Taxes made easy with Paypal Annual Financial Summary Report

United States business / premier Paypal account holders can access the Annual Financial Summary Report for key information when filing tax returns. This report contains valuable information used on Tax Form Schedule C Profit or Loss from Business. To access the report, online sellers should log in to Paypal, then:

1. Click the Activity link across the top
2. From the drop down box on the right where it says Statements, select Reporting Center

3. On the right, select Financial Summaries. The far right side has the Annual Financial Summary.

4. Select the tax year from the drop down list and click “download report”

The Annual Financial Summary includes key information that can be used on Tax Form Schedule C Profit or Loss from Business. Specifically:

Schedule C, Gross Receipts = Sales Activity / Payments Received
Schedule C, Line 2.Returns and allowances = Sales Activity / Refunds sent
Schedule C, Line 27a Other Expenses = Fees / Payment fees

In addition to the information provided on the Annual Financial Summary Report, Paypal users exceeding the IRS threshold amounts will receive a 1099-K form. To see if your account qualifies for a 1099K form, visit How Online Sellers Find Tax Form 1099-K from Paypal.

Sellers should have an organized bookkeeping system to store receipts. A simple and inexpensive solution is a bankers box. More sophisticated sellers may choose to store receipts digitally using a receipt scanner. Online sellers who have experience completing a tax return can file online for free using the IRS free file program. Visit How to File Federal Taxes Online for Free. Less experienced tax filers may use TurboTax which offers a guided, step-by-step questionnaire tailored to your personal income tax situation. For further guidance on starting to sell on eBay, subscribe to my YouTube Channel: Piece of Scrap, for how to sell on eBay, what to sell on eBay, shipping on eBay and much more!

How to File Taxes for Selling on eBay

It is against the law not to report all income to the IRS. Whether selling on eBay is your primary source of income, or simply a hobby, all income should be reported. Selling on eBay can be viewed as a hobby as long as one is not in it to make money. As such, any hobby expenses associated can be used to offset the income. However, unlike a business, any hobby losses cannot be used to offset hobby income. If one sells on eBay to make money, then the income must be reported as business income. In addition, any associated losses (lost or damaged packages, refunds) can be used to offset the income.

Only eBay sellers who exceed the IRS thresholds will receive an IRS Form 1099-K from Paypal. Sellers exceed the IRS thresholds when they received $20,000 in gross payment volume for the sale of goods or services AND have over 200 separate payments for goods or services in the same calendar year. 1099-K Tax Form is found via Paypal. Visit How Online Sellers Find Tax Form 1099-K from Paypal for detailed instructions on downloading Paypal's 1099-K Tax Form.

Advice for sellers reporting eBay income as a business:

- Keep detailed records including all receipts for purchases and expense. Organized sellers can use a bankers box or store receipts digitally with a receipt scanner.
- Research home office use expense. Write It Off! A-Z Guide to Tax Deductions for Home Based Businesses is full of helpful tax deductions.
- Research deductions for transportation: gas / parking / depreciation on vehicle
- Seek professional assistance related to tax accounting and IRS reporting
- Many deductions are available on Tax Schedule C Profit or Loss from Business.

Visit Taxes Made Easy with Paypal Annual Financial Summary Report for details.

For detailed information regarding the Internal Revenue Code Section 6050W as it relates to payment processors, including Paypal, visit:

https://www.paypal.com/webapps/mpp/irs6050w

How online sellers find tax form 1099-K from Paypal

Only eBay sellers who exceed the IRS thresholds will receive an IRS Form 1099-K from Paypal. Sellers exceed the IRS thresholds when they received $20,000 in gross payment volume for the sale of goods or services AND have over 200 separate payments for goods or services in the same calendar year. To download and print your Paypal 1099-K, do the following:

1. Log in to Paypal
2. Click on the Activity link at the top of the Summary page
3. On the Activity page, click the drop down arrow next to the Statements link near the right hand side of the screen.
4. After clicking on the arrow, a drop down list appears. Click “Tax Documents”
5. If you have met the IRS thresholds mentioned above, a downloadable 1099-K form will appear for the tax year. If you have not met the thresholds, a simple message appears: “You have no 20xx tax documents.”

If a seller has not met the IRS thresholds, the total sales amount for the year can still be determined. United States Business & Premier Account holders have access to an Annual Financial Summary Report. Visit Taxes Made Easy with Paypal Annual Financial Summary Report for more information. Any seller can download all account activity and total the amounts for "Payments Received". Visit How Online Sellers Find Total Shipping Costs Via Paypal for Tax Filing as an example.

