[raulus]

Welcome to the wild and wacky world of IRS examinations.

I am a CPA, and I've been through this a few times with some of my clients. My experience is that as long as you're not hiding stuff, you'll be okay. From what you've suggested above, it sounds like you haven't been hiding stuff. On the other hand, if you have been hiding stuff, then the whole process is going to get painful and ultimately very expensive.

As others have mentioned, your gain on sale for any given item is calculated as the sales price, less your selling costs (including eBay fees), less your cost to buy the asset (also known as your basis). Hopefully you filed the correct forms on your tax return to report your sales. And hopefully when you add up all of the sales reported on your tax return, it sums to the amount that eBay reflected on the forms 1099 that they filed with our friends at the IRS. If not, then the agent will probably start poking at those differences, trying to figure out why there's a difference, and whether that means that you have additional gains that need to be reported.

Part of the fun here will also revolve around whether you are a dealer, a collector, or an investor. Depending on which group you land in, your ability to deduct losses may be limited. And your tax rate will also be impacted.

I agree with the general sentiments here that if you're not a savvy tax professional, then now is the time to hire one. My guess is that without help, this audit will chew up an incredible amount of your time and introduce a lot of stress. In case you were thinking it, you probably don't want to hire me, as I'm far too expensive for this type of work, and generally don't do a lot of work with individuals.

Good luck, and hopefully it's a walk in the park. With any luck, at the National you'll be able to regale us with tales of how you beat the G-men at their own game.