For those that sell cards mainly for profit, do you....

tommyfro21 · Aug 27, 2010

Do you simply file your taxes as a hobby or do you do yours as a business?

I am heavily debating on entering back into the hobby, but purely to buy and sell. I've learned a few things and purposely stopped collecting for a while and it's helped me think about what I would like to do pertaining to cards.

Some of you sell thousands and probably do it as a business while others just file as hobby.

Any advice on the best way to get started selling "for profit" regularly? Should I create it as a business for more deductions? Should I create an inventory...etc? Hopefully you get the idea of what I am thinking about here. Just want to make sure I start off right if I decide to do this again.

Thanks in advance for the help...

tommyfro21 · Aug 27, 2010

Lots of looks but no advice...dang. :|

daveyou · Aug 27, 2010

i think they're all hiding in case you work for the irs

dave

pigskincardboard · Aug 27, 2010

How much is your other income? Honestly, since no one knows what you're currently at, it's going to be utterly impossible to tell you whether or not you should incorporate.

If you plan on losing money and a lot of it, there's no harm in incorporation, except that you won't be able to use your current personal line of credit, or credit ranking, to purchase. It's not that expensive to start and it's a bit of a pain in the butt depending on your state, I'd imagine. There's also mandatory filings and you have to keep up with your books.

Talk to a local attorney, which of course will cost you more than the incorporation itself, about the cost/benefits of an LLC depending on your state.

tonsofcommons · Aug 27, 2010

Pigskin, what the hell are you talking about?? :^) Incorporation? For a small business? LLCs?

Man, it's just a sole proprietorship/Schedule C.

I file my taxes every year with the cards as a business.

I keep an inventory and deduct EVERYTHING I possibly can. Typically claim a loss.

That reminds me, time to pull reports to see how I have done this year.

Just keep track of EVERY little expense/trip to walmart/trip to the post/supplies/etc.

tommyfro21 · Aug 27, 2010

tonsofcommons said:
Pigskin, what the hell are you talking about?? :^) Incorporation? For a small business? LLCs?

Man, it's just a sole proprietorship/Schedule C.

I file my taxes every year with the cards as a business.

I keep an inventory and deduct EVERYTHING I possibly can. Typically claim a loss.

That reminds me, time to pull reports to see how I have done this year.

Just keep track of EVERY little expense/trip to walmart/trip to the post/supplies/etc.

Is it really that simple (I know, not really that simple, but you know what I mean)?

Basically just keep records of everything and file as a Schedule C?

I seriously doubt I will be raking in thousands of dollars, but I wondered about the deductions. What about buying a card for $500 this year, but selling it 3 years down the road? Wouldn't you have to have an inventory for that to be worth it deduction-wise?

tonsofcommons · Aug 27, 2010

The $500 card that you buy today sits in your inventory number until you sell it.

Example.

You have 0 cards today= $0 inventory

Tomorrow, you buy a $100 card.= $100 inventory.

You make no sales or purchases from now until December 31st

December 31st rolls around and you still have that card= ending inventory of $100. You can not deduct the cost of that card this year.

January 3, 2011, you sell the cards for $125. you then buy 5 more cards for $200 each in 2011 for a total of $1000, and you sold 2 of them for $300 each.

You would take your beginning inventory at 1/1/11------------ $100
Add any purchases you made in 2011------------------------- $1000
Deduct your ending inventory at 12/31/11-------------------- -$600
Cost of goods sold (amount you can expense)--------------- $500

So you would then take your sales-------------------------- $725
Deduct your Cost of goods sold---------------------------- -$500
Deduct any other expenses (mileage to shows, postage, etc) -$200
Net Profit (loss)------------------------------------------- $25

You would then claim this on the main page of your 1040 as income.

If you show a profit for the year, you must pay SE taxes on that amount.

loftlife · Aug 27, 2010

tonsofcommons said:
The $500 card that you buy today sits in your inventory number until you sell it.

Example.

You have 0 cards today= $0 inventory

Tomorrow, you buy a $100 card.= $100 inventory.

You make no sales or purchases from now until December 31st

December 31st rolls around and you still have that card= ending inventory of $100. You can not deduct the cost of that card this year.

January 3, 2011, you sell the cards for $125. you then buy 5 more cards for $200 each in 2011 for a total of $1000, and you sold 2 of them for $300 each.

You would take your beginning inventory at 1/1/11------------ $100
Add any purchases you made in 2011------------------------- $1000
Deduct your ending inventory at 12/31/11-------------------- -$600
Cost of goods sold (amount you can expense)--------------- $500

So you would then take your sales-------------------------- $725
Deduct your Cost of goods sold---------------------------- -$500
Deduct any other expenses (mileage to shows, postage, etc) -$200
Net Profit (loss)------------------------------------------- $25

You would then claim this on the main page of your 1040 as income.

If you show a profit for the year, you must pay SE taxes on that amount.

I have been having trouble sleeping until I read your post... nap time

tonsofcommons · Aug 27, 2010

How do you think I felt typing it?

HAHA!

Roy Birchler · Aug 27, 2010

tonsofcommons said:
The $500 card that you buy today sits in your inventory number until you sell it.

Example.

You have 0 cards today= $0 inventory

Tomorrow, you buy a $100 card.= $100 inventory.

You make no sales or purchases from now until December 31st

December 31st rolls around and you still have that card= ending inventory of $100. You can not deduct the cost of that card this year.

January 3, 2011, you sell the cards for $125. you then buy 5 more cards for $200 each in 2011 for a total of $1000, and you sold 2 of them for $300 each.

You would take your beginning inventory at 1/1/11------------ $100
Add any purchases you made in 2011------------------------- $1000
Deduct your ending inventory at 12/31/11-------------------- -$600
Cost of goods sold (amount you can expense)--------------- $500

So you would then take your sales-------------------------- $725
Deduct your Cost of goods sold---------------------------- -$500
Deduct any other expenses (mileage to shows, postage, etc) -$200
Net Profit (loss)------------------------------------------- $25

You would then claim this on the main page of your 1040 as income.

If you show a profit for the year, you must pay SE taxes on that amount.

I have a couple of questions.
Do you have a business license and does your state have a inventory tax?
I am only asking because I have been thinking about this for awhile.

tonsofcommons · Aug 27, 2010

Roy Birchler said:
I have a couple of questions.
Do you have a business license and does your state have a inventory tax?
I am only asking because I have been thinking about this for awhile.

I do not have a business license. I don't have a lot of sales tax because 99% of my sales are over the internet and not to people in Iowa.

Iowa does not have an inventory tax.

pigskincardboard · Aug 27, 2010

tonsofcommons said:
Pigskin, what the hell are you talking about?? :^) Incorporation? For a small business? LLCs?

Man, it's just a sole proprietorship/Schedule C.

I file my taxes every year with the cards as a business.

I keep an inventory and deduct EVERYTHING I possibly can. Typically claim a loss.

That reminds me, time to pull reports to see how I have done this year.

Just keep track of EVERY little expense/trip to walmart/trip to the post/supplies/etc.

edit: Did not see that you only planned on making small sales.

[strike:1tme333h]haha, you can only embezzle so much as an sole proprietorship. Many small businesses should be incorporated. You can't deduct losses from your personal income, but:

a) you can pay yourself whenever you want and you can essentially name your dog as a shareholder and dump income into his kibble until you've reached the tax limit.
b) absolutely no worries ever about losing the house.
c) small business tax credits are nice and taxes are deferrable.[/strike:1tme333h]

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