Sellers should have an organized bookkeeping system to store receipts. A simple and inexpensive solution is a bankers box. More sophisticated sellers may choose to store receipts digitally using a receipt scanner. Online sellers who have experience completing a tax return can file online for free using the IRS free file program. Visit How to File Federal Taxes Online for Free. Less experienced tax filers may use TurboTax which offers a guided, step-by-step questionnaire tailored to your personal income tax situation. For further information on tax laws relating to online selling, The Complete Tax Guide for E-commerce Retailers including Amazon and eBay Sellers is a great read!

How to File Federal Taxes Online for Free

Tax time is upon us. Entrepreneurs including eBay and Amazon sellers can file the Federal Tax Return online using IRS freefile. The software is available via the Internal Revenue Service IRS website: www.irs.gov
 

One must know how to prepare taxes as the software is not as user friendly as others (TaxAct, TurboTax). The tax forms are fillable and can be sent electronically, but the software lacks the interview type questionnaire available in other tax preparation software. It does, however, perform math calculations and provides basic guidance with help screens per form.

To begin, direct the browser to http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free

Each user will need to create a new account for every year as the information is not carried over from year to year. To complete the process more easily, I recommend the user have the following documentation available:

1. Copy of last year’s tax return. Last year’s Adjusted Gross Income (AGI) is required to e-file this year.

2. Total expenses to be used on Schedule C Profit or Loss from Business. Find out how to determine total shipping costs and transaction fees via Paypal.

3. Total sales for last year. Sellers meeting the IRS thresholds will receive a 1099-K from Paypal. See how to find the 1099-K from Paypal.

4. Amount of refunds / returns for the year. Returns and allowances as well as other expenses are available on the Annual Financial Summary Report. See how to download your copy at Taxes-made-easy-with-paypal-annual-financial-summary-report

As always, research the new tax laws and consult a professional if needed.

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How to research an accepted Best Offer price on eBay

One of the biggest questions for experienced and newbie eBay sellers alike is, “How much should I sell this for?” While there are numerous ways to research selling prices for items listed on eBay, I will discuss a very specific one: after searching completed items on eBay, the price accepted was via Best Offer. What is the best offer accepted price?

To learn how to search completed listings for similar items on eBay, visit How to research what price to sell an item for on eBay If an item has sold with a Best Offer, the asking price is crossed out. To see the accepted Best Offer price, do the following:

1. Click to view the complete item auction detail page
2. Click the link near the top of the item description page “see original listing”
3. On the original listing page, scroll down to where the auction item number is stated
4. Just above the item number, is a link to Print the page
5. Click the Print link.

The print item page will display the accepted Best Offer price. Continue to research other sold items by returning to the Advanced Search Results and repeating the steps above to identify the selling price of a Best Offer acceptance.

How to research what price to sell an item for on eBay

One of the biggest questions for experienced and newbie eBay sellers alike is, “How much should I sell this item for?”. While there are numerous ways to research selling prices for items listed on eBay, I will discuss just one: search completed items on eBay for similar items or exactly the same item. 

To see how I search for completed comps (comparative solds) on eBay, watch this video on an eBay BOLO that sold for over $100! 

eBay also offers a FREE Terapeak Research tool. I use this tool when pricing rare BOLO items, including this one that sold for nearly $200! Watch how to use Terapeak Research Tool

To search completed listings for similar or exactly the same item on eBay:
1. Click the Advanced Find link in the upper right hand corner of most any eBay page.
2. On the Advanced Find page, enter the keyword search term (very generically).
3. Check the appropriate box for Condition (New or Used).
4. Then, scroll further down the page and select the box for Sold Items.
Optional: On the left side, click the box to search US only listings
5. Click the button to Search Now.
6. On the search results pages, the completed and sold listings appear. In the Sort drop down box, select the option to sort by “Highest price plus shipping”

Optional: The date of sale may be important if an item was once hard to find or just released. Newly released items will initially fetch a higher price until the item is readily available nationwide (rules of supply vs. demand)

Using the steps above, click here for an example of completed eBay listings for "cashmere sweater"

A seller can see what similar items are selling for by looking at these completed search results listings. If desired, click one of the completed listings to see the item auction description to verify the item is exactly you think it is.

If an item sells quickly at the Buy It Now price, some sellers may think that they let the item go at too low of a price. In fact, some sellers may think they could have received more for the item and greed sets in. Second guessing the price of an item that has already sold is easy to do, but not healthy. As long as a seller had made money on the item (after all fees, of course), then selling the item was a success and the overall store inventory turnover ratio has been improved.

If an item sells via Best Offer acceptance, the price is crossed out. To see the actual price accepted, visit How to Research an Accepted Best Offer Price on eBay