Quote:
Originally Posted by MooseDog
Art - it's really not as hard as you would think. The main thing is intent...if you just set up a business for selling your collection over time, there is a (very small) chance you can run into problems in terms of hobby vs. business in the eyes of the IRS...now if you still continue to buy and selll, with the INTENT of making a profit, you're good so long as you show a profit in 2 of 7 years (I think, could be old info).
Basic steps:
1) Inventory your collection as it will be your starting inventory for your business. Record cost and market value for everything you intend to sell (no you don't have to do each individual common card but you can group things like (1956 Topps Baseball Commons 55 @ $1.50)
2) Spend a little money for an hour or two consultation with an lawyer, accountant or tax expert, in order of preference. Around my area it's easy to find a lawyer/CPA maybe not so much in yours. Explain what you want done, have them help you set up an accounting system and what records you need to keep. They can also explain what paperwork you need, what deductions you can take, etc. Best of all any fees they charge you are a business expense!
3) Keep hobby assets and business assets separate. Likewise, have a separate checking account for business.
The better records you keep and the more you "act" like a business the less likely you'll run into any issues.
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Thanks for this. I will definitely engage a professional before starting. A couple things I was wondering:
1) I have kept a spreadsheet for about the past 10 years of what i've spent on most of my significant purchases. Can I use that to inventory my collection? I have virtually no receipts except for maybe old invoices for items won from auction houses. For items not on the spreadsheet, can I estimate what I paid?
2) If I only sell on ebay, do I have to pay self employment tax? That seems to be another sizable chunk out of the pie and makes me wonder what's left for me.