Paypal Reporting Income to IRS with 1099-K. eBay Sales Over $20,000 AND Sold Over 200 Items

It is either backtrack to the best of your abilities or pay the IRS more than you wanted. Im doing a month a day or two at a time. We have until April to get it right and at the same time, ensure we are properly setting ourselves up for 2012 taxes. I doing an Excel sheet right now, but bought Quickbooks. Still contemplating after Im done my backtracking if I should QB or not, based on reviews or leave things in Excel.

This is going to take a while LOL! I was going to work with Excel also, but I have been researching and found this software that looks like it would solve most of my problems going forward:

Easy Auctions Tracker [easyauctionstracker.com]

I have read a lot on it, watched the videos and it seems like just what I need. Has anybody tried this program???

I've seen this software, but for $50, I think I'd rather stick with quickbooks that I got for $100. If it was $15, then I'd bite. I also want to track inventory bought, mileage to post office, shipping supplies bought and office supplies (ink, paper, printer, etc) used for Ebaying. This may track things to give you your net, but what about deductions?

It is either backtrack to the best of your abilities or pay the IRS more than you wanted. Im doing a month a day or two at a time. We have until April to get it right and at the same time, ensure we are properly setting ourselves up for 2012 taxes. I doing an Excel sheet right now, but bought Quickbooks. Still contemplating after Im done my backtracking if I should QB or not, based on reviews or leave things in Excel.

Also, you bring up a good point, hobby seller vs small business. Whether your making money from photography, selling junk you work on or on Ebay, once a certain amount of profit is turned, I think you are viewed as a small business and no longer considered a hobby seller.

Well, at least we get to write off some deductions, but my question to that is, if we are being viewed as a small business, what other items should we know about being a small business if we never saw ourselves that way to begin with

I hear terms of sole proprietorship, LLC, etc. Do we need to establish something of those sorts to do a schedule C? I haven't researched these items as of yet as Im still backtracking 2011

A "hobby seller" still reports the income they make in the course of the hobby to the IRS, the difference is that they do not get to deduct hobby loss against ordinary income, and they are limited to deducting against that hobby income on the schedule A under misc deductions (which are limited to anything above 2% of AGI, and can only be used if they are in excess of the standard deduction). If you are making money, you want to be classified as a business. The IRS will actually challenge your business status if you have too many loss years in a row (at that point they make your business into a hobby with the above limitations).

Secondly, a sole proprietor is just a person in everyday business, requires no special forms or start up procedure. What you may require is a tax id from your state, or an employer id in the odd chance you employ another.

Exactly right. And dollar limits are not involved, if you are a sole proprietor or joint venture (basically all others but partnerships, c and s corps) you belong on the schedule C.

Oy, this is all very confusing to me, for some reason taxes are like Greek to me, and I'm a smart gal! I mean really, how hard are they going to make this for us...can't I just file taxes with the 1099 without being some kind of business with an ID, or picking some kind of "schedule" form?

Guess it's time to hire that tax guy...the husband is freaking out saying we need an accountant, a tax person, ect.

Also, I have done a lot of research on ways to track sales/profits/expenses. I have googled to my heart's content. At this point I will probably be making my own Excel Spreadsheet since I just purchased Office 2010. I would be interested in hearing what people are using...or if you already have a spreadsheet that you would be interested in sharing...

I can share my spreadsheet columns once set up (still working on it). As Im backtracking, Im refining. I'll send you a PM once I have those columns mapped out.

Was reading this
http://www.irs.gov/irs/article/0,...56,00.html

And this stuck out
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year

So, adding to what you've already said, unless folks already set themselves up as a business in 2011, everyone here is a hobby seller (due to this being first year Paypal reports gross income) and the IRS could potentially see you as a business if the hobby creates profit for at least three years. So, schedule A it is.

Depending on how much profit folks made, and these new rules, I will assume there will be some folks wondering if they should register themselves as a business of some sorts?

Question: You mention the IRS can challenge your business into hobby selling limitation. Would they challenge hobby selling to be seen as business and make you do the necessary steps that is associated with that?

This is a misinterpretation, many, if not most business start-ups do not make a profit their first, or second years around. The IRS tracks these loses, and if they go on too long they will make it a hobby.

The primary purpose for this hobby/business thing is that if they don't approach it like this, the rich will abuse the ability to take a loss on something fun (against their normal income), like a amusement park in their backyard that no one goes to, but they enjoy (major exaggeration, but these things happen).

Believe me..Schedule C, I do this for a living!

So even if you don't officially have a business, you can do Schedule C and claim deductions like a small business? Ahhhh, not enjoying tax season right now