Today TaxMama® hears from Tax455 in the TaxQuips Forum with this question. “If I earned k through eBay buying and selling phones, and k was profit, should I get a business license or incorporate for tax purposes?
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I did not hit the 200 transactions so I’m not sure if eBay will send me a tax form.
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What’s the best way for me proceed for the tax year?
Incorporating now, or getting a business license now, will not have any effect on the business you ran before taking those steps. It’s too late.
You will need to report your income on Schedule C. Go back and do your bookkeeping in detail for the year, to record all the appropriate business deductions.
Depending on your income from other sources, this profit won’t generate a big tax for you. But it will generate self-employment taxes of 13.3%, regardless of other itemized deductions or reductions in taxable income.
I don’t know why eBay shut you down. They don’t generally do that unless there are a great many complaints. But, if you’re still running your business for next year, I do encourage you to sit down with a good tax pro and do some planning for NEXT year.
And remember, you can find answers to all kinds of questions about business structure and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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