Ebiz Tax Tips » Uncategorized

What if You Receive Two Form 1099s Reporting the Same Income?

Kristine — Wed, 25 Jan 2012 15:11:57 +0000

One of my concerns about the new 1099-K form is that people may receive two 1099s for the same income. For example, lets say you are a graphic-designer and you use PayPal to process payments you receive.

You could receive a 1099-K from PayPal (assuming you earn over $20,000 and you have more than 200 transactions). In addition, you could receive a 1099-MISC from one or more of your customers.

The problem is that both 1099 forms are reporting the same income. So you could earn $40,000 in any given tax year, and receive 1099 forms reporting $60,000!

How do you report your income on your tax return if this happens? There’s actually a pretty easy solution.

First, report the total income reported on 1099-K forms you received on line 1a of Schedule C (note: for 2011 only, you will use 1b instead of 1a to report 1099-K income). Second, report all income reported on 109-MISC plus all income you earned that was not reported on a 1099 on line 1b.

If you find that your income was double reported you can adjust your reportable income by entering a negative item for the amount that was double reported on line 6 – Other Income.

Using the same example above, let’s assume that your gross income for 2011 was $40,000. You received a 1099-K from PayPal for $25,000, a 1099-MISC from your largest customer for $10,000, and several more 1099-MISC forms adding up to $13,000. You also earned $5,000 that was paid to you directly (cash or check), that you did not receive either a 1099-K or 1099-MISC form for.

You will report:

Line 1a: $25,000 (from the 1099-K you received from PayPal)
Line 1b: $23,000 (from the 1099-MISC forms you received) + $5,000 (any income not reported on a 1099)

Total Gross Receipts: $53,000

As you can see your total gross receipts are too high because you had income that was double reported (on both a 1099-K and 1099-MISC). To correct this, enter a negative number on line 6 – Other Income as follows:

Line 6: Other Income ($13,000)

Your gross income (line 7) after making this adjustment will be $40,000.

By reporting your income this way your tax return will match the IRS’ records of 1099s you received, and you will not be over-reporting your income.

Tax Carnival #95: Tax Filing Season 2012

Kristine — Wed, 18 Jan 2012 14:06:36 +0000

For filers who do their taxes the old fashioned way, the tax filing season began a couple of weeks ago — as long as they had all the necessary 2011 statements to fill out their paper forms.

Taxpayers who prefer to to e-file can hit “enter” tomorrow, Jan. 17. That’s when the IRS starts accepting electronically filed returns and also opens the door to Free File 2012.

But regardless of how you submit your return, the tax laws and rules are the same. Tax Carnival #95: Tax Filing Season 2012 looks at some of the issues taxpayers might encounter.

One of the first considerations is timing.

Tim asks the key question: When Are 2011 Taxes Due? Tax Deadline in 2012, an update on when the 2011 taxes are due. “Hint…they’re not due on April 15th,” says Tim, who posted the answer at Faith and Finance.

Continue reading Tax Carnival #95: Tax Filing Season 2012

via feedproxy.google.com

Thanks to Kay Bell for another great tax carnival. If you’re looking to get up to speed on taxes before you file your return, the tax carnival is a great resource.

1099s Delayed This Tax Season

Kristine — Tue, 20 Jan 2009 00:59:06 +0000

The IRS has announced that brokers may furnish certain composite annual tax reporting statements by Feb. 17, 2009, without penalty.

The notice provides that the new February due date established under a recent law change to provide Form 1099-B information to customers also applies to other tax information customarily reported to customers with Form 1099-B statements, such as interest and dividends. This means that customers can expect to receive Forms 1099-INT and 1099-DIV late as well.

If you normally receive Forms 1099-INT, 1099-DIV and 1099-B for investment income and transactions, be aware that these forms will arrive later than usual this year. Some clients have reported that they have received letters from financial institutions saying not to expect these forms until the end of February (although the official due date is February 17).

As a tax preparer, I’m not particularly happy about this change, but on the bright side, I’m hoping the extended deadline will cut down on the number of corrected 1099s issued this tax season.

