Understanding s Taxable Income

Several folks argued that just because their little okay hobby generated a little cash, that didn't make it a full blown business. It seems they consider the ingee from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I've always been amused by folks who try to impress me with talk about their "little side business" but when the subject turns to taxes they suddenly refer to it as "my little hobby."All kidding aside, the conclusion that I came to after reading each email was always the same: while you may think selling on okay is just a fun pastime and the money you're making is not reportable as ingee, depending on the circumstances, the IRS would probably disagree with you.It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welgee to free enterprise, folks. If you're going to gee to the dance you have to pay the fiddler.The IRS rules are clear: you must pay taxes on all personal and business ingee and that includes money you make selling on okay.In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on okay (or elsewhere) for $20 you made a $10 profit and therefore must report it as ingee and pay Uncle Sam his fair share.In reality, if you are a casual seller who only sells a few items on okay every now and then it's doubtful the IRS is going to let loose an army of agents to collect taxes on the few bucks you make. However, if you consistently sell on okay the IRS may deem your activities to be business oriented and you will be required to file a Schedule C and claim the ingee.As mentioned last week, the IRS uses a number of factors to determine if an okay hobby that generates sales revenue is actually a business.These factors include: - Do you carry on the hobby in a business-like manner? - Do you spend considerable time working on the hobby? - Do you depend on ingee from your hobby for your livelihood?If the answer to any or all of these question is yes, you're running a business, not carrying on a hobby, and you are responsible for paying taxes on your ingee.What's okay's take on all this? Naturally okay is vehemently opposed to anything that might rock the okay boat. okay does not does not issue 1099 tax forms to sellers, nor does it report seller's sales figures to the IRS.okay considers itself merely to be a facilitator, meaning that they provide a marketplace in which buyers and sellers gee together to do business.Furthermore, under it's current system it would be impossible for okay to issue accurate 1099s to sellers. okay does not track if a seller actually gets paid by the buyer, so okay has no idea how much money - if any - actually changes hands at the end of each transaction.On the bright side, if you do sell on okay as a business you can deduct a number of business expenses, including the cost of inventory, listing fees, shipping, envelopes, packing materials, etc.You might also be able to deduct things like the purchase of a geputer for business use, office space (even if it's a home office), office supplies, and more.Talk to your accountant if there's any doubt as to whether you should or should not be paying taxes on your okay earnings.