Topic: Member Workshop: Accounting Do's & Don'ts for the eBay User
Host: keepmore Date: Wednesday 09/19 Time: 12:00 p.m. to 1:00 p.m. Pacific time Location:Workshop Board
Description: Please join Phyllis Wischer, Business Coach of Certified Solution Provider SageFire, Inc., in this informative workshop as she outlines some of the common mistakes small business owners make that can end up costing them literally thousands in overpayments to the IRS each year. Members will also learn how to use the new KeepMore.net solution, the "Plain English", online accounting solution for their eBay business.
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My name is Phyllis Wischer and I am the Lead Business Coach at SageFire, Inc., the makers of KeepMore.net. We are a Certified Solution Provider that specializes in simple accounting solutions for eBay users and small business owners like you; our online accounting solution, KeepMore.net, makes it simple to keep track of your business while maximizing your tax benefits.
I'm excited to be here today to tell you about Accounting Do's & Don'ts for the eBay User. With my 20 plus years as an accountant helping small business owners with their accounting, bookkeeping, tax and payroll needs, I hope I can answer all your specific tax or business related questions. I do not, however, provide tax advice.
And this brings us to our first "Do": Adopt a simple Record Keeping System.
Later in this workshop I will introduce you to the solution we offer, KeepMore.net, but regardless if you adopt our solution, use a system that will help you to quickly, accurately, and securely capture all of your business income and expense activity.
And make sure your system is truly easy-to-use, or you won't use it. The philosophy is to minimize your time spent on record keeping, so you can maximize your time selling!
It is against the law to not report all income to the IRS. I have heard that some eBay users think that because they consider their eBay selling a hobby, they don't need to report it. Not true!
Although we don't recommend it, if you decide to identify your eBay venture as a hobby, you can not have the intention of making a profit. (Businesses make money, not hobbies.) You should still deduct hobby expenses from all hobby income, but you can't use hobby losses to offset other, non-hobby income.
DO: Maximize your net income by deducting every allowable expense as a business expense.
You can and should deduct every expense that is reasonable, ordinary, and necessary for your business.
For example, perhaps you started your eBay venture buy selling an almost new CD-changer that you found at a tag sale last weekend. You bought it for $25 and sell it for $62. For tax purposes, your expenses or cost basis include the cost of the item, the costs of listing the item, the mileage (at $0.485 per mile) you drove to and from the tag sale, your shipping and handling expenses and any other direct expenses associated with the sale.
After all of that - let's say that's a profit of $15. It's a lot better to pay tax on $15 than on $62!
For each expense, be sure to fully document the details to show why this expense is part of your business. NOTE: this is particularly important for meals and entertainment expenses - the IRS always looks a little more carefully at this expense category.
- When did the transaction take place?
- What method did you use to pay for the expense (bank, credit card)?
- Who did the money go to?
- What did you receive in return for the money spent?
... and of course, what did you pay for the expense?
Our best recommendation here is to use an online record keeping solution that will automatically backup and store your records. But at the very least, it is your responsibility to store these (now well documented) records for at least the current tax year and 3 prior years.
NOTE: The 3 prior year limit assumes no fraud, where fraud is defined as underreporting your income by over 25%. If the IRS discovers fraud, then all years are open for audit.
If you haven't started yet, start good record keeping practices today!
Perhaps the most under reported business expense by very small business - automobile mileage. Even the eBay user needs to leave their home every so often...
- Did you drive to a tag sale (even if you did not find items that you wanted to buy)?
- Did you drive to your friend's house to go through their basement for inventory items?
- Did you drive to the bank or post office or UPS store?
- Did you drive to the airport to fly to eBay Live?
One of the big no-no's is to guess at mileage at the end of the year. You should be tracking mileage in a detailed mileage log that tracks date, miles, and purpose.
And no matter what you do, be sure not to round your business miles: i.e. 12,000 miles - a big red flag.
DO: Always know your net income and how profitable your transactions are.
Profit means you owe tax. That's OK if you know how much you owe throughout the year, but don't go out of business because you're too successful, make too much profit, and forget to set aside the dollars that you need to pay the IRS.
Also, by having a system that helps you know the details of your business and lets you report on how your business is performing, you can focus on what makes you the most money.
With the right data, you can ask these questions:
- Should I sell more antique lamps or hot video games?
- How much tax will I owe in April 2008 due to success in June 2007?
- If I was planning on buying that new laptop, should I do it in December to offset my profit?
- Should I upgrade my shipping service? How much did shipping cost me in May?
COGS can be confusing, but it shouldn't. Use this simple rule if you purchased items to re-sale on eBay: COGS is the actual price of the item that you are selling at the time that you paid for it. The IRS does not care about 'current value', they care about actual cost.
If the item you are selling is a personal item that you have used and now wish to sale, get a current estimated value of an exactly duplicate or very similar item that is selling today. Where can you get that value? eBay of course! There are some great tools to help you get this information. You might want to check out Terapeak (www.terapeak.com), HammerTap (www.hammertap.com), or Vendio (www.vendio.com).
Some collectables like comics, antique toys and such may increase in sale price significantly resulting in increased profits.
Meanwhile, some aging electronics lose value each month which may result in a loss or write-off for your business, offsetting other profits.
The bottom line? Whatever you do, don't miss this tax deduction!
Track your spouse's auto mileage for all miles driven for your business as well. This year you will deduct $0.485 for every business mile; that's $485 of deductions for every 1,000 recorded.
KeepMore.net Tax Tip #8
You can write off a portion of your Vacation costs if it is combined with a legitimate business trip and you follow all the rules and regulations related to such expenses.
KeepMore.net Tax Tip #14
Greeting cards used for business purposes are 100% deductible.