Tax Questions Recording Ready

Kristine — Sat, 17 Jan 2009 03:19:15 +0000

If you missed the eBay Selling Coach grilling me on taxes, here’s the recording. Enjoy!

Recovery Rebate Credit for 2008

Kristine — Sat, 10 Jan 2009 12:42:46 +0000

If you didn’t receive a rebate check in 2008, or if you think you should have gotten a larger check than you did, you can apply for the Recovery Rebate Credit on your 2008 tax return.

The Recovery Rebate Credit is a special one-time benefit that most people received last year in the form of an Economic Stimulus Payment. But people who did not receive the maximum amount of the Economic Stimulus Payment, or whose circumstances have changed, may be eligible now.

In most cases, the IRS will calculate whether a person is eligible and how much of the credit may be due automatically. To allow the IRS to calculate this automatically, simply file your 2008 tax return and follow the “Credit Figured by the IRS” instructions. However, may choose to calculate the Recovery Rebate Credit themselves instead.

In order to calculate the Recovery Rebate Credit, you to know the amount of the Economic Stimulus Payment you received in 2008. If you’re having your tax return prepared by a tax preparer, make sure you give them this info so they can calculate your return correctly.

For more information, please visit Recovery Rebate Credit Is for Individuals Who Missed Last Year’s Economic Stimulus Payment on the IRS website.

Happy Tax Day!

kamckinley — Tue, 15 Apr 2008 11:48:00 +0000

For me this is a very happy day because it means another tax season is behind me

Don’t forget to file your tax return and/or your extension by the end of today! I wanted to quickly address a question I hear very frequently, especially on Tax Day…

"What if I can’t pay the balance due on my tax return?"

The first thing you should understand is that filing an extension does NOT extend the time to pay your taxes. This is a common misunderstanding. Filing an extension only extends the time to file your tax return, it does not extend the time to pay.

The best thing to do if you owe taxes is to send in a payment with your extension request. If you can’t send in the total balance due, send in as much as you can.

Filing an extension can still be helpful because it gives you more time
to review your tax return and make sure you haven’t missed any
deductions. It also reduces the penalties you will incur (there are
late filing and late paying penalties; filing an extension will
eliminate the late filing penalty, but not the late paying penalty).

If you owe a significant amount, you should consider applying for a payment plan with the IRS.
While you will still pay interest and penalties, this will keep the IRS
from garnishing your wages or filing liens against your property.

Another alternative is to use a credit card to pay your taxes, however
the IRS does charge a fee for this service. This might make sense if
you have a low interest rate on your credit card compared to the
interest and penalties that you could pay to the IRS.

For more information directly from the horse’s mouth, please visit Filing Late and/or Paying Late at the IRS website.

Not just for eBay sellers!

kamckinley — Sun, 06 Jan 2008 13:10:27 +0000

How do you like our new header? I changed the name of this blog from "Tax Tips for eBay Sellers" to "Ebiz Tax Tips" to reflect that the tax tips on this blog are not just for eBay sellers.

While I originally started this blog to answer tax questions for eBay sellers, the tax tips on this blog are really for all online businesses – whether you sell on eBay, run affiliate programs, have a service business, or have another home-based business, this blog applies to all of you!

So if you’re a WAHM, a service business, an affiliate marketer, or some other online business owner, I would like to welcome you to my blog. I look forward to sharing tax tips for all online business owners in 2008!

Merry Taxes 2007!

kamckinley — Tue, 04 Dec 2007 10:12:43 +0000

The 25th Tax Carnival: Merry Taxes 2007 is up at Don’t Mess With Taxes.

As I mentioned in my year end tax tips post, now is the time to do tax planning to reduce your 2007 tax bill. Kay continues this theme in the 25th tax carnival…

"
To paraphrase a beloved seasonal song, it’s the most wonderful tax time of the year!

That’s right. During this time of gift giving, make sure you get the best present of all — a lower 2007 tax bill.

If you wait until April to ask what you can do to lower your tax bill, the answer will be not very much!

But if you consider your tax situation and options now, before
the tax year is over, you still have a chance to keep money in your
pocket instead of putting it in Uncle Sam’s grasping hands.

