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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 entrepreneurand 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.comhttp://www.dropshipwholesale.net
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Is Australia's beloved home auction dying a slow death? The Australian Financial Review
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How To Sell On Ebay: Using Store Policies To Cement Your Credibility
In your quest to build credibility as an Ebay seller, few things are more important than creating and following consistent store policies. Doing so will provide your customers with an attractive buyingatmosphere, where they will feel safe making any transaction.
Selling through Auction Marketplaces
Consumers are increasingly feeling more comfortable in buying products through the Internet. According to a report released recently by the Department of Commerce first-quarter retail salesrose 23.
Use Auction Templates For eBay Success!
Auction templates are simply a must for successful online auction selling. One day I spent approximately 45 minutes writing a listing for an item that would make me about $5 in profit! I suddenly realized the stupidity of what I was doing.
The Down Side Of Using Dropshippers In The Ebay Auction Arena!
Ok, let me just say right up front that I am not against drop-shipping! I love the concept. If you are dealing with a particular wholesale drop-shipping distributor that is serving your Ebay ambitions well, then hold onto that company with bonds of steel, for truly good drop-shippers are hard to find!Drop-Shipping sounds like the utopian business model.
USP on eBay
If you have dabbled at all in the world of Internet marketing, you may have heard the term "unique selling proposition" or USP. USP is a technique that Internet marketers use to set themselves apart from the competition.
What To Do After Your eBay Auction Closes
So your auction closes. Now what?Hopefully you made a sale or several sales.
Internet Auction Sites : Find Good Deals on Almost Anything
You can find good deals on almost everything you need on internet auction sites. There is almost nothing that you can't find over the internet.
Be Realistic When Selling on eBay
As some of you know, I spent many years buying and selling both on and offline and several of my products are based upon my own experience in this area. I know that the vast majority of my customers and subscribers have an interest in trading whether it be on eBay or at the local market but more and more I am seeing people with completely unrealistic expectations of what they will be able to do.
Just The Ticket - How To Make Hundreds Per Day As A Ticket Broker On eBay!
It should be simple - your favourite team/band/theatre play is just about to perform in a couple of weeks. You've waited months for this, now you're going to log on, book the tickets for yourself and your best buddy and bingo?you'll be at the event of the decade for a night to remember.
From Ebay Zero to Power-Selling Hero: How To Learn New Tricks Without Spending
The Internet is the fastest-changing marketplace on earth. Million-dollar ideas from one year ago might notgenerate a single penny today.
Importing Products to Sell on eBay
The interesting thing about online buyers is they are extremely price sensitive. A survey done by Forrester Research shows that 73 percent of surveyed online buyers expect prices on the Internet to be cheaper than in stores.
Why Its a BAD Idea To Promote Hot Selling Products on eBay
Do a quick search on Google, Yahoo, or your favorite auction resource site, and you'll quickly discover there are several software programs targeted to vendors who want to promote hot selling products on eBay.The infatuation with hot selling products exists because sellers believe if you target items that have a robust sales pattern, you'll have a better chance at profiting on eBay.
The Top Sellers On eBay & What We Can Learn From Them
A fascinating eBay case study is the number one seller on eBay, a little outfit called Marie's CDs, but is better known under its old name "1 Cent CD." Jay and Marie, current ID "jayandmarie", are an institution on eBay and are a big part of what makes eBay such an amazingly popular phenomenon.
5 Secrets To Make A Killing on EBay
Secret #1: Find a 'real' wholesale and drop ship companyDo you know what one of the biggest problem is to be successful on eBay? 'What should I sell"? I can tell you, I get many emails per day from eBay sellers, asking me what they can sell. Let me explain this more in detail.
How To Convert eBay Surfers into Bidders!
Do you know the phrase "A Call To Action"? Well, using "A Call To Action" on your eBay Auction could help increase your sales almost immediately. As outlined in my book "eBay Marketing Wholesale SourcePak" having the right product, at the right price is crucial.
Attract eBay Buyers Like Crazy!
As an ebay(TM) seller it happens very often (too often) that listings close without any bids. Did this happen to you? Many sellers are frustrated and quit their eBay(TM) business.
Learn How To Be A Successful eBay Seller
Anyone can sell anything on eBay. Open an account, list your product, and wait for the bids to start coming in.
Start Your Own Business: Sell Things on eBay
The popularity of online auction site eBay has beenlegendary. With millions of transactions completed daily,it is no surprise why many individuals who do not usuallyshop online regularly purchase items through eBay.
Mr. Rich vs. Mr. Job: How to Start a Dropship Business on eBay
Mr. Asset vs.
Turn Your eBay Experience Into Even More Profit
Everyone's talking about eBay these days. With the frequency of the TV advertising campaigns increasing, and no sign of any sizable competitors the eBay empire is only going to get bigger.
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