Self employment profits and loss 1099

[Ann46]

If I decide to sell on eBay or have Shopify store how does the profits and gains work on your taxes if get paid from the customer for example and clock sold for 18 bucks and I bought the item form the merchant for 15 dollars to send it to the customer does that mean my profit Loss would be the 15 dollars and my profit gain would be the 3 dollars I made of the sale ? And would that profit loss be deducted off what I owe for my total sale for the year?

[kfenwick · Accepted solution]

For Self Employed activities the income reported on Schedule C of your tax return would be the sales price to the customer.  The price you paid to purchase the item for resale would be considered an expense and reported as Cost of Goods Sold.  So if you sold an item to your customer for $18 and your price to purchase that item for resale is $15, then the net income on which you will be charged tax is $3.  You will pay income tax as well as self employment tax on the net income for the business.  

[John-H2021]

Hello Ann,

The amount of money you take in from a sale would be considered gross income ( $18 for clock)

The amount of money you spent to make the income would be an expense ( $15 for clock)

The net profit would be the gross income minus the expense ($3 for the clock)

You will be taxed ( income tax and self emplyment tax) on the net profit.

Here are a couple of links that will be helpful

https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed...

https://turbotax.intuit.com/tax-tips/self-employment-taxes/top-tax-write-offs-for-the-self-employed/...

[kfenwick]

Exactly what I said too John.