Auction eZine - Issue 10
________________________________________________ AuctionInsights Newsletter ________________________________________________ March 24, 2005 -=-=-=-=-=-=-=-=-=-=-=-=-=- Hi, Doug Feiring here from AuctionInsights Well, I did my taxes this past weekend... One of the few drawbacks of a successful home business occurs this time of year as I prepare my taxes. I did better this year than previously so I will be writing a nice check to Uncle Sam in a couple of weeks. As my auctions and web sites morphed from what I considered a hobby to that of a small business, I've experienced some painful lessons in the business side of tax regulations. To make these lessons less painful to you, here's the first of two articles provided by Tim Knox that points out some tax regulations of which every eBay seller needs to be aware. Sincerely, Doug http://www.auctioninsights.info http://AuctionLink.to -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- eBay Sellers - Do you really know what your auction costs are? ... Or are you guessing like most sellers? See how one tool can help you lower costs and increase profit... http://profitcalc.com/a.cgi?i=auction223 -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- o FEATURED ARTICLE... Taxing Your eBay Profits By Tim Knox 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. Next week... Taxing eBay Part Deux 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 Article Source: http://EzineArticles.com/ -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- eBay Sellers - Do you really know what your auction costs are? ... Or are you guessing like most sellers? See how one tool can help you lower costs and increase profit... http://profitcalc.com/a.cgi?i=auction223 -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
Comments
RSS feed for comments on this post. | TrackBack URI
Leave a Reply