Thanks to some astute pre-dawn shopping the past couple of days, I’ll be making some money on Ebay in the next few weeks. I got to wondering:
Is one required to report Ebay income to the IRS? Above a certain threshold?
Does Ebay or Paypal report sellers’ activity to the IRS?
I’m not a business or a major seller; I make about $2-3K/year as a hobby.
Search the IRS site for hobby income. Yeah, you’re supposed to report everything, but you’re allowed certain deductions.
There’s no question that money received from eBay is taxable income if you’re selling something with the intention of making a profit. There’s an exemption for hobbies (like maybe coin collecting) that are undertaken purely for fun and any income is incidental. I may be reading too much into the OP, but it sounds like “hobby” used in that context is “I don’t do this for a living, but it’s just nice to have a few more bucks every now and then.” I don’t believe the IRS would agree to that definition of “hobby.”
If you never gave them your Social Security Number, then I’d suspect that they’re unable to report it even if they wanted to. OTOH, you’re still required to tell the IRS yourself, as the other posts said.
If you are selling your own personal property, not bought with the intention of resale, and at a loss, there is nothing to report.
If you bought stuff with the intention of reselling it, that is a business.
There is no difference between profit from a hobby and profit from a business. You pay the same taxes on both. The only difference is when you suffer a loss . If you have a hobby and you suffer a net loss, you cannot use that loss to offset other income (from non hobby sources). Having the IRS rule that your activity is a hobby is never a good thing. It is probably not a bad idea to at least determine what your profit on your activity is. If you are simply subtracting what you paid for certain items from what you received, without taking into account all the costs you incurred securing and selling the goods, then you are overstating your profit. Perhaps you are even suffering a loss, which might be valuable to you in decreasing taxes.
I don’t believe this claim. Can you provide a cite?
What would you report? The net loss on the sale? Read Pub 17 or The Master Tax Guide or check the IRS.gov cite.
And you are asking me to prove a negative, so I’ll ask you to cite us for the positive, show us where it sez a net loss on the sale of used personal goods (as at a garage sale) is taxable or reportable.
Sorry, I should have been more precise.
It’s true that if you can show that your personal property is being sold at a loss then it is considered a hobby and you do not need to report it to the IRS.
However, it’s also true that if you can’t prove the original value, the IRS deems that value to be $0.
That’s from a 2006 article saying the IRS wants to change the tax laws to make more things reportable. I can’t find what action, if any, they’ve taken in a quick search.
Neither of these truths is exactly relevant to the larger issue of whether you have to report eBay income. I would assume that most people do not keep sales receipts of all the property they sell on eBay to show that it is being sold at a loss. And many times, the resale value of something is more than it originally cost. It doesn’t have to be a real collectible. Even an old 25 cent paperback that sells for a buck is now selling for more than the purchase price.
So while selling things at a loss is not reportable, I wouldn’t want to try to tell that to the IRS when they ask about the thousands of dollars of income I make, as the OP does. Some or for I know most or all of that money may indeed be reportable.
Nothing really to do with “hobbies”. Hobby concerns deductable losses for hobby type businesses.
Here’s a better cite:
http://www.associatedcontent.com/article/116458/tax_tips_for_online_sellers_do_you.html
*Are You Holding an Online Garage Sale?
If you sell only occasionally, the way you would hold a garage sale at your home, you may not have reportable sales. As with a real garage sale, you are usually selling the items at bargain prices compared to the purchase price, in order to attract buyers. In other words, you are selling at a loss, therefore no income tax is owed. You should also know that losses from the sale of personal property are not deductible.*
As far as “If an item’s original purchase value cannot be determined it is typically valued at $0 under current tax law.” that is complete bullshit. There is no such law for CoGs/purchases. In fact, it flies directly against Cohan vs. Commissioner, 39 F. 2d 540 (2d Cir. 1930).
Remember, my Bro is a retired IRS agent, now a Enrolled Agent/Tax Specialist.