Paying Taxes On Paypal Profits?

[starsky]

um so what's going to be next....

[Adam West]

You never know how this would really work out if strictly enforced. For instance, if I have to pay taxes on toys that I buy and sell on ebay, then you should be able to deduct any losses as well. Just like gambling. So I'd just claim everything as a loss since I have awesome records of everything I've bought an sold and I know I can easily show this as a loss. If I have to pay tax on the profit, I should get to deduct the loss, right?

You can only deduct gambling losses against winnings. For example, if your gambling losses exceeded your winnings; you can't claim the excess losses on your tax return.

You definitely need to have excellent records. If you purchased something at a yard sale and resold it on Ebay, you better have some type of receipt as to what you paid...otherwise the cost basis is zero and it gets taxed at 100%. The big problem I see is selling an item like a high end Mego that you received as a Christmas gift when you were a child decades ago, you sell it for a lot of money but how do you prove what was paid for it? That's going to create a huge problem.

There are two main problems here. One, whether or not they consider your buying and selling a hobby or business. If hobby, you can't deduct losses in excess of earnings. If business, it's keeping meticulous records. Like I said, it appears that they are going after Ebay sellers who appear to have a business because $25,000 is a lot of money.

[Adam West]

um so what's going to be next....

Sales tax on internet sales from websites such as Amazon.com.

After that, it will be sales tax on everything from goods to services. This is at least what I am hearing through my continuing education classes that I take to keep my CPA license active.