| Even though you may want to declare your eBay | | | | hobby or a real business, after they perform an audit. |
| selling as an eBay business, there is the chance that | | | | If you treat your eBay business as a business and |
| the IRS will treat your eBay selling as a hobby even | | | | during an audit the IRS decides that you’re business |
| though you declare it as a business on your tax return. | | | | is a hobby, than you can no longer have the business |
| The IRS will treat you as a business if the business | | | | deductions or losses you may have claimed. |
| makes a profit for three consecutive years, including | | | | Even if you made money from your eBay business |
| the present one. For businesses that are more recent | | | | last year, you can still treat your eBay selling as a |
| or businesses that make money in some years and in | | | | hobby, but you will have to report your income (profit) |
| the next lose money, the IRS uses a “fact and | | | | from selling on eBay on the ‘Other Income’ line |
| circumstances” test to determine if they should | | | | of Form 1040 and you will have to pay taxes on that |
| treat you like a business. They look at factors like… | | | | money if you don’t have a hobby related losses to |
| • How organized are you in keeping your business | | | | offset the profit (or you don’t have enough |
| records and accounts | | | | hobby-related losses to offset your income entirely). |
| • If you have formed a legal business entity like an | | | | A good source where you can find a lot of training |
| LLC (limited liability corporation) for your business and | | | | material about how to start your eBay business is by |
| you are complying with the laws that apply to those | | | | going to Worldwide Brands. They have the biggest |
| legal entities. | | | | wholesale data available on the internet and they are a |
| • If you work a regularly amount of hours in your | | | | certified eBay Solutions provider. |
| business | | | | Make sure you talk with a certified CPA or lawyer. |
| • Whether the activity is, by its nature, overly | | | | These are not financial advices. You should treat them |
| pleasurable or fun. Basically you decide if you want to | | | | only as an entertainment. We do not assume any |
| treat your eBay business as a hobby or as a business | | | | responsibility on your losses or gains. |
| for tax purposes. But the IRS decides if you are a | | | | |