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Preparing Tax Documents for Ebay Profits

Updated on March 12, 2010

Unfortunately, eCommerce is still fair game for the IRS, so if you have made money by selling items on eBay, then it would behoove you to claim it. This particular section is more than just what to do about your eBay money, but also what to do about your eBay money in general.

You will find that the more money that you make on eBay, you will find that you will lose money as well. Of course, if you can make a lot more money, that’s a good thing, but you still have to claim it as income. The good news is that you can claim expenses.

Here’s what you should do: on a piece of paper, Microsoft Word Table, or Excel Spreadsheet, make yourself a chart. You will need to make some columns, and write in the values of each item in rows.

Item: Write in a Brief Description of the item.

Sold At: What the item sold for on eBay.

Posting Charges: What it cost to post the item on eBay.

Shipping Charges: What you charged the buyer for shipping.

Actually Shipping Charges: What the shipping charges ended up being, most of the time, what you calculate the shipping charges to be and what they end up being are two different things.

Refund: If the Buyer overpaid for shipping, then you really should refund them this, really. It’s a simple thing to do in PayPal.

What you paid: If you ended up paying anything for shipping, delivery confirmation, or packaging, make a note of this.

PayPal Charge: PayPal charges a small percentage for its transactions. This value will be visible on PayPal.

Reverse PayPal Charge: If you send someone a refund with PayPal, then you will receive some money as well. It won’t be as much as the PayPal Charge.

Final Value Fee: This is what eBay charges after the auction. Hey, they have to make money somehow.

Now that you have this, you will need to get yourself a 1040 Schedule C. Go ahead and enter in the obvious information, and you will want to enter a code. The one that best fits is 454112 for online auctioneers.

You should then add up all the profits that you have made. Just take the column for “Sold At” and add it all up. It’s very simple.

You will then need to calculate your expenses. I just group mine together under “Fees”. This number is obtained by simply adding up the Posting Charges, PayPal Charges, and the Final Value Fees. If you paid anything for shipping on any items, group all those payments together and count that too. However, you should have arranged your sale so your buyer paid for your shipping, so the money you paid to have it shipped should have been paid by the buyer. In other words, these fees should cancel each other out.

From there, it’s just income minus expense to figure out what you are going to put on the 1040.


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      Sunnie Day 6 years ago

      Great and helpful article..Thanks!