Figuring out what to report to the Internal Revenue Service (IRS) is a daunting task no one has on their favorite to-do list.
For online sellers, the law gets a bit fuzzy on the things you should be reporting and what is okay to leave out.
Should you be reporting the keyboard you sold on eBay?
How about the regular flow of cash you rake in from selling those empty toner cartridges?
When you understand how the IRS categorizes your income and extra cash, you’re taking steps to stay off the radar for an audit.
Hobby or Business?
This happens to be the most important question to ask yourself in order to understand your expectations from the IRS. Are you getting some extra cash from recreational habits? Or are you organizing your selling plan for profit and income?
Reporting sales from online transactions is tricky business so clarifying your intentions from the beginning is a crucial step.
The IRS guidelines outline that if your internet sales are equivalent to a garage or yard sale, you generally aren’t required to report it. Considered ‘online garage sales’, selling your used, personal or household items online for no profit is hardly something they will be knocking down your doors for.
For example, if you bought a printer for $150 a couple of years ago, but sold it for $70, you’ve made no profit and therefore aren’t required to report it as income. You’re now under the ‘hobby sales’ category which can be determined by a number of different factors including:
- Intent to generate profitable income from the online activity.
- Intent to make profit from appreciation of assets.
- Success from previous similar activities that generated profit.
So, if you’re selling something like your empty or unopened toner cartridges for less than you bought it, you’re at a personal loss and not required to report your sales as income. Don’t forget that with hobby sales, your losses cannot be deducted to offset any income.
Though, if you are in the habit of buying toner to resell it or are strategic in how you sell your toner to maximize profit, you’re running a business and are subjected to business taxes.
Why businesses must report sales
Business taxes or folks required to file as a business must report all of their sales. If your activity’s goal is creating profitable income, you should report this money as a part gross income on taxes. The IRS categorizes an online business as for profit with regular recurring sales.
If you sold that $150 printer for $170 and are in the habit of buying printers for resale, you are running into business owner territory and essentially a separate bracket to consider your taxes.
Unlike ‘hobby sales’, you can report your expenses and deductions for your business. Therefore, if you spent money on fixing up an item or advertising it for sale, you could include it when you file.
Do you have to pay taxes on selling toner?
There isn’t a right or wrong answer here as situations vary on an individual basis. If you make money selling toner and your sales are equivalent to an online garage sale, you’re in luck. You can report these as hobby sales without expecting trouble from the IRS.
If you sell toner cartridges consistently for profit, however, you must report your activity as a business. Thus you should treat this income as revenue earned from selling products like any other business.
If you are;
- Selling your toner for less than originally bought.
- Looking to gain some extra cash but not extra profit.
- Not selling toner as your income.
You might qualify to report your sales as a hobby. You must always check with a trusted tax preparer if you are unsure of your tax obligations. It’s important to check for changes in policies with IRS guidelines to avoid penalties.
We’re happy to offer assistance if you ever need it and always happy to be your number one go-to for getting rid of those unused toner cartridges!