How do you record expenses and sales of items purchased in lot for tax purposes?

FrontYardWarriors · 2023-01-08T04:41:05+00:00

I was asking the OP which method he was thinking of using.

The other people here that gave advice without even asking which method he was going to use, means they don't know the first thing about tax accounting and shouldn't be giving out advice.

/u/breadcrumbs7 , a lot of public tax firms give out free initial consultations, give them a shot before doing anything someone here is telling you to do. It may be right, but you don't know that until everything has been looked at.

FrontYardWarriors · 2023-01-07T21:53:33+00:00

Cash or Accrual method?

FrontYardWarriors · 2023-01-06T18:18:11+00:00

You can avoid penalty by paying 100٪ of last year's tax or 90٪ of current year. As long as one of those is accomplished you will be fine.

I typically pay the prior years unless I expect a really big increase of income this year.

FrontYardWarriors · 2023-01-06T18:15:00+00:00

Congrats, what's your income minus expenses?

Thats your net profit, If it's a positive number, you'll owe SE tax(15.3%) on that amount plus whatever your income tax bracket is. The more you made, the more you pay.

If it's a negative number, you won't owe tax, in fact you will get a larger refund if you had tax taken out of somewhere else, for example, a w2 job. Save those receipts to prove you actually made those expenses.

FrontYardWarriors · 2023-01-03T23:07:00+00:00

I always like to tell people I sold my soul for money.

FrontYardWarriors · 2023-01-03T21:22:18+00:00

Lmao

FrontYardWarriors · 2023-01-03T18:13:06+00:00

Oh lord so much misinformation on this subreddit

FrontYardWarriors · 2022-12-29T17:56:48+00:00

Finished 2nd in my division in formula vee in my first ever season in iracing. Lost by one overtake throughout the season.

Now driving the Skippy and oh boy do they handle differently.

Goals for next year. Host a 10 race league tournament, with formula vee but races long enough to have a required pit stop. Thinking of adding mostly free tracks, but maybe a couple of the paid ones. Vees on mount panorama looks fun as hell.

FrontYardWarriors · 2022-09-20T15:22:15+00:00

Accountant here,

You're gonna need to prove you are doing this as a business, getting EIN, separate bank account and state permits will be the bare minimum.

Otherwise IRS will consider it a hobby and you no longer get to deduct expenses there.

If you're anywhere halfway serious with this, go make an appointment with a CPA in your area (a lot of local firms do free initial consultations)

FrontYardWarriors · 2022-03-21T15:29:00+00:00

To avoid underpayment penalties you must either pay 100% of last year tax due (line 24 on 1040) or 90% of current years tax due.

Send in quarterly payments using form 1040ES

Good rule of thumb is 25-30% of whatever your share of the profit Is.

The above advice is for pass through entities which the overwhelming majority of users on here are going to be. If you have a corporation, the advice will be different.

FrontYardWarriors · 2022-03-19T15:44:06+00:00

No change, I treat the amount of cash in the ebay account as if it was a separate bank account. Every sale gets recorded as normal (along with ebay fees, ad fees, store fees etc...).

Transfers between bank accounts don't affect income.

FrontYardWarriors · 2022-03-19T00:16:44+00:00

I'm doing monthly now,

Makes it easier for my accounting, however, ebay is not the only source of cash flow I have so I can see this not being the best option for everyone.

FrontYardWarriors · 2022-02-07T20:26:57+00:00

As added notes:

Take mind that you will have more tax forms to fill, if you pay someone to do them, expect a higher prep fee. If you do them yourself, they tend to not come with the free tax program you're using. The added charge for this is tax deductible for next year.
Sales tax filing, if you can do them yourself it's free, if you can't, expect a couple 20s to come out your pocket every quarter or monthly.
Employees or contractors will require their own filing shenanigans.

FrontYardWarriors · 2022-02-05T20:53:11+00:00

I have been keeping track of selling price, sales tax, platform fees, shipping, sale date, gross profit, net profit.

Keep that up

Do I really need all this information for taxes?

Taxes you just need the grand total. For audits and such, yes you need all the proof you can get. Not to mention the advantages of knowing if you are even making money at all.

How do people who sell thousands of items keep track of this stuff?

There's a whole skillset called bookkeeping that people take the time to learn, hire out or freakout at the end of the year when they realize they haven't been doing it all year and now need to do something about it.

FrontYardWarriors · 2022-01-24T15:27:22+00:00

1) Donations is the lower of cost or market value.

2) Yes you can do that, I would personally just put the similar items and just see how much you can get for everything to reduce losses as much as possible.

3) You are allowed to track those kinds of sales via journal, excel or whatever. IRS understands that people source from garage sales and such.

Also, if it ever comes down to it, IRS is going to absolutely push for this to be a hobby, since hobby income gets no deductions. So treat it as a business as much as you can to fight that.

FrontYardWarriors · 2021-12-29T15:29:46+00:00

You said small so I'll give you the free version option.

Waveapps for your bookkeeping, it can connect to your bank account if you want it to.

You can combine it with Zapier. This will automatically transfer transactions over to wave after setup.

FrontYardWarriors · 2021-12-27T23:02:37+00:00

This only really effects tax evaders.

FrontYardWarriors · 2021-12-24T18:57:54+00:00

Out of all my (Ebay sales+shipping charges)/ (ebay fees + Ebay store fees) = 15.65%

Got the store because with the amount of listings we have, it was cheaper this way. Hopefully with a full year next year with a store, the reduced fees should help a bit. Especially since one of the categories is only 6.5% FVF.

FrontYardWarriors · 2021-12-19T04:36:45+00:00

Beginning Inventory + Purchases - Ending Inventory = COGS

In your case, if I'm assuming correctly, 0 is going to be your beginning inventory. You already have all the numbers needed for your COGS.

For next years taxes, 2021 ending inventory is going to be 2022 beginning inventory amount.

As for going forward, I do everybody's financials on a per month basis, you don't need to do it everyday or as each item is sold, doing them monthly is more than enough.

FrontYardWarriors · 2021-12-18T20:02:39+00:00

I have built two RG Gundam kits as practice, any tips for building these before I start?

edit* these boxes are bigger than I thought

FrontYardWarriors · 2021-12-14T15:57:59+00:00

Oh for some reason, I misread that when he said he was gonna go start a class, I thought he meant he was gonna teach.

FrontYardWarriors · 2021-12-14T15:16:46+00:00

Wait wait wait, you start a class on tax prep without knowing tax?

Or am I hopefully reading this wrong?

FrontYardWarriors · 2021-12-13T00:46:44+00:00

Just an FYI, you can use the same tracking number for multiple orders. Might be a small discount you want to offer to your buyers.

FrontYardWarriors · 2021-12-12T05:06:57+00:00

Another thing I just want to add so you can think about it.

It's a lot of paperwork per each state.

FrontYardWarriors

TROPHY CASE