Heck, you might even be able to save enough to pay off your post-Christmas credit card bills! So let’s get right to our holiday edition of Merry Taxes 2007!"

Click here to continue reading and to see my own contribution to the tax carnival!

The IRS and eBay: Tax Season Is Here

kamckinley — Sat, 08 Sep 2007 08:54:28 +0000

Ok – it’s not tax season yet, but I ran across Ina’s article, and wanted to share it, so here it is…

—————————

The IRS and eBay: Tax Season is Here

By Ina Steiner

AuctionBytes.com
April 03, 2005

It’s
that time of year – April 15 is looming. As if I wasn’t already
thinking about it, the Associated Press ran an article about eBay
sellers and whether they were required to report eBay income on their
taxes.

How do you know if you are required to report eBay income in your
taxes? Barbara Weltman, publisher of the "Big Ideas for Small Business"
newsletter and author of several books, including, "J.K. Lasser’s Small
Business Taxes 2005," said the rule as the tax law states it is that
you have to report all income from whatever source derived.

However, an eBay sale may not be income. She explained that if you
purchased a designer dress for $1,000 and sold it on eBay for $200,
that is a loss.

Whether your eBay selling is a hobby, and the frequency of your
sales, doesn’t matter, Weltman said. Whether it is income or not is
what matters.

Weltman said eBay sellers who do not report their income are missing
out on opportunities. It’s the right thing to do, and the law, but in
addition to helping you sleep at night, reporting income allows you to
report expenses, like Internet access fees and all expenses related to
eBay selling. There may be an opportunity to take a home office
deduction, she said. And, if you show a profit, you can put money in a
retirement plan.

Some people are concerned that eBay is cooperating with the IRS, making it easier for the IRS to come after Powersellers.

eBay spokesperson Chris Donlay said, "The IRS would need to provide
us with a subpoena for a specific individual before we would provide
any data. I don’t believe this is something that would be typically
done for a routine audit, though it theoretically could happen." He
said this is true for both eBay and PayPal.

Where do you learn how to report eBay income on your taxes? Weltman
suggested IRS Publication 334, "Tax Guide for Small Business" (http://www.irs.gov/pub/irs-pdf/p334.pdf). She said her newsletter

and book, "JK Lasser’s Small Business Taxes 2005" (http://www.amazon.com/exec/obidos/ASIN/0471683825/auctionbytescom) can also help.

If you have questions, talk to a tax professional. Additional resources are listed below.

IRS Industry/Profession pages (IRS said they will be adding a section on online auctions):
http://www.irs.gov/businesses/small/industries/index.html

"Taxes Part One: Do I Have to Report My Auction Earnings?" By Mike Batsimm
http://auctionbytes.com/cab/abu/y201/m03/abu0033/s03

"Taxes Part Two – How Do I Report My Auction Earnings?" By Mike Batsimm
http://www.auctionbytes.com/cab/abu/y201/m03/abu0034/s05

IRS Section for Small Businesses and Self-Employed
http://www.irs.gov/businesses/small/index.html

Is it a Business or a Hobby?
http://www.irs.gov/businesses/small/article/0,,id=99239,00.html

Publication 535 (2004), Business Expenses
http://www.irs.gov/publications/p535/index.html

Recordkeeping
http://www.irs.gov/businesses/small/article/0,,id=98575,00.html

IRS Forms and Instructions
http://www.irs.gov

Ernst & Young Tax Guide 2005
http://www.amazon.com/exec/obidos/ASIN/1593150199/auctionbytescom

eBay Radio Interview with Barbara Weltman, August 2003 (Scroll down)
http://www.wsradio.com/ebayradiobytopic/businessadvice.htm

eBay Radio Interview with Barbara Weltman, March 2005 (Scroll down)
http://www.wsradio.com/ebayradio/march2005.htm

UK Article: "Taxman has sights set on eBay traders"
http://business.timesonline.co.uk/article/0,,9559-1419932,00.html

"Australian Tax Office Investigates eBay PowerSellers"
http://www.auctionbytes.com/cab/abn/y04/m09/i16/s01

About the author:

Ina Steiner is Editor of AuctionBytes.com and
author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). She has a
background in marketing and research in the high-tech and publishing
fields. If you have story ideas, comments or questions, send them to ina@auctionbytes.com.

