Hello everyone and thanks for joining us today. My name is Phyllis Wischer and I am the Lead Business Coach for Certified Provider SageFire, Inc. - the creators of KeepMore.net. I am a Public Accountant with over 20 years experience in helping thousands of small business owners with their bookkeeping, accounting, payroll and tax needs.

SageFire is a Certified Solution Provider specializing in helping small business owners’ track their business financial activity using our online accounting, contact management and document storage solution. Our solution, KeepMore.net makes it simple for you track your business while maximizing your tax benefits.

Think about the big picture

We constantly get the comment, ‘But I am just selling items out of my home and for a few family members and friends, I am not in the business of selling online.’ But, does the IRS consider you as having an online selling business? Let’s look at what the IRS says about online selling.

Did You Have an Online Garage Sale?

If your online auction sales are the Internet equivalent of an occasional garage or yard sale, you generally do not have to report the sales. In a garage sale, you generally sell household items you purchased over the years and used personally. If you paid more for the items than you sell them for, the sales are not reportable. Losses on personal use property are not deductible, either. However, see Did You Sell Appreciated Assets at an Online Auction for gain reporting.

Did You Start a Home-Based Online Auction Seller Business?

If your online garage sale turned into a business and/or you have recurring sales and are purchasing items for resale with the intention of making a profit; you may have Link started an online auction business.
To learn more, just visit this IRS link - Link

Last fall, the IRS announced that they will be auditing 13,000 individual tax returns for the tax year 2006. This does not necessarily mean there is a Schedule C filed with the tax return. It may simply be a compliance audit to see that the taxpayer(s) is reporting all their income. In this type of audit, you are asked to document the source of all funds received by you (and your spouse if filing a joint return).

Today, it’s a garage sale….tomorrow a business?

Daily I speak to all levels of eBay sellers. There are those sellers who feel they are not in the business of selling online, some are just starting to sell on eBay and feel their business is ‘too small’ to worry about the ‘big picture’; and, then there are those who, over night, have surprisingly found themselves grossing thousands of dollars a month and say they are too busy to worry about the big picture ‘right now’. It does not matter which category you fall into… what matters is how you will survive tax season and any potential IRS audit.

Let’s look at the occasional garage sale type seller. It’s early January 2006 and you sell a few things online and deposit that money into your bank account. Let’s say you sold some old 33 music albums left to you by your grandma. You make a nice profit and like making deposits into your checking account. But you are not in the business of selling online so you don’t keep any records. But this first experience was fun, and you got a little money for your effort. Now you start looking around for more and more items to sell. Next thing you know, its November and you are selling hundreds, if not thousands of dollars of items daily on eBay for not only yourself, but some of your family and friends. Still you do not keep any records because you are not in the business of selling online. Two years later, wham!....you get the dreaded IRS notice of a compliance audit of your 2006 tax year. Will you be ready?

Your eBay transactions are not available on the site after 90 days – keeping records of your eBay activity is your responsibility, not eBay’s.

Think about the big picture!

By keeping organized records that paint a complete picture of how your online selling activity functions and profits, you will be better able to present your case before the IRS. Spare no detail… document, document, and document. And, speaking of presenting your case before the IRS, you should speak with your tax advisor before you start selling online to get a better understanding of how the IRS will view your eBay activity.

Pick the right tax advisor

That’s right – the word is hire! When you seek out the services of a tax advisor, remember that you are paying them for a service. You have hired them to work for you!

We all live in a hectic world. We have jobs, family and lots of things we want to do in our lives. So, it’s real easy to just get a referral for a tax advisor from someone we know and trust. But do you know if this tax advisor understands the online auction business. How qualified and experienced are they? If you get notice of an audit of your tax records, whether you consider those online sales deposits from a business or not, will you be comfortable having this friend of a friend represent you before the IRS? Having someone on your side that knows tax advantages specific to your business will be a terrific asset.

Choose a well-qualified advisor!

So how does one go about choosing a well-qualified advisor … do your own research! But where do you start? I recommend that you open your search engine and type in ‘questions to ask an accountant.’ You will be amazed at the number of links you will find to all sorts of articles about questions to ask a tax advisor. Review some of these articles and start making a list of the questions that are most important to you. You might want to sort them by importance – from most important to least important. In your most important list you should question their background in preparing tax returns for business owners with an online auction business like yours and don’t forget to ask about their fees.

Now its time to get referrals and look in the yellow pages for a tax advisor in your area. You probably want to choose someone that is local and that you can access easily for tax advice. Set up interview appointments and take your list of questions with you. How many appointments you make will be determined by how successful you are in finding the right tax advisor. There is one more critical item in the search for a tax advisor and this will not be on your list of questions to ask. Besides being well qualified, the tax advisor you choose must be someone you can talk to!

And, choose one you can talk to!

Let me share a true story with you. I work with a lady who does bookkeeping for small business owners and for tax advisors who do not offer bookkeeping services. One of her long time bookkeeping clients (over 15 years) uses one of the tax advisors. This client constantly comments that she cannot “talk” to her tax advisor. Her tax advisor ‘talks over her head’ - does not answer her tax questions so that she can understand what is being reported on her tax return. She wants to better understand the income tax returns that are prepared for her business annually, but can’t get answers she understands. This person should have changed tax advisors years ago, but like so many small business owners, she doesn’t know where else to go. Don’t go there – choose a well qualified tax advisor who understands the online auction business and is someone you can talk to!