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| | | Author: | Biggie_Bricks  | | Posted: | May 13, 2021 21:49 | | Subject: | Filing Taxes? | | Viewed: | 248 times | | Topic: | Selling | |
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| I received a 1099-K form from PayPal this year reporting my gross income. I understand
this value includes Bricklink sales tax and Bricklink fees. My actual profit
is about 1/4 of this value. When I plug this gross value into my tax forms, it
says the amount I owe is 50% of my profit for the year! I’m a student and haven’t
filed taxes since high school when I worked easy to file minimum wage jobs. How
am I supposed to report Bricklink sales? I can’t lose 3,400 of my 5000 profit
for the year. Any guidance on this matter is greatly appreciated.
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| | | | | Author: | peregrinator | | Posted: | May 13, 2021 21:53 | | Subject: | Re: Filing Taxes? | | Viewed: | 77 times | | Topic: | Selling | |
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| In Selling, Biggie_Bricks writes:
| | I received a 1099-K form from PayPal this year reporting my gross income. I understand
this value includes Bricklink sales tax and Bricklink fees. My actual profit
is about 1/4 of this value. When I plug this gross value into my tax forms, it
says the amount I owe is 50% of my profit for the year! I’m a student and haven’t
filed taxes since high school when I worked easy to file minimum wage jobs. How
am I supposed to report Bricklink sales? I can’t lose 3,400 of my 5000 profit
for the year. Any guidance on this matter is greatly appreciated.
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You have to deduct your business expenses as well, then it will make sense.
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| | | | | | | Author: | Biggie_Bricks | | Posted: | May 13, 2021 22:04 | | Subject: | Re: Filing Taxes? | | Viewed: | 83 times | | Topic: | Selling | |
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| | | You have to deduct your business expenses as well, then it will make sense.
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How do I find the total sales tax costs? Are LEGO sets considered supplies or
inventory?
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| | | | | | | | | Author: | wildchicken13 | | Posted: | May 13, 2021 22:14 | | Subject: | Re: Filing Taxes? | | Viewed: | 90 times | | Topic: | Selling | |
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| In Selling, Biggie_Bricks writes:
| | | | You have to deduct your business expenses as well, then it will make sense.
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How do I find the total sales tax costs?
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Download your orders received as a spreadsheet:
https://www.bricklink.com/orderExcel.asp?orderType=received
The total of the "sales tax" column is the total sales tax you paid. Note that
you should exclude cancelled orders when you download.
According to some BrickLink sellers, sales tax shouldn't even be reported
on your tax return. After all, it's not your money. Instead, you should report
the total on the 1099-K minus sales tax. However, I haven't tried this yet,
so I don't know how the IRS will respond when they see that the total on
your tax return is lower than the total on the 1099-K. It would be nice if PayPal
did not include sales tax on the 1099-K.
| | Are LEGO sets considered supplies or inventory?
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I would consider them inventory.
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| | | | | | | | | | | Author: | peregrinator | | Posted: | May 13, 2021 22:20 | | Subject: | Re: Filing Taxes? | | Viewed: | 76 times | | Topic: | Selling | |
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| In Selling, wildchicken13 writes:
| | In Selling, Biggie_Bricks writes:
| | Are LEGO sets considered supplies or inventory?
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I would consider them inventory.
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It should not matter if you're using the cash method of accounting.
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| | | | | | | | | | | | | Author: | CPgolfaddict | | Posted: | May 14, 2021 12:44 | | Subject: | Re: Filing Taxes? | | Viewed: | 60 times | | Topic: | Selling | |
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| Inventory matters very much if you are using the cash method of accounting.
If not, you could just buy enough new inventory before the end of the year to
chew up your profits. Then you would never owe taxes. No way any government
allows that. As a sole proprietor ship (in the US) you must account for year
end inventory if you use the cash method.
In Selling, peregrinator writes:
| | In Selling, wildchicken13 writes:
| | In Selling, Biggie_Bricks writes:
| | Are LEGO sets considered supplies or inventory?
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I would consider them inventory.
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It should not matter if you're using the cash method of accounting.
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| | | | | | | | | | | | | | | Author: | peregrinator | | Posted: | May 14, 2021 18:57 | | Subject: | Re: Filing Taxes? | | Viewed: | 69 times | | Topic: | Selling | |
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| Thanks for the correction, but I have to note that if you spend all of your profits
on inventory, you don't have any actual profit, just a huge inventory
In Selling, CPgolfaddict writes:
| | Inventory matters very much if you are using the cash method of accounting.
If not, you could just buy enough new inventory before the end of the year to
chew up your profits. Then you would never owe taxes. No way any government
allows that. As a sole proprietor ship (in the US) you must account for year
end inventory if you use the cash method.
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| | | | | | | | | | | | | | | | | Author: | CPgolfaddict | | Posted: | May 15, 2021 01:39 | | Subject: | Re: Filing Taxes? | | Viewed: | 47 times | | Topic: | Selling | |
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| My point is you might still owe US income tax even if you spend all your cash
on hand before the end of the year.