Do You Pay Taxes On eBay Income?

kamckinley — Wed, 05 Sep 2007 08:59:00 +0000

Another great article on eBay and taxes from Tim Knox…

—————————————-

Do You Pay Taxes On eBay Income?
By Tim Knox

Q: I read your last column about paying income tax on eBay sales if you are doing it as a business, but as someone who only sells on eBay occasionally I’m still confused if the IRS rules apply to me. Can you tell me more?
– Norman L.

A: Last week’s column on whether you were required to report income earned from eBay sales to the IRS sparked a number of additional questions and comments from eBay sellers who were hoping that I could somehow validate that their eBay activities were mere hobbies instead of actual businesses and therefore not susceptible to IRS taxation.

Several folks argued that just because their little eBay hobby generated a little cash, that didn’t make it a full blown business. It seems they consider the income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I’ve always been amused by folks who try to impress me with talk about their "little side business" but when the subject turns to taxes they suddenly refer to it as "my little hobby."

All kidding aside, the conclusion that I came to after reading each email was always the same: while you may think selling on eBay is just a fun pastime and the money you’re making is not reportable as income, depending on the circumstances, the IRS would probably disagree with you.

It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise, folks. If you’re going to come to the dance you have to pay the fiddler.

The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on Ebay.

In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 profit and therefore must report it as income and pay Uncle Sam his fair share.

In reality, if you are a casual seller who only sells a few items on eBay every now and then it’s doubtful the IRS is going to let loose an army of agents to collect taxes on the few bucks you make. However, if you consistently sell on eBay the IRS may deem your activities to be business oriented and you will be required to file a Schedule C and claim the income.

As mentioned last week, the IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business.

These factors include: – Do you carry on the hobby in a business-like manner? – Do you spend considerable time working on the hobby? – Do you depend on income from your hobby for your livelihood?

If the answer to any or all of these question is yes, you’re running a business, not carrying on a hobby, and you are responsible for paying taxes on your income.

What’s eBay’s take on all this? Naturally eBay is vehemently opposed to anything that might rock the eBay boat. eBay does not does not issue 1099 tax forms to sellers, nor does it report seller’s sales figures to the IRS.

Ebay considers itself merely to be a facilitator, meaning that they provide a marketplace in which buyers and sellers come together to do business.

Furthermore, under it’s current system it would be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actually gets paid by the buyer, so eBay has no idea how much money – if any – actually changes hands at the end of each transaction.

On the bright side, if you do sell on eBay as a business you can deduct a number of business expenses, including the cost of inventory, listing fees, shipping, envelopes, packing materials, etc.

You might also be able to deduct things like the purchase of a computer for business use, office space (even if it’s a home office), office supplies, and more.

Talk to your accountant if there’s any doubt as to whether you should or should not be paying taxes on your eBay earnings.

Here’s to your success!

Tim Knox
Entrepreneur, Author, Speaker, Radio Host
Check Out Tim’s New Radio Show! =>http://www.timknoxshow.com
Preorder Tim’s New Book =>Everything I Know About Business I Learned From My Mama
http://www.timknox.com/amazon/

Article Source: http://EzineArticles.com/?expert=Tim_Knox
http://EzineArticles.com/?Do-You-Pay-Taxes-On-eBay-Income?&id=40793

Ebiz Tax Tips » Uncategorized

What if You Receive Two Form 1099s Reporting the Same Income?

More Posts:

Tax Carnival #95: Tax Filing Season 2012

More Posts:

1099s Delayed This Tax Season

Related Posts:

Tax Questions Recording Ready

More Posts:

Recovery Rebate Credit for 2008

Related Posts:

Happy Tax Day!

More Posts:

Not just for eBay sellers!

More Posts:

Merry Taxes 2007!

Related Posts:

The IRS and eBay: Tax Season Is Here

Related Posts:

Do You Pay Taxes On eBay Income?

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