|One Of The Last Sure Things...|
By Steve Weber
QUESTION: I'm a part-time "hobby" seller of used books on Amazon and eBay. Do I need to pay income tax on the sales I had last year?
ANSWER: Yes, you are required to pay federal income tax and self-employment tax on your net income from selling used books online, whether you sold them on Amazon, eBay, Half.com, ABE, Alibris, or any other venue.
Since you don't have an employer reporting your bookselling income and withholding a portion for taxes, you must inform the IRS about it yourself. It makes no difference that you consider your bookselling a "hobby." If you're making a profit, the IRS considers it a business, and wants its cut.
I'm assuming you won't be incorporating your business, so you'll need to report your bookselling income as a "sole proprietorship" on the long tax form, IRS Form 1040, Schedule C, "Profit or Loss From Business."
You can report your self-employed income using the personal editions of TurboTax or TaxCut software. These programs can save you lots of time, since they give instructions in plain English instead of the bewildering jargon of IRS instruction manuals.
If you made a profit during 2005 from bookselling, you'll also owe some state income tax for that, so I'd also recommend you also use the state version of TurboTax or TaxCut to figure your state tax obligation.
To complete your tax return, you'll need to account for every transaction involving your book business. If you're not already doing so, keep all your receipts and records, and put your expenses into categories such as "postage," "shipping supplies," "books," and so on. This is the information that will go on your Schedule C.
Next year, don't wait this long to get your affairs in order. With self-employed income, you're supposed to estimate your tax obligation during the year, and make quarterly payments on your profits, submitted with Form 1040-ES, by April 15, June 15, September 15, and January 15 of the following calendar year. Since you didn't do this during 2005, you may owe a penalty for late tax payments. If you were expecting a tax refund this year, it may be smaller than you thought.
For next year, I'd recommend you have a separate checking account to track expenses and income from your bookselling. If your bank enables you to download your transactions into Quicken or another personal-finance program, you can automatically categorize expenses such as "postage," etc., in Quicken. And next year you can transfer this same data into your tax-prep software. This will greatly lessen your bookeeping chores next year, and also give you a handy tool for examining the performance of your book business.
See a real-time list of the most highly sought after used and collectible books.
Read more free articles on selling used books profitably online: http://www.weberbooks.com/selling/selling.htm
Steve Weber is author of "The Home-Based Bookstore: Start Your Own Business Selling Used Books on Amazon, eBay or Your Own Web Site" (ISBN 0977240606). Got a question for Steve? Send to: firstname.lastname@example.org
Article Source: http://EzineArticles.com/?expert=Steve_Weber