Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/a26f9f83/public_html/articles/includes/config.php on line 159
Taxing Your eBay Profits > NetSparsh - Viral Content you Love & Share

Taxing Your eBay Profits

As a small business person-slash-advice columnist I dread the first quarter of the new year. Not because in my mind my own business fortunes start at zero again every January or because I have already dismissed every New Year's resolution I made when the clock rang out the New Year.

No, the reason I dread the first quarter of the new year is that my email box floods with questions about business taxes and the IRS, my two least favorite subjects on earth. It's not that I am opposed to paying my fair share of business taxes. It's that I consider the IRS to be a little like Beetlejuice, the movie demon who appeared only after his name was called three times in a row. My fear is if I write too many IRS columns their dark agents may appear on my doorstep, ready to drag me away to an uncertain fate.

Oh well, one must do his duty no matter the consequences, so here we go?.

Q: I am starting a small retail business. While talking to a potential supplier last week he asked for my EIN number. I had no idea what he was talking about, so I told him I would have to get back with him because I didn't have the number handy. What is an EIN number and why do I need one? -- Robert P.

A: Robert, do you remember the old Johnny Rivers song "Secret Agent Man?" There was a line that said, "They're giving you a number and taking away your name." An EIN isn't as cool as a secret agent number, but it works much the same way when it comes to your business' relationship with the IRS. Instead of identifying your business by name, the IRS identifies your business by EIN.

EIN stands for Employer Identification Number and is also known as a federal tax ID number. The EIN is a nine-digit number that the IRS assigns to businesses and is used to identify taxpayers that are required to file various business tax returns.

Does your business need an EIN? According to the IRS the answer is yes if:

· Your business has employees

· Your business is a corporation or partnership

· You file returns for Employment, Excise, or Alcohol, Tobacco and Firearms tax

· You withhold taxes on income (other than wages) paid to a non-resident alien.

· Your business has a Keogh plan

· Your business involves trust, estate, real estate mortgage investment conduits, non-profit, farmers' cooperatives, or plan administrators.

Applying for an EIN is a relatively painless task. You can apply online at the IRS website (irs.gov), apply by mail or telephone, or if you do business in a state that participates in the Federal Employer Identification Number project you can apply through you local IRS office (sorry, Alabama is not one of them).

You will need an EIN number prior to filing business returns with the IRS, so make sure you give yourself plenty of time to obtain one. For more information on EINs and your business, consult your accountant.

And while we're on the subject ?

Q: I made extra money selling things on eBay last year. These were items I picked up at yardsales mostly. My husband says I am responsible for paying income tax on the money I made, but I disagree. This is just my hobby, not a business. What do you think? -- Gladys A.

A: With so many people selling on eBay these days this is a question I get quite a bit. In fact, I have plans for a future "eBay and taxes" column, but I believe your question is more, "is it a hobby or is it a business?"

Again, I went to the horse's mouth (at least I think it was the mouth) for the answer. According to the IRS there are a number of factors that help determine if your hobby can be considered a business and thereby make you susceptible to the IRS tax rules governing business.

Do you carry on the activity in a business-like manner? If you conduct your eBay activities like a business, i.e. you keep business records, track your profit and loss, keep a separate checking account, etc. then whether you think so or not, your hobby is considered a business.

If you put considerable time and effort into your venture, the IRS may contend that you do so for profit and not fun. It seems the folks at the IRS don't believe in doing things strictly for pleasure. My guess is, neither do you. If you weren't making money selling on eBay I doubt you'd be bothering getting up at 4am to hit all those yardsales. Then again, maybe you would?

If you depend on income from your eBay activities for your livelihood, it's a business, not a hobby.

There are a number of other factors the IRS considers to determine if a hobby is really a business, but in your case I think that covers the basics.

For detailed answers to any tax question you should consult a qualified accountant or tax attorney. God forbid you rely on a guy who is afraid to mumble the letters "IRS" three times in a row.

Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim's latest books include "Small Business Success Secrets" and "The 30 Day Blueprint For Success!" Related Links: http://www.smallbusinessqa.com http://www.dropshipwholesale.net

In The News:

STORAGE AUCTIONS  Columbia Star

Why Its a BAD Idea To Promote Hot Selling Products on eBay

Do a quick search on Google, Yahoo, or your favorite... Read More

Turn Your eBay Experience Into Even More Profit

Everyone's talking about eBay these days. With the frequency of... Read More

Attract eBay Buyers Like Crazy!

As an ebay(TM) seller it happens very often (too often)... Read More

How To Convert eBay Surfers into Bidders!

Do you know the phrase "A Call To Action"? Well,... Read More

Dropship Your Way to Success

Many people know they would like to start an Internet... Read More

How to Sell Your Crafts on eBay

Artists, craftspeople and photographers are successfully selling their wares everyday... Read More

What YOU Must Know About The Advantages And Pitfalls Of Dropshipping

The following may be the most important information about dropshipping... Read More

Tips on How to Profit from eBay Buy It Now Auction Listings

eBay is an online auction site so it stands to... Read More

Profit through Other Peoples eBay Errors

There are many issues that influence how an eBay auction... Read More

Royal Memorabilia ? An eBay Prince or Pauper?

There has always been a fascination with royalty and as... Read More

Is it Antique and is it Worth Anything?

Is it an antique and is it worth anything? Would... Read More

Taxing Your eBay Profits

As a small business person-slash-advice columnist I dread the first... Read More

How To Increase eBay Profits

Some sell on eBay to clean out their garage or... Read More

How To Make Money Online : Sell On eBay

Selling on eBay can be very profitable, and is a... Read More

Louis Vuitton -- Avoiding the Ebay Nightmare Fakes

Without a doubt, eBay was one of the cleverest on-line... Read More

Online Auctions: 5 Ways Your Business Can Benefit From Online Auctions

Online auctions are now the new gold rush on the... Read More

How To Sell On Ebay: Using Store Policies To Cement Your Credibility

In your quest to build credibility as an Ebay seller,... Read More

Bananas - Your Source of eBay Packing Materials!

This is the most boring stage of the process and... Read More

An eBay Computer Purchase

An eBay purchase that turned sour.A story of fraud, deceit,... Read More

Buying & Selling Gently Used Baby Clothing, Strollers, Toys, and Other Baby Items & Products on eBay

Need Extra Money? Buy and Sell Your Gently Used Baby... Read More

Why Ebay Is The Best Place To Make Your First $1000 Online

I'd like to begin with a question ? and I'll... Read More

The Top Ten Antique Categories On eBay!

Knowledge is Power! And this statement could not be more... Read More

Effective Auction Listings - How To Create Them

Once you've created the best possible title for your item,... Read More

5 Reasons Why Playing Music On Your Auctions Is A Bummer Of An Idea

There are 147 million registered users on eBay, and tens... Read More

To eBay or NOT to eBay

FACT: eBay's Gross Merchandise Sales (GMS) 2003 - GMS, the... Read More