If your cost of inventory increases year over year, that yearly increase amount
is deducted from the actual amount spent on Cost of Goods Sold (COGS). --
assuming cash method of course.
Say at year end (YE) 2019 the cost of your on hand inventory level was $10K.
You buy $5000.00 in new inventory in 2020. Say you calculate your 2020 YE cost
of on hand inventory at $12K. You fill out your 2020 taxes and enter the deduction
for $5K spent on goods. You must also account for your inventory levels in your
tax filing. YE 2019 = $10K and YE 2020 = $12K. The increase of $2K effectively
reduces your $5K goods deduction by $2K. You will only be able to claim $3K
spent on goods for resale.
In Selling, peregrinator writes:
| | Thanks for the correction, but I have to note that if you spend all of your profits
on inventory, you don't have any actual profit, just a huge inventory
In Selling, CPgolfaddict writes:
| | Inventory matters very much if you are using the cash method of accounting.
If not, you could just buy enough new inventory before the end of the year to
chew up your profits. Then you would never owe taxes. No way any government
allows that. As a sole proprietor ship (in the US) you must account for year
end inventory if you use the cash method.
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| | | | | Author: | chromeking71 | | Posted: | May 13, 2021 23:55 | | Subject: | Re: Filing Taxes? | | Viewed: | 68 times | | Topic: | Selling | |
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| I was in a similar position earlier this year. In Illinois most of us got blindsided
when our governor changed the thresholds for online payments (with zero info
provided before hand). I simply hired a CPA. Best $200 I spent this year!
I've always saved my expense receipts just in case something like this ever
happened. FYI the following are all tax deductible...
Shipping supplies and postage
Paypal, Bricklink, or any other online service fees relating to your business.
Product bought for reselling. Get a receipt book to keep track of cash paid
for private collections.
Vehicle mileage. (runs to the post office or purchase of product or supplies)
Home office if you have one.
A portion of your monthly internet bill.
There's a few others too. HIRE A CPA! LOL
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| | | | | | | Author: | Biggie_Bricks | | Posted: | May 14, 2021 00:08 | | Subject: | Re: Filing Taxes? | | Viewed: | 67 times | | Topic: | Selling | |
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| In Selling, chromeking71 writes:
| | I was in a similar position earlier this year. In Illinois most of us got blindsided
when our governor changed the thresholds for online payments (with zero info
provided before hand). I simply hired a CPA. Best $200 I spent this year!
I've always saved my expense receipts just in case something like this ever
happened. FYI the following are all tax deductible...
Shipping supplies and postage
Paypal, Bricklink, or any other online service fees relating to your business.
Product bought for reselling. Get a receipt book to keep track of cash paid
for private collections.
Vehicle mileage. (runs to the post office or purchase of product or supplies)
Home office if you have one.
A portion of your monthly internet bill.
There's a few others too. HIRE A CPA! LOL
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Thanks for the tip! For product bought for reselling, what sort of expense do
you list that as? When I put it as inventory, any sets I paid for that haven't
been sold this year (inventory remaining) are not deducted from my profit, which
doesn't seem right to me because inventory purchased is still an expense.
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| | | | | | | | | Author: | chromeking71 | | Posted: | May 14, 2021 00:36 | | Subject: | Re: Filing Taxes? | | Viewed: | 64 times | | Topic: | Selling | |
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| | | Thanks for the tip! For product bought for reselling, what sort of expense do
you list that as? When I put it as inventory, any sets I paid for that haven't
been sold this year (inventory remaining) are not deducted from my profit, which
doesn't seem right to me because inventory purchased is still an expense.
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I just declare it as inventory purchased. Weather it sells or not during the
year it's still a business expense. Even if you sell those unsold sets the
following year you'll still get taxed on them.
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| | | | | | | | | | | Author: | Teup | | Posted: | May 14, 2021 03:57 | | Subject: | Re: Filing Taxes? | | Viewed: | 50 times | | Topic: | Selling | |
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| In Selling, chromeking71 writes:
| | | | Thanks for the tip! For product bought for reselling, what sort of expense do
you list that as? When I put it as inventory, any sets I paid for that haven't
been sold this year (inventory remaining) are not deducted from my profit, which
doesn't seem right to me because inventory purchased is still an expense.
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I just declare it as inventory purchased. Weather it sells or not during the
year it's still a business expense. Even if you sell those unsold sets the
following year you'll still get taxed on them.
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Not US here, but just a headsup: This wouldn't fly here, so you better make
really sure that this is OK. It's a very good question and many sellers
struggle with it. Here, you do need to know strictly the costs of what it took
to generate the income that you generated (that does include the chair you sit
on, but not stock that you didn't sell). Lego that is left is simply money
turned into stock, still capital, so it doesn't do anything for your balance
either way. If it did, then it would be easy to "hide" profit on paper by simply
turning it into stock. A second weird side effect (which I assume is universal)
is that if you quit your business, you would have to somehow undo these costs
as they didn't turn out to be business costs after all (you still have the
goods in your hands, as a private person).
Of course, laws are different everywhere, so I have no clue how it works in the
US. But maybe part of it is universal logic, so just saying, you better double
check.
