Online Sales: Keep These Items In Mind
Did you know that if you sell items online you may have to report them on your taxes?
There are three main categories when selling goods online. They include selling used/personal items for less than cost, occasionally selling items at more than cost, and flipping/creating items to be sold at more than cost. Let’s dive deeper into each one and what they mean for your tax return!
1. Selling used or personal items for less than cost
Lucky you! There are no tax implications as long as you sell your items for less than they cost you. All the profit is yours to keep so go ahead and clean out that closet!
2. Occasionally selling items at more than cost
There is a fine line between occasionally selling items at more than cost and running an online business. If you create a painting for $30 and someone offers to pay you more than that, it is considered a capital gain. Since you didn’t plan on selling the painting for more than $30 you’re not considered a business. However, whatever profit you make in these situations needs to be reported on your tax return. The best way to do this is by using a Schedule D form, use the links below to learn more about this form and how to fill it out!
Link to Schedule D form: https://www.irs.gov/pub/irs-pdf/f1040sd.pdf
Link for Schedule D instructions: https://www.irs.gov/pub/irs-pdf/i1040sd.pdf
3. Flipping or creating items to be sold at more than cost
If you are creating goods and selling them online at a higher cost, you are considered an online business (even if it’s just a side hustle). It is important to keep track of income and expenses procured throughout the year. Many online sites will send a Form 1099 at the end of the year. This is a record of who paid you money and how much. Use this form to fill out a Schedule C to report your profits (or losses).
Don’t forget about sales tax for your online business. Make sure and check with the site you are selling your goods to see if they are already collecting sales tax for you or if you need to do it yourself!
Link to Schedule C form: https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Link for Schedule C instructions: https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
If you are still confused make sure and contact Jenkins CPA for more information! Call/Email/In person at 204 Village Center St, Nixa MO | email@example.com | 417-725-3924