If you haven’t read Part 1 of this article already, please click here.
Most sellers’ sales proceeds are not reported to the IRS by Ebay or PayPal. However, PayPal is required to report gross payments for sellers receiving over $20,000 in gross payments and 200 separate payments in a calendar year.
New Proposed Legislation
Wait. You thought you were off the hook? Not so fast. Because there could likely be new reporting requirements for both Ebay and sellers. In addition, they are guaranteed to give you a real bad migraine.
Two pieces of proposed legislation could pose a paperwork and logistical nightmare for everyone in the industry, even deterring many people from doing business as online auctioneers.
1)Internet Broker Tax
The IRS, apparently unhappy about so much unreported income, is considering a proposal that would require Ebay to report all sales proceeds. This means sellers would be required to provide social security or federal tax id numbers to Ebay, as well as report all their profits to the IRS.
2) Ebay Sales Tax
And now several states are starting to make noise about their share of the pie. The Streamlined Sales Tax Project Legislation is a proposal put forth that would require you, the seller, to collect sales taxes from all of your customers, in every state you do business. Hence, you would also be responsible for paying sales taxes back to the states you collected them from.
Most of all, I would strongly advise keeping up with the status on these two pieces of industry-unfriendly legislation. No doubt you could be painfully affected by one or both in the very near future.
Become a Business
After all, you do business every time you’re transacting sales or keeping track of day-to-day information. What about monitoring your inventory, scheduling photo shoots, and delivering excellent customer service?
If you’re making a profit on your Ebay sales, you should set up a business for tax purposes (if you haven’t done so already). That way you can report business income and deduct all related expenses.
Trump says he will lower business income tax to 15%. As a result, this flat rate would affect every business from a sole proprietorship to a mega corporation. But you only have to do the math to see who benefits the most. Plus, critics say his plan could end up raising taxes on very small enterprises. And consequently, add trillions to the federal debt over the next decade.
Clinton’s tax proposals favor simplified tax filing and targeted tax relief to small businesses, although she yet hasn’t provided much more detail than that. Critics contend that her economic approach may be cost prohibitive.
And Sanders really hasn’t said specifically how his proposals will make tax-related issues easier for small businesses. His plan focuses more on bringing in revenue by increasing taxes on the big corporations.
Hopefully this article has shed some light on your concerns as a seller. Seems like as far as presidential politics goes, what they really mean is anyone’s guess.
Finally, I would love to hear your comments on this article and any ideas or suggestions you have for future articles.
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