@anaestheticpredi wrote:
Also If I do find the receipts for old items I didn't make a profit on, would that count as a negative in my totals sales, or is there a seperate place to input that?
There's a couple of conflicting issues here, and I want to leave this open for other expert comments.
@VolvoGirl @Critter-3 @rjs
First issue is, are you a business or a hobby? This sounds like a business, an activity carried out in a regular and ongoing manner for the purpose of making a profit. See here. https://www.irs.gov/newsroom/earning-side-income-is-it-a-hobby-or-a-business
Second issue is with respect to personal property, as separate from inventory. If you have a gain on the sale of personal property, that's taxable, but if you have a loss, that is not deductible. Is your personal property transformed into business inventory when you list it for sale? Perhaps. That would allow you to reduce your income for losses.
Now, if we assume that personal property is not business inventory, then you consider them separately. Your business activity only consists of buying and selling for resale. You report this activity on schedule C. You include your cost of inventory, selling fees, shipping, and so on as expenses. You pay regular income tax plus self-employment tax on your net profit after expenses. Then separately, the sale of used personal property is reported as capital transactions on form 8949 and schedule D. Items sold for more than you paid are capital gains transactions. You can't take a deduction for property sold for less than you paid, and there's really no point in listing them. You can't deduct fees or shipping. You pay capital gains tax on your gains, which will have a much lower rate than income tax plus self employment tax, but your losses are ignored. You will want to keep two sets of records, for personal capital sales and business sales.
Or, if you convert your personal property to business inventory, then everything is reported on schedule C. You don't report the details of the sales, but you must have records. Your schedule C will report total sales, and total expenses, broken down by category (cost of goods, fees, shipping, shipping supplies, etc.). You pay income tax and self-employment tax on the net profit. By including the cost of your personal items in your overall expenses, and the proceeds from your personal items in your gross sales proceeds, items you sell at a loss will potentially offset other items sold at a profit. (In other words, if you report $5000 in sales and $4000 in expenses, you have a $1000 profit. It's as simple as that, you need your own detailed records but they don't go to the IRS unless you are audited.)
Now, I don't know how to get your old personal items into inventory so you can account for their cost as part of your cost of goods sold. Someone else can answer that.
Also note, if you show a loss on your business for 3 or more out of 5 years, the IRS will automatically try to reclassify it as a hobby, which will disallow most of your expenses and may result in higher taxes.
I would be inclined to keep personal items and business inventory separate and treat sales of personal items at a loss as capital losses, which will not offset the profits on your business inventory, and will mean you don't include selling fees and shipping as business expenses. That would result in paying more overall tax than if you treat your personal sales as inventory. But I am happy to consider the opinions of other experts who probably know more than I do about this.
For your personal items, you don't necessarily need receipts, but you need to keep the best records you can. You will want a list of your items sold with a description in reasonable detail, date acquired (approximately), how acquired (purchased, gift, inherited), price (to the best of your recollection), date sold, and selling price.
For business inventory you want the same information, plus your fees and other selling expenses.
