I sold things on Mercari that were given to me, all under about 2-3k total for the year. Do I need to file taxes on that? And if I do, should I do that quarterly?
That is a great question!
You'll report these Mercari sales as self-employed income when you file your 2023 federal and state income taxes.
You do not need to file any quarterly reports for these sales.
Report your Mercari Sales as self-employed income using Schedule C Profit or Loss from Business
To enter your Mercari self-employment in TurboTax follow these steps:
- Open or continue your return
- Search for schedule c and click the Jump to link in the search results
- Answer Yes to Did you have any self-employment income or expenses?
- If you've already entered self-employment work and need to enter more, select Add another line of work
- Follow the on-screen instructions to add your self-employment information.
Good Luck on your Mercari sales!
Hope this helps you understand how to report this income on your 2023 tax return
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My colleague provided some great instructions. I'd like to add a few more clarifying details. A lot of people struggle to determine when they cross the line from selling old things online, to being self employed. If you sold things online regularly with the intent of making a profit, you're in business. If you were just clearing out your closets, selling your old possessions and those handed down to you by friends, these may be personal sales.
Starting in 2023, the IRS has issued new guidelines that require sales on credit card processing sites or online marketplaces to be reported.
If you sold things regularly with the intent to make a profit, then I agree, you will need to report that as self employment income. (If you were given one batch of items, sold them, and don't intend to continue doing so, then this may not be self employment. See below.) However, when you report self employment income, you also get to report all your expenses and deductions to offset that income. This includes the original cost of the items. The resulting profit will be the amount on which you owe both self employment taxes (15.3% to cover both social security and medicare contributions) and income tax (which depends on what tax bracket your total income falls into). Based on the amount you mentioned, quarterly payments are most likely not needed this year. If you intend to continue in this side gig and earn more money in the future, you may want to consider quarterly estimated tax payments. These are only necessary if you expect to owe $1000 or more in taxes on your self employment income. There are penalties for underpayment if you don't pay the taxes you owe throughout the course of the year. You can find more information about that at this link: https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-how-to-determine-what-to-p...
For anyone else following who may have sold a few things online and be wondering if this applies to them, read on to learn about occasional sales that don't constitute self-employment.
Typically, you only need to report personal items that you sold if they were sold for more than what you originally paid. Let's say you purchased a vintage item at Goodwill for $3 and recently sold it for $50. In that case, you'd have to report the profit as an investment sale.
Most of the time, personally-owned items decrease in value. If you sell them, it's almost always for less than what you paid, so there's no gain to report. Ahe IRS won't let you deduct losses on personal items. Therefore, there is no need to report these sales on your tax return.
If you sold something given to you as a gift, the original cost is considered to be what the giver — not you — paid for it.
Note: For tax year 2023, if you have over $600 of transactions on a payment processing or marketplace app, you will receive a 1099-K for those transactions. In that case, you would need to report those items on your tax return. The IRS also receives the 1099-K, and will notice if you don't include it on your return. You would then have to include any costs to offset that income to arrive at an accurate profit or loss. Personal items sold at a loss go on schedule 1, and will result in $0 effect on your income. Personal items sold at a gain would go on your schedule D, and you would pay capital gains tax on the profit.
Here is an IRS resource on the subject: https://www.irs.gov/businesses/understanding-your-form-1099-k#:~:text=Report%20on%20Schedule%201%20(....
As it was over $600, you should receive a 1099-K from the online platform. The IRS will also receive that. So you will have to file that income somewhere. The distinction to be made is whether this was a one off event, or self employment. If it was a one-off thing you can report the income on your schedule 1, and offset it with the giver's value to show no profit according to the instructions in the IRS article I linked. If this was a regular activity that could be considered self employment, then you will report it on a schedule c, and enter any expenses you have to offset the income.
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