Tax Advice…sort of.

OK, I am not really giving tax advice…but I am giving advice that is worth at least what you pay for it here…consider it advice to be proactive, consult your tax professional and all that disclaimer-y kinda stuff that usually goes in small print somewhere.

There has recently been an announcement that services like PayPal will begin issuing 1099 forms to those whose sales are above a certain threshold (600 bucks, if I understand correctly) I have seen in several online groups people complaining about this. I get it, nobody wants to pay more taxes. BUT. This could actually be a blessing in disguise, and it is very simple. And let’s be honest, we all knew this day was coming….Internet sales have been a tax target for years and even ebay began collecting state sales taxes a while back.

So, what to do?

First off, as soon as you can, go on your state’s website and buy a business license. They don’t cost much, and in some places they are doing them for free right now as a pandemic related effort to jumpstart local economies. Get one.

Next, get some sort of software to track all of your income and expenditures. Quickbooks or something like that will work fine.

Now this is the part that requires your ongoing effort: You are going to save every receipt for every part of whatever it is that you are doing. You had to get a box to mail whatever it was you sold?…save the receipt for the box, and for the postage. Oh, and don’t forget your mileage to go to the post office to send it. And the cost of the software and business license and YES, EVERY CENT IN FEES THAT EBAY OR PAYPAL CHARGES YOU……And the space in your home that you are using to conduct this business…..calculate the square footage of it vs the overall square footage of the home….this percentage of it and the percentage of all associated costs like utilities that make it happen are business expenses. Yes. Really. The software is good to keep it all categorized and added up and all legal and up to date with the tax codes and all that mess so you stay outta the clink whether if you file it yourself or give it all to your accountant to do for you. (my personal preference is the latter because even though I understand how this works and can handle the prep work and record keeping end of it, the process of actually filing taxes makes me feel physically ill even though I have absolutely no rational reason to)

Suddenly that 601 dollars is going into a schedule C against all those expenses and will likely come out as a net loss…..which will LOWER your overall tax bill. The difference is that because it is a business, you are now allowed to claim a bunch of little stuff that you never could before…..you just need to make the effort to keep track of it to do it.

And, if you were selling many thousands of dollars of stuff online each year you were probably doing all this anyway, or at least you should have been.

My point is simply that this whole fuss could become much ado about nothing if you act accordingly.

As for my friend who was bemoaning this a LOT and hopping mad that they’d send a 1099 if she took in more than 600 bucks……all I can say is I wish I had an extra six-hundred-and-one dollars to send you just for the heck of it. Because that is how my sense of humour works. 🙂