Starting an Ebay Business

[Gusturd]

Originally Posted by timzcardz

The answer to your question is at the very top of the very page on this forum . . .

"Welcome to Net54baseball.com. These forums are devoted to both Pre- and Post- war baseball cards and vintage memorabilia, as well as other sports."


The business implications are about tax codes, not baseball cards.

And very seldom is there anything pinned to the top.

This thread is very much about baseball cards and I would think much more relevant than the "Worst type of Ebay guy" thread that's been very active for weeks now.

[RL]

irs....

https://www.irs.gov/businesses/small...-self-employed

[Gusturd]

Originally Posted by RL

irs....

https://www.irs.gov/businesses/small...-self-employed

Interestingly, If you click the "starting a business" link and then click "is it a business or a hobby", I believe the site provides obsolete information. Am I wrong about that?

[BobC]

Originally Posted by Gusturd

Interestingly, If you click the "starting a business" link and then click "is it a business or a hobby", I believe the site provides obsolete information. Am I wrong about that?

Though the article on the IRS site regarding if it is hobby or a business notes that it was written in May of 2017, it is not necessarily obsolete. If you compare it to the Taxslayer article written in January of 2021 that was referenced and also linked to earlier in the thread, you'll note that there are 9 bullet points given to weigh and consider in that Taxslayer article, which just happens to be the exact same number of questions referenced on the IRS site from four years earlier. That isn't a coincidence. The person writing the Taxslayer article just re-wrote what was on the IRS site already, changing wording so it didn't look like a blatant copy job. The IRS site article from 2017 hasn't been changed or updated since it was originally posted because what it says still reflects all the pertinent points and considerations that the IRS and its agents look at when trying to determine if someone has a business or a hobby. The problem is that the answers to all those points/questions aren't always simple yes or no answers.

There's also no definitive measurement, like saying if you answer yes to 5 or more of those points/questions that you are definitely a business, and if 4 or fewer yes answers that you definitely have a hobby. You have to look at and weigh the facts and circumstances for each indivual taxpayer and their unique situation to make the determination of if you have a business, hobby, or investments. It is definitely a subjective question, and not an objective one.

Also, over time as specific facts and circumstances change, you can go from having a hobby to a business, and vice versa. So you must continually review what you are doing as well.

There is one sort of safe harbor the IRS lets you rely upon in determining if you have a business or a hobby, regardless of those 9 points/questionsy they tell you to look at, and that is what is known as the "Hobby Loss Rule". According to this unofficial rule, if you claim some activity is a business and not a hobby and in any 3 out of the last 5 years you reported a net taxable profit from that activity, the IRS will pretty much concede it is a bona fide business for federal income tax purposes.

[Gusturd]

Originally Posted by BobC

Though the article on the IRS site regarding if it is hobby or a business notes that it was written in May of 2017, it is not necessarily obsolete.

These are excerpted from the IRS article. Are these still accurate? I thought the rules changed this in 2018?

2. Allowable Hobby Deductions. Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

3. Limits on Hobby Expenses. Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

4. How to Deduct Hobby Expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.

[BobC]

Y

Originally Posted by Gusturd

These are excerpted from the IRS article. Are these still accurate? I thought the rules changed this in 2018?

2. Allowable Hobby Deductions. Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

3. Limits on Hobby Expenses. Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

4. How to Deduct Hobby Expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.

The gist of those comments and the articles was I thought more towards the question of if you had a business or a hobby, and that was what I was referring to when I said they weren't really obsolete. Those determining factors haven't changed. You are correct in that the tax law changes in 2018 did away with miscellanous itemized deductions, which is where hobby expenses would have been reported and deducted. So the tax change effectively made those hobby expenses totally non-deductible. Good news is that is only in effect from 2018 through 2025, after which that particular change expires with most of the other 2018 tax law changes.

[Aquarian Sports Cards]

Originally Posted by Gusturd

This thread is very much about baseball cards and I would think much more relevant than the "Worst type of Ebay guy" thread that's been very active for weeks now.

Kind of contradictory, no?

[Gusturd]

Originally Posted by Aquarian Sports Cards

Kind of contradictory, no?

Not really. Just goes to show people here are interested in topics on the fringe of the hobby as well. But there are a few "by the book" members who are easily puckered and compelled to "yell at the clouds" rather than just ignoring a topic that doesn't interest them. Every forum has them.