Are You Required To Report Your EBay Earnings ?

Many people ask me if they are REQUIRED to report the PROFITS they earn on items they sell on eBay on their income tax return.

In short, YES. :-)

If you sell items on eBay for a profit, then you should report your eBay sales on your income tax return and you may owe income taxes on any profits.

It doesn't matter if it's just a HOBBY or if you are trying to build a BUSINESS - if you earned a PROFIT, it's taxable income.

Generally, ANY income you receive from ALL sources is subject to income tax unless it is specifically EXEMPT by law ( hint: eBay PROFITS are NOT EXEMPT ).

You MUST file a TAX RETURN if your net earnings from SELF EMPLOYMENT are $400 or more.

You are SELF EMPLOYED if you carry on a trade or business for PROFIT.

If you are selling on eBay with the INTENT of making a PROFIT, then you are SELF EMPLOYED.

To report your eBay earnings, you should file Form 1040 and attach Schedule C or C-EZ.

Schedule C is used to calculate your net profit or loss from your business, which is then reported on your Form 1040.

This is assuming you are a SOLE PROPRIETOR.

If you are INCORPORATED, you have to file a SEPARATE business return.

You will file Form 1120 or Form 1120s ( for S Corporations ).

If you are a PARTNERSHIP, you will file Form 1065.

At this point, you may be thinking “ I don’t run a business ; I just sell on eBay as a hobby.”

Unfortunately, income from HOBBIES is taxable AS WELL.

Even WORSE, you can only deduct EXPENSES up to your HOBBY INCOME, which means losses are NOT deductible.

Finally, there is a common misconception that if you did not receive a 1099 or W-2, you are not required to report your income.

This is NOT true.

ALL income is reportable, REGARDLESS of whether you receive a form or not.

EBay is only a FACILITATOR of the auction; therefore, you will NOT receive a 1099 from eBay reporting your sales.

To your financial success. :-)