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cmnkb8
New member
Hello all,
As most of you know,the IRS has imposed on Paypal for 2011, the requirement to issue 1099 forms for anyone with 200+ transactions AND $20K gross payments received - and I will be one of those, as I buy singles to flip (and some cases to rip and flip). Although for the past 2 years, I've been in the red (too many bad cases, not enough good singles), 2011 is the first year I expect to make a profit (cutting back on cases and focusing more on singles).
I've been pondering about registering with the IRS to get an EIN as a sole proprietorship and reporting my business expenses to offset any net income I make. Also, I would register with my home state (NJ) for a resale/tax license to buy cases from dealers at wholesale (of course, the resale license comes with the stipulation that I must collect sales tax from NJ Ebay buyers, which would in theory lower my sales to NJ buyers, but that's another discussion).
Now, here's some things about the related income taxes as a business that I've wondered about (CPA's please chime in):
I know that income from cards sold for investment profit are considered capital gains. At least for the average collector. If I become a business (in this case, an Ebay dealer) after I register for an EIN, can I still report the profit from cards sold (both singles and cards from case breaks) as capital gains?
Or does this profit now become ordinary income, and become subject to self-employment tax to boot?
OR, can SOME of the cards I sell - the singles, be considered capital gains, while the sales from case breaks are considered ordinary income?
Lastly, if I CAN report my sales as capital gains, can I still deduct business related expenses on a Schedule C AND file a Schedule D for the capital gains portion for the SAME cards? (Meaning deduct expenses related to the sale of the cards as a business, i.e ebay fees, mileage to PO, postage, etc. while still considering them capital gains.)
Thanks for any insight.
As most of you know,the IRS has imposed on Paypal for 2011, the requirement to issue 1099 forms for anyone with 200+ transactions AND $20K gross payments received - and I will be one of those, as I buy singles to flip (and some cases to rip and flip). Although for the past 2 years, I've been in the red (too many bad cases, not enough good singles), 2011 is the first year I expect to make a profit (cutting back on cases and focusing more on singles).
I've been pondering about registering with the IRS to get an EIN as a sole proprietorship and reporting my business expenses to offset any net income I make. Also, I would register with my home state (NJ) for a resale/tax license to buy cases from dealers at wholesale (of course, the resale license comes with the stipulation that I must collect sales tax from NJ Ebay buyers, which would in theory lower my sales to NJ buyers, but that's another discussion).
Now, here's some things about the related income taxes as a business that I've wondered about (CPA's please chime in):
I know that income from cards sold for investment profit are considered capital gains. At least for the average collector. If I become a business (in this case, an Ebay dealer) after I register for an EIN, can I still report the profit from cards sold (both singles and cards from case breaks) as capital gains?
Or does this profit now become ordinary income, and become subject to self-employment tax to boot?
OR, can SOME of the cards I sell - the singles, be considered capital gains, while the sales from case breaks are considered ordinary income?
Lastly, if I CAN report my sales as capital gains, can I still deduct business related expenses on a Schedule C AND file a Schedule D for the capital gains portion for the SAME cards? (Meaning deduct expenses related to the sale of the cards as a business, i.e ebay fees, mileage to PO, postage, etc. while still considering them capital gains.)
Thanks for any insight.