Must I report ebay income to IRS?
Posted by Reviews on March 31, 2009 · 5 Comments
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I notice that there are many sellers, some called power sellers, utilizing eBay as a profitable source of income by selling products. Is this money reportable to the IRS? Does eBay or papal report any transaction information to the IRS?
Thanks in advance for your response
Ed
You are required to report any income you make within the reporting requirements. Most of the time people selling stuff on e-bay are selling something at a loss and therefore there is no income to report. For example you buy a shirt for $25 and wear it for a couple of years and sell it for $5 on e-bay. Most likely you have not gained any profit from that sale and thus have no reportable income. On the other hand you by my shirt for $5 and tell the world that a famous person like me wore the shirt and you get $8 for the shirt when you resell it on E-bay. Your $3 profit is reportable as income if you are otherwise required to file a tax return. If you sell 134 such shirts at $3 profit and make no other income you have reached the $400 limit and would report the e-bay income even if you had no other reportable income.
The IRS wants anything that you make as income reported. I would say power sellers are suppose to report it because they are making a business out of it abnd profitting. If you on the other hand are selling say a dress your child had and old dresser etc etc and you don't use ebay as a source of income but more like a garage sale place you do not have to report it
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You are required to report any income you make within the reporting requirements. Most of the time people selling stuff on e-bay are selling something at a loss and therefore there is no income to report. For example you buy a shirt for $25 and wear it for a couple of years and sell it for $5 on e-bay. Most likely you have not gained any profit from that sale and thus have no reportable income. On the other hand you by my shirt for $5 and tell the world that a famous person like me wore the shirt and you get $8 for the shirt when you resell it on E-bay. Your $3 profit is reportable as income if you are otherwise required to file a tax return. If you sell 134 such shirts at $3 profit and make no other income you have reached the $400 limit and would report the e-bay income even if you had no other reportable income.
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Ebay and Paypal do not report transactions to the IRS, although Paypal may report suspicious transactions or cash transactions in excess of $10,000.
If you make income from online auctions, it is subject to income tax. If you are in the business of online selling, you are self-employed and subject to income tax reporting when your net profit is $400 or more.
If you are not in the business of online selling, then you have taxable income only when you sell your personal items for more than you purchased them for. It would be necessary to report the gains on the sale of personal items if your total income is above the filing requirement ($8,950 for a single filer in 2008).
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Yes, anyone making a profit, or trying to make a profit, on ebay is running a business and must report their activities.
If you are just selling a few of your old things, you are probably selling them for less than you paid for them so don't have to report it.
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It probably won't happen before 2009, but the IRS has been floating proposals to have eBay issue 1099-Misc forms if a seller has more than 100 transactions or more than $5000 in sales. (Several power sellers are begging that the forms be issued instead by Paypal since not all sales go through and they don't want to have to track cancelled sales just to have the numbers match up to what the IRS hears about.)
In the meantime, the IRS has regularly issued subpoenas to both eBay and Paypal for records. eBay does supply the data when asked and will send the affected seller(s) a letter informing them of the fact. (This surprised a few sellers last year when they got the letter because at least one of their buyers had paid with an off-short credit card…it was the buyer being investigated, not the seller.)
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