Is Your Ebay Activity A Business Or A Hobby?
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A hobby is an activity that you do {simply|merely|just|basically link because you love doing it, but it may also earn you some income. That income must be reported on your tax return, even if it is just a hobby.
Some hobbies may actually be businesses, which would allow you to deduct expenses against any income you earn. On the flipside, some businesses may only be ...
Many eBay sellers start out as a hobby, or just to clean out their closets. Many times, this hobby can lead to a profitable business.
A hobby is an activity that you do simply because you love doing it, but it may also earn you some income. That income must be reported on your tax return, even if it is just a hobby.
Some hobbies may actually be businesses, which would allow you to deduct expenses against any income you earn. On the flipside, some businesses may only be hobbies, in which case you would only be able to deduct expenses up to your earnings.
How can you tell if your activity is a business or a hobby? Basically, it's whether you have a profit motive or not.
Learn what link factors the IRS looks at when determining whether a business is a business or a hobby. The IRS looks at nine factors to determine if you are trying to make a profit, or if you're just enjoying a hobby:
Whether you run the activity in a business like manner
How much time and effort you put into making a profit
Whether you depend on the activity for your livelihood
Whether your losses were due to conditions beyond your control
Whether you changed your operating methods to improve profitability
Whether you or your advisors have the knowledge needed to carry on a effective business
Whether you successfully produced a profit in comparable activities in the past
Whether the activity makes a profit in some years, and how much
Whether you can anticipate to make a profit in the future from the activity
Here are some issues you can do to show that you are indeed operating a business and not just a hobby:
Get an employer identification number (EIN)
Apply for a business name
Have a separate checking account to be utilized for business tr ansactions
Hire an accountant to maintain your books
Produce a business strategy
Maintain track of the time you invest every week doing business activities
Seek the advice of other business owners or advisors to assist make your business profitable
To reduce the income tax on your eBay sales, you ought to treat your business like a business, not a hobby (even if it is just a hobby!). By following the suggestions in this lesson you will be able to deduct your business expenses and maintain your tax liability to a minimum.
To your monetary link achievement,
