Financial stuff

Making Cash Selling Your Old Stuff Online?

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If you’re in it for the profit or if it’s more than an occasional sale, you may be crossing the line.

You love holding garage sales, and selling on eBay and Craigslist. You’ve become expert at holding garage sales – friends seek your advice for success and you’ve cleaned out your attic and closets. You don’t want to stop, but you’ve run out of items to sell.  “Maybe you can buy that sweet chair at the sale around the block and with a little *brush up* sell it for more than the neighbor asked?  Um, maybe that lamp at the flea market could go for more if you added some beads…”

“Look out – you may be crossing a line,” says Leigh Mutert, CPA and Community Manager at H&R Block. “Whether sales occur occasionally or regularly, and if there is intent to make a profit are two factors that separate casual sellers from hobbyists and business operators,” says Mutert.  Remember, most casual sellers are holding sales where the items are sold for less than the seller paid for the items – i.e. there isn’t a profit or gain.

A taxpayer with a hobby must report all income generated from sales.

  • As a hobbyist, the taxpayer may deduct all related expenses, but not more than the total revenue from that hobby.
  • This means that a hobby can’t generate a loss on your tax return.
  • If your activity is a hobby, report your income on line 21, Form 1040. Check out a full list of Hobby Expenses Tax Tips.
  • A hobby that supplements income could be considered a business by the IRS.
  • An H&R Block professional tax advisor help you determine if you need to file as a business; get a free 30-minute tax consultation at an H&R Block office near you.
  • If a taxpayer regularly buys and sells items to the extent that a business results, each sale has a tax consequence.
  • If the taxpayer is the sole owner, purchases and sales must be reported on Schedule C.
  • For example, if a business buys basketballs for inventory at a wholesale price of $3 each and sells them for $10 each, the business can deduct the $3 cost. The $10 sales price is revenue and the $7 profit is taxed. If a basketball is sold for $2, the $1 loss is deductible.
  • Also, there are several Schedule C tax deductions the business owner may be entitled.

ALERT for Online Sellers: For 2011 returns, taxpayers who annually sell more than $20,000 worth of goods and have more than 200 electronic transactions will receive the new 1099-K Form, which will report payment card and third-party transactions, including PayPal and eBay payments.

For more expert tax advice on any topic go to H&RBlock.com. H&R Block At Home online and desktop solutions for tax filing make it easy to file from home., or you can find an H&R Block office near you.

Mystery Shopping Road Trip

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My wife and I went on a mystery shopping road trip Wednesday.  This is a good way to increase your earnings from mystery shopping.  We did shops in some small towns that were 1-2 hours away from us.  Shops in little towns often go undone and the mystery shopping companies will give you nice bonuses to do them before the end of the month.  It isn’t cost effective to drive an hour or so each way for just one shop but by both of us going we were able to make the road trip worthwhile.  We did two bank shops and four fast-food shops.  The bank we shopped for only allows a shopper to do one shop a day but since there were two of us we were each able to pick up a nicely bonused shop in towns located close to each other.  At the end of the day we made about $150 and had received five free meals and only spent about $20 on gas.  Since we only actually worked a couple hours each I consider that a pretty good deal.

Tax School Update

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Calculating Financial Figures Video
photo credit: Rentvine.com

I have officially finished tax school and will be starting work as a tax preparer in the next couple of weeks.  The first week of tax school was focused on learning some basic tax topics and I found it to mostly be a waste of time.  Especially since I wasn’t getting paid.  Other tax schools charge you to attend so I guess going for free was a good deal.  There wasn’t anything covered in the first week of school you couldn’t have learned from a Pub 17 and 1040 instruction book. Still  about half the class apparently found it too difficult and dropped out.  Of course,  I have been doing my own and other family member’s taxes for years and had several tax classes in law school so I should know at least the basics of taxes.

The second week was a little better since it involved learning the computer software and it was paid.  I’m a little uncomfortable with the products and fees.  They seem rather high to me but I guess they are in line with other tax companies.  I’d never pay that much to get my taxes done but I do know a lot of people aren’t capable (or at least don’t think they are capable) of preparing their own taxes and consider the tax preparation fees reasonable in relation to the big refund they receive.  Getting a big refund isn’t smart from a personal finance perspective but I suppose the clientele see it as a good deal.

I’m considering starting my own tax preparation business.  The  experienced preparers don’t seem to have much more, if any, tax knowledge than I do. I’ve done a little research and it doesn’t look like it would be too difficult to start.  I’ve already got a PTIN, I’d just need to get an EFIN and the proper tax software.  The hard part would be getting customers.  Since I need to concentrate on studying for the bar the next couple of months I might wait until next year before starting my own business.  I’ll make up my mind in the next couple of weeks.

Do People Never Learn?

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Last week there was a news story stating that trucks outsold cars by the highest margin in five years in October. This is considered a sign that people are starting to spend again. If that is correct then I think it is an indication that people did not learn much from the recession.

Some people do actually need trucks for work or other reasons but my guess is that the vast majority of the people who own trucks do not actually need them. The fact that so many people are splurging on an unnecessary item might indicate that many people are going back to their free spending ways. It seems people have forgotten the high gas prices of just a few years ago. Gas prices will go up again but it seems that many people are in denial of that fact. Buying a new truck that you don’t actually need is not a financially or ecologically smart decision in my opinion.

The article states that personal savings rates decreased from a yearly high of 6.4 percent in June to 5.3 percent in September. Even at 6.4 percent personal savings rates were well below historical highs. I’m sure some people have learned to be more frugal due to the recession but my guess is that most people will ditch frugality as soon as they feel confident about the economy. What do you think?

It’s Just 35 Cents

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I was reading the comments on another site recently and a commenter complained about a customer holding up a line for 10 minutes because he had been overcharged 35 cents.  The commenter felt it was ridiculous to cause such a fuss for just 35 cents.  As you might expect from a tight-fisted miser I have a different view. My feeling is that if it is just 35 cents then it should not have been a big deal for the store to give the customer his money. As a matter of principle I would get my 35 cents.  I suspect that whether “it’s just 35 cents” varies somewhat depending on whether it is your 35 cents or somebody else’s 35 cents.  Also a feeling of “it’s just 35 cents” might lead to it’s just a dollar or five dollars or one hundred dollars.  You need to respect your money if you want to keep it.

That  being said there are situations in which I would not worry about 35 cents.  What do you think?