Official Blog of the Tophatter Auction House
They say that nothing in life is certain except for death and taxes. And, for those of us in the US, it’s getting to be tax time again. April 15th looms ahead of us on the calendar, commercials on TV remind us of it with lures to take advantage of their tax prep software and services, commercials tempt us to come shop with that anticipated tax return before it’s even in our bank accounts. So, before it all gets to be too much, I wanted to stop and take this opportunity to give everyone some tips/advice that you may find beneficial as you prepare to file your tax returns.
The first, and easiest tip, anyone can give you regarding taxes and how to keep from paying too much is to file and pay! An income tax professor told his class this bit of information: when you see commercials on TV with the attorneys offering to help you save on back taxes you owe to the government, their biggest money-saving tip is to FILE. If you owe back taxes and file on your own, you are going to do better than if the IRS comes to you.
Your online income needs to be reported to the IRS on Schedule C of the 1040 form, even if you are a sole proprietorship and are not a corporation. What is Schedule C? That is the section for “Profit or Loss from Business”, which means that you report your income minus any business expenses. Remember to be sure you have documentation for any numbers you put on the forms! The IRS can come back to you for an audit up to 3 years from now, so make sure you save that documentation too.
Where does this income documentation come from? If you did a LOT of business online, you may have already received income information from PayPal. What is considered a LOT of business? PayPal is required to report your income to the IRS (and provide documentation to you) if you made more than $20,000 in 2012 and that income comes via more than 200 individual transactions. While most of us aren’t quite that kind of PayPal high-roller, you still need to report your income.
For the “regular” folks among us, here is a way to get all of your 2012 income information from PayPal. Log in to your account and select “View All of My Transactions.” In the next screen that pops up, select the time frame you want to look at, and then select “Payments Received.” That will give you a report of all of the money you received in that time frame. You can then export the report in whatever format works best for you (CSV, Tab delimited, etc) and then use it to work on your taxes.
What about expenses? I can’t help you with all of your expenses, but I can give you some tips about costs for selling on Tophatter. The first thing you’ll need to do is download your CSV file from your Items for Sale page. Once you’ve downloaded it, you can use the file to get the following useful information:
- Date range…Use the Paid Date (Column AC) to determine what income you had in 2012.
- Hammer Price + Shipping Price (Columns M&N) will give you the total amount of money paid to you by your customers on Tophatter.
- Shipping Price (Column N) is the amount paid to you for shipping your items but not your actual shipping costs since your shipping is done outside of Tophatter, so please bear that in mind.
- When looking into the total fees paid to Tophatter, use the Listed Date (Column Z) to determine your 2012 fees. Don’t use the Paid Date because you would be excluding items that were listed but didn’t sell.
- Seller Fee + Scheduling Fee (Columns AH&AI) will give you the total fees paid to Tophatter for the year.
Now, you have all of the information you should need from Tophatter to take care of your taxes for 2012. While you’re at it, there are a few other things to keep in mind. If your state has a state income tax, don’t forget to file that too! And, if you should be reporting sales tax for sales to customers in the state you live in, you can also refer to your CSV to check for any applicable information and to also ensure that you’ve reported those numbers accurately. There’s always a few little things you’ll need to keep in mind when filing your taxes, but the biggest thing to remember is (in the words of Nike) “Just Do It!”
If you have any questions about filing your taxes as an online seller, let Katie know in the comments below!