taxpayer or his advisors have the necessary knowledge to continue operating as a successful company?
- Has the taxpayer made a profit on similar activities in the past?
- Will the activity make a profit in a few years?
- Can the taxpayer expect to make a profit in the future from the appreciation of the assets used in the activity?
If you can answer “yes” to any of these questions you are probably running a business in the eyes of the IRS. The more questions you can answer "yes" the more likely it is a deal.
The distinction between business and hobby is important as some tax measures, such as business expense deduction, are only available to one and not the other.
And just to be clear, even if the title of this article only mentions eBay and Craigslist, these tax guidelines apply regardless of how you actually get your sales - regardless of whether you sell on Amazon. Here's Why You Need To Sell Your Crafts On Amazon Here's Why You Need To Sell Your Crafts On Amazon The introduction of Amazon Handmade presents a great opportunity for Etsy users and manufacturers. Here are the reasons why. Read More Selling Items On Facebook: Everything You Need To Know Selling Items On Facebook: Everything You Need To Know With Facebook, we can go on the internet, put our For Sale signs up, and proclaim, "Yes! I want your money on this toaster with an unpredictable one." Short circuit in the cord! " Before you decide ... read on.
You may also have to pay sales tax on items that you sell online. Unfortunately, sales tax is far more complicated than income tax, and it would be impossible to cover it all in one item. So please refer to this guide to Internet sales tax in all US states.
How Much Do You Owe Taxes?
The first thing you have to do is keep good records. You should always be able to look at a transaction report (or at least a transaction history) and summarize the amount of your sales over a period of time.
You will need this information to determine how much tax you really owe, and in case you are ever audited by the IRS, keeping this record will save you a great deal of time, energy, and pain. 1099 forms are great, but you should still keep independent records.
If you are dealing with a lot of sales and you feel overwhelmed, consider using small business accounting software to pay a professional accountant) expensive. Continue reading .
And yes, you still owe taxes even if you never received 1099 forms from eBay, Craigslist, Paypal, or wherever. It is your responsibility to track your sales and pay your eligible amounts.
The next question is how much do you owe.
If you sell on sites like eBay and Craigslist, the income you generate from those sales will most likely be subject to two taxes: Income tax and Independent tax.
Income tax is a little tricky as the brackets depend on your registration status and can change from year to year. Fortunately, you can easily use the MoneyChimp tax calculator to calculate what you owe on any given taxable income.
The self-employment tax is more straightforward, but it has two parts: Social Security and Medicare. In 2015, the Self Employed Social Security tax rate was 12.4% against initial income of $ 118,500 and the Medicare tax rate on all income was 2.9%.
You must pay both income tax and self-employment tax on income generated from self-employment, including online sales.
For example, if I sold $ 10,000 worth of goods on eBay and taxed being married together, I owed Social Security about $ 1,240 and Medicare $ 290 (actually less if you include deductions and exemptions).
Visit the IRS Tax Center for Self Employment Page.
A little overwhelming, isn't it? For this reason, we strongly recommend using control software. 6 Best Free Tax Software To Submit Your Next Return 6 Best Free Tax Software To Submit Your Next Return When you're tired of filing your taxes, you'll love these six free options for filing your federal and federal forms. Read More You will likely have to pay a little more for a version that can handle self-employed income, but it is worth the time and effort saved.
Don't forget about quarterly payments!
There's one more thing to worry about when dealing with self-employed income: you need to earn something quarterly estimated payments to the IRS.
As an employee working for an employer, a portion of each paycheck is recorded as “tax withholding” - these are payments to the IRS that generate income over the course of the year.
Self-employed income is subject to the same “year-over-year” payments, except those payments are only required to be made once per quarter and only need to calculate the tax you pay on self-employment income earned that quarter.
The quarterly payment deadlines are:
- Q1 April 15 (for income from January to March)
- Q2 June 15 (for April to May income)
- Q3 September 15 (for June to August incomes)
- Q4 January 15 (for income from September to December)
If the day falls on a weekend or a public holiday, the due date will be moved to the next business day.
The easiest way to make these quarterly estimated payments is through the IRS website's online payments gateway, which is just one of the IRS 7's many useful online tools that can save you time and money. 7 IRS Website Tools That Could Save You Time And Money Here are a few online IRS tools for US citizens diligent in deducting their taxes. They make your job a lot easier. Don't give up just yet. Continue reading .
- Visit irs.gov on a secure computer.
- click Pay your tax bill.
- click IRS Direct Pay.
- click Make a payment.
- Under “Apply payment to,” select 1040ES.
- Select “Reason for payment” Estimated tax.
- Select the tax year and click Continue.
- Fill out the taxpayer information and click Continue.
That's it! Any payments you make in this manner are considered a type of "self-reliance" payment on the total tax you owe at the end of the year.
Don't skip the quarterly taxbecause you will have to pay interest on what you still owe the IRS when tax day comes.
When in doubt, seek a professional
While this is all very confusing, especially if you've never had to deal with any kind of self-employed tax. The point, however, is this: you owe taxes on all sales made through sites like eBay and Craigslist for the purpose of profit.
If this is too much for you to wrap your head around, don't worry. You're not the only one feeling this way, which is why so many people assign their taxes to a Certified Public Accountant (CPA). When in doubt, do this.
In the meantime, here are these tips for improving eBay sales. 11 Important Tips To Selling More On eBay 11 Important Tips To Selling More On eBay eBay is one of the top websites for online shopping. You may be a seasoned eBay seller or you may have just started your career as an eBay seller. These tips can help you increase your bottom line. For More Information And Tips On How To Make More Money On eBay How To Make More Money On eBay How To Make More Money On eBay Make More Money On eBay To maximize your earnings on eBay, there are a few factors you need to consider. We'll show you how to get the most out of your auctions. Continue reading .
Does this make you less enthusiastic about selling goods online? Let us know your tax experiences in the comments!
Photo credits: smartphone on laptop via Shutterstock, shopping apps via Shutterstock, 1099 form via Shutterstock, self-employment via Shutterstock.
Learn more about: Craigslist, eBay, Tax Software.
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