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| | | | | | | | | | | | | Author: | peregrinator | | Posted: | May 14, 2021 07:26 | | Subject: | Re: Filing Taxes? | | Viewed: | 65 times | | Topic: | Selling | |
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| In Selling, Teup writes:
| | In Selling, chromeking71 writes:
| | I just declare it as inventory purchased. Weather it sells or not during the
year it's still a business expense. Even if you sell those unsold sets the
following year you'll still get taxed on them.
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Not US here, but just a headsup: This wouldn't fly here, so you better make
really sure that this is OK. It's a very good question and many sellers
struggle with it. Here, you do need to know strictly the costs of what it took
to generate the income that you generated (that does include the chair you sit
on, but not stock that you didn't sell). Lego that is left is simply money
turned into stock, still capital, so it doesn't do anything for your balance
either way.
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My understanding is that it depends on the system of accounting that you use,
and if your revenue is below a certain threshold you can use a system under which
buying inventory can be counted as a business expense when it is bought (as opposed
to when it was sold). But by all means, talk to an accountant. I know it's
getting a bit late to file taxes (due Monday in the US!) but you can get an extension.
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| | | | | Author: | change | | Posted: | May 14, 2021 01:47 | | Subject: | Re: Filing Taxes? | | Viewed: | 58 times | | Topic: | Selling | |
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| In Selling, Biggie_Bricks writes:
| | I received a 1099-K form from PayPal this year reporting my gross income. I understand
this value includes Bricklink sales tax and Bricklink fees. My actual profit
is about 1/4 of this value. When I plug this gross value into my tax forms, it
says the amount I owe is 50% of my profit for the year! I’m a student and haven’t
filed taxes since high school when I worked easy to file minimum wage jobs. How
am I supposed to report Bricklink sales? I can’t lose 3,400 of my 5000 profit
for the year. Any guidance on this matter is greatly appreciated.
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Download the Schedule C from IRS and read the instructions.
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| | | | | Author: | rab1234 | | Posted: | May 14, 2021 21:15 | | Subject: | Re: Filing Taxes? | | Viewed: | 65 times | | Topic: | Selling | |
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| In Selling, Biggie_Bricks writes:
| | I received a 1099-K form from PayPal this year reporting my gross income. I understand
this value includes Bricklink sales tax and Bricklink fees. My actual profit
is about 1/4 of this value. When I plug this gross value into my tax forms, it
says the amount I owe is 50% of my profit for the year! I’m a student and haven’t
filed taxes since high school when I worked easy to file minimum wage jobs. How
am I supposed to report Bricklink sales? I can’t lose 3,400 of my 5000 profit
for the year. Any guidance on this matter is greatly appreciated.
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Also the option of claiming them as sold collectibles. Probably costs more in
taxes, but is incredibly easy. I don’t sell currently available sets... not sure
it would be accurate to claim as collectibles if you’re a new parts seller.
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| | | | | Author: | CPgolfaddict | | Posted: | May 15, 2021 02:18 | | Subject: | Re: Filing Taxes? | | Viewed: | 53 times | | Topic: | Selling | |
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| First step is Hobby selling vs. a Business. https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide
If you file as a hobby I THINK it is part of your 1040. But I've never done
this.
If it is a business you will use Schedule C for income and deductions. Your
schedule C results will then get rolled back into your 1040 and taxes calculated
as part of your total income tax obligation. There are more deductions available
if it is a business (vs. a hobby). For example home office and/or inventory storage
in the home. A schedule C business can also show a loss which reduces taxes
owed from your other income.
Good luck!
In Selling, Biggie_Bricks writes:
| | I received a 1099-K form from PayPal this year reporting my gross income. I understand
this value includes Bricklink sales tax and Bricklink fees. My actual profit
is about 1/4 of this value. When I plug this gross value into my tax forms, it
says the amount I owe is 50% of my profit for the year! I’m a student and haven’t
filed taxes since high school when I worked easy to file minimum wage jobs. How
am I supposed to report Bricklink sales? I can’t lose 3,400 of my 5000 profit
for the year. Any guidance on this matter is greatly appreciated.
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| | | | | Author: | wahiggin | | Posted: | May 15, 2021 08:53 | | Subject: | Re: Filing Taxes? | | Viewed: | 75 times | | Topic: | Selling | |
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| In Selling, Biggie_Bricks writes:
| | I received a 1099-K form from PayPal this year reporting my gross income. I understand
this value includes Bricklink sales tax and Bricklink fees. My actual profit
is about 1/4 of this value. When I plug this gross value into my tax forms, it
says the amount I owe is 50% of my profit for the year! I’m a student and haven’t
filed taxes since high school when I worked easy to file minimum wage jobs. How
am I supposed to report Bricklink sales? I can’t lose 3,400 of my 5000 profit
for the year. Any guidance on this matter is greatly appreciated.
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A couple of helpful links
https://www.irs.gov/publications/p538#en_US_201809_publink1000270704
https://notyourdadscpa.com/can-i-deduct-inventory-when-i-purchase-it/
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USA, Ohio
Netherlands, Utrecht
