Keeping in the spirit of watching out for the IRS, you might be interested to know that President Bush is about to sign new legislation that will require PayPal and other online payment services to report annual gross receipts to the IRS.
As Martin Vaughan at the Wall Street Journal reports, online sellers are facing new tax rules.
This includes casual eBay sellers. The IRS says that many people do not realize or choose to ignore their tax responsibilities when it comes to online selling, and they're aiming to change that.
The law won't take effect for another three years, so sellers have some time to get their acts together.
Vaughan gives the following suggestions to meet compliance:
- Report all income from online sales, even from casual selling
- If you mean to deduct expenses, act like a business
- Keep your personal and business accounts separate.
- Claim the home office deduction.
The biggest problem still, is that many casual sellers will not ever think about themselves as businesses, and therefore will not ever enter the business mindset.
These people will probably still be in the dark about their responsibilities because they probably do not read many business publications that will inform them of such news.
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Taxes
How about selling used items
How about selling used items on Ebay? Is this income too? I bought product for 500, sold for 200. Where is the income?
RE: How about selling used items
Donations?
What if I start up a website, and take in donations from people who like it. What would I do about that income?
Taxes and Donations
Good questions about donations.
I have been in both the for-profit and non-profit sectors. In the U.S., it matters not where the money comes from, it's still income. It depends on your status as to how that income is treated by the I.R.S.
Unless you are a registered non-profit (i.e. 501c3) entity, your donations are treated as personal or for-profit business income and taxed as such. Of course you can deduct any legitimate business expenses to reduce tax liability.
This is based upon my personal experience, however, it is advisable to consult a tax consultant or the I.R.S. directly to know how the rules apply in your particular case.
I, too, receive donations on my blogs and report the income to the I.R.S.
Jim DeSantis
Gifts from Jim DeSantis
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