More bad news. BusinessWeek reports that the IRS is starting to scrutinize the massive amounts of money (and therefore potential taxes) that people are making on eBay. I knew that this would happen some day, with the explosion of eBay and the ability of anyone to buy something cheap (like toast) and resell it at a profit. I think it’s a matter of time before eBay must report sales figures directly to the IRS. I’ve easily sold over $10,000 of stuff on eBay.
Of course, I also spent thousands of dollars to buy those things. Back in a previous not-so-frugal life, I was a gadget-addict. I’ve owned 8 laptops and 12+ PDAs, everything from the original US Robotics (Palm Pilot) 5000 to a Dell Axim. I would basically try to buy things cheap at SellThingsAtALossWithNoRealBusinessPlanIn2000.com, play with it for a couple weeks, and resell on eBay when I got bored. Sometimes I would make money, sometimes break even, sometime lose some money. I was even a “PowerSeller”, which mostly meant that PayPal was a happy camper.
I do think that people running true businesses should pay the appropriate taxes. If you’re selling 10,000 cell phone boosters a month, you are a business. However, having someone like the woman in the article who made $2,000 selling old baby clothes pay taxes on it may be overkill. I mean, she probably paid more than that for the clothes, so she is probably technically not making any profit. Maybe on some of the thrift store flipping. But for the people who are simply scared of the big bad tax man, they may pay too much, and you can bet the IRS isn’t going to go “Oops, you paid too much, here’s your money back”. I mean, am I going to have to keep a Schedule D and record the cost basis or receipts for all my old CDs or lawnmower?
By Jonathan Ping | Frugal Living | 3/29/05, 10:36pm