In the good old days, the IRS seemed to be unable to deal with the concept of online auction sales.
Alas, the good old days are over.
If you are an EBay seller, you have to report your earnings.
In many ways, the government is like a baby bird.
It is always hungry.
It always has its mouth open.
It expects someone else to feed it.
In this case, the food is tax money.
You and I are responsible for coming up with the grub to keep little baby happy.
A few years back, the government didn't really have a grasp of how the web worked.
It really didn't understand that there were certain niches where a lot of money was changing hands.
One area in particular, auctions, were completely overlooked.
Unfortunately, this is no longer the case.
The government wants its chunk of change and knows you are out there.
I mention EBay, but you should be clear that you have to report earnings from any auction site.
Obviously, EBay is the biggest.
So, what are the rules? The issue with online auction revenues generally comes down to profit and loss.
If you are making money doing it, you need to pay income taxes on the earnings.
If you are losing money because you are essentially having a garage sale, to wit, selling for less than you bought the items, you do not.
Of course, the IRS doesn't let you claim any loss from this, but who said the government was fair? If you have a full blown internet auction business going, you are going to have to report the earnings on your personal taxes.
This typically will be done through Schedule C, which is designed for people with sole proprietorships.
If you formed a business entity for your auction efforts, taxes should be handled as they normally are for that particular business entity, to wit, file corporate or partnership returns.
Obviously, there can be variations the above situation depending on the nature of your business.
The point of this article is to simply let you know the IRS has discovered auction sites and expects you to report any earnings.
If you fall into this niche, you might want to sit down with an accountant to get your situation sorted out.