Many people ask me if they are required to report the profits they earn on items they "nofollow" target="_blank" href="https://www.smartsrdigital.com/go/dropshippingforprofit.html">fryy ba rOnl 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,
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