KeepMore.net Tax Tip #15
Business gifts are 100% deductible but are limited to $25.00 per person per year.
For the complete Tax Tip list, email our support team at help@KeepMore.net.
By now you may be thinking, "How do I do this and not become an accountant?"
That's where KeepMore.net comes into play. First, here are three things I want you to know about KeepMore.net:
Easy-to-use: Accounting software is for accountants. KeepMore.net is different. It is built for the business owner and puts everything in Plain English. No "Credit" or "Debit", all you need to know is whether money went in or out of your business. Think of it as accounting for the rest of us.
Online: eBay users know the power of online! Access anytime, anywhere, no software to download or install and data backup automatically.
Integrated with eBay: KeepMore.net has an "automatic import from eBay" function. So once activated, KeepMore.net will automatically import your bought and sold items from eBay. With no effort, your data's there for you.
Capturing all of your income and expense within KeepMore.net is fast and simple. You can quickly enter any transaction, you need no accounting knowledge to enter it and you have an instant financial dashboard about your company's performance!
You simply click and choose for each transaction [Highlighted in Yellow] and the 5 W's for each expense are properly recorded for the IRS - click submit, and you're done! Headache eliminated.
The Year-To-Date Bottom Line [Highlighted in Red] gives you an instant snapshot of your business and your profitability - now you know your business and your profit!
It can really be that easy for you to be in control!
Wow, I am going to have to print out this workshop. Most of what you have mentioned I already do. One thing I find most helpful is to record all sales and purchases the same day they occur in my QBpro program on my computer. Then file them. If I don't they tend to pile up and my office gets to cluttered.
We have also made it simple to import your eBay bought and sold items. After giving KeepMore.net permission, it will directly import the transactions, break out the different income and expense items for each transaction and allow you to rapidly categorize your eBay activity.
The pop-up screen shows all of the transaction details, such as listing fees, paypal fees, and shipping charges.
The best part? At the end of the year, with just one click, you have completed tax worksheets that you can either hand to your accountant or plug the numbers into your self-file program - bingo, your taxes are done - saving you time while helping you keep more of your hard-earned money.
After all, it's Keeping More that counts.
Whether you are a Sole Proprietor, S Corp, or LLC, KeepMore.net will provide you the reports you need to be successful.
Speaking of the end of year, have you heard about YES! for the eBay business owner? For the first time ever, YES! gives you an entire year's* worth of eBay transaction data - plus loads of reporting on your bought and sold items - in one concise place! Here is an example of what you will see if you get KeepMore.net's YES! report.
Does keepmore.net also intergrate with prostores? I am considering getting a prostore and while I do use QBP2006 it doesn't always import things quite they way I want them.
At this point, we've gone through all the content. I know I've fed you a bunch of information in a short amount of time, but feel free to take your time reading through it.
Be sure to ask any questions that you may have. We're here to help answer them!
Hello! Great Workshop with a Wonderful service you offer!
I was looking at your website and see the $19.95 a month price. Is that a flat rate or are there different rates for different plans or only one set price?
Does your program allow you to export your ebay sales information to Quickbooks? I like the feature of being able to import a year's worth of transactions. Thanks
danna: the $19.95 is a flat, monthly fee. For eBay users, the price is discounted to $14.95/month. We also offer a discount ($149) for users who pay for an annual membership instead of a month to month subscription.
linaalcantara: This is a good question. The best answer would be to ask your tax advisor how they would like for you to handle the cost basis. They will be signing off on your tax return and need to feel comfortable with the numbers on the return. Another way, which may benefit an antique, is to research what a very similar or exact item is selling for.
I have not sold many items yet on ebay. I doesnt seem to make sense to use a monthly paid program yet. I was hoping you were going to tell us newbies something on the line of how to set up a simple recording just to keep the records in place until it is the right time to get a paid program. I am not savvy to even the very basics of a simple recording of what I am suppose to do. Could you give me a simple way to just do a recording with the right categories and a transaction or two with a lot of heavy accounting? Sure would appreciate it. Or what would a simple program be even if its not downloading my transactions. I hope I explained that right?!? thanks.
sportsblanketsonline: I assume that you're referring to our YES program. YES allows you to get a report of all of your transactions for a single year. The report can be downloaded in a couple different formats:
Portable Document Format (PDF) Microsoft Excel Spreadsheet (XLS) Comma-Separated Values (CSV)
I have to admit, I don't know a whole lot about Quickbook's functionality (it's too complex for me), but if you can manipulate the data out of one of those formats and into a QB acceptable format then the answer is YES.
Please note that if you sign up for a full year of KeepMore.net ($149), then you get your 2006 YES Report free!
rlhenryjr: Most new small business owners say exactly what you stated. They believe that they are too small for any type of a business tracking system. However, the IRS states that as a business owner you must keep good records (this is particularly true if you a showing a loss). If you do not maintain good records, the IRS could label your business as a hobby and limit your losses. Besides our program there are a lot of inexpensive paper products available at any office supply store. But you need to remember that with a program like our KeepMore.net, we will back up and store your records for you. You will always have access to your records and the if you purchase the annual package for $149.00 you are actually paying just a little over $12.00 a month to have a product that is simple to use and gives you peace of mind that your transactions are safe. And, most importantly, we have the direct import of all your eBay bought and sold itmes. Also, the cost of KeepMore.net is 100% deductible.
well, if there's no more questions, I guess it's time to wrap this up...
In closing, I would like to recommend that you work with an accountant or tax advisor to insure that you take advantage of the most current and applicable tax regulations for your business.
We had a great time today and thanks for tuning in. Please feel free to email us at the link below if you have further questions.
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