As a Bookseller Don't Risk Being Accused of Cheating on Your Taxes
Copyright (c) 2006 Michael Mould
Many online booksellers are of the opinion that their selling of books online falls under the heading of a hobby and they are not obligated to report the federal or state income from their bookselling endeavors, and while I am not a tax consultant or a tax lawyer, I believe many of them are grossly mistaken in their interpretation.
If you are selling books regularly through one of the online marketplaces and realizing a real profit from these sales, you are operating a business and you are required to pay an income tax on your profits.
If you are selling your own collection of books, you may still be obligated to pay an income tax on the sales if what you are selling them for exceeds what you paid for them or if you depreciated them previously.
I have read several places recently that the IRS has been looking into the online sellers of all kinds of products with a particularly keen interest in sellers having high volumes of sales.
It is only a matter of time before they require the online marketplaces to file paperwork that reports all of the proceeds paid to a seller and the burden to show how much of the proceeds is profit will be left on the seller when he/she files their tax return.
This is the norm for business, so you shouldn't really be surprised when it becomes a reality for online booksellers.
For this reason, as well as to be in compliance with current tax laws, it is essential that you keep good records of your sales, expenses, business use of your vehicle/home, and all other relevant tax information.
It sure is a lot easier to keep track of it throughout the year than to wait until the end of the year to bring it all together.
You don't even have to keep them well organized as long as you enter the data as it becomes available, i.e., when you sell your books, record the sales, when you buy books, record the cost of those books, when you pay postage, record what you paid, etc., you can then put everything in one big folder if you are inclined to mix everything up, or sort the sales and expenses according to categories you can later review.
Even if you have a medium sized online bookselling business, you will find yourself going through thousands of sales papers, hundreds of postal receipts, dozens of marketplace statements, and perhaps a few hundred receipts for the books that you bought to sell - if you wait until the end of the year.
It is much easier to enter them as you go in software designed to make life easier for you.
After you have done all these things, you still need to take deductions for the business use of your personal car and if you didn't keep a log, it is too late, this deduction which could amount to hundreds of dollars, can only be taken if you have a written record of the miles your car was used in your business.
The best part of income taxes is the more you have to pay, the more profit you made throughout the year.
It is illegal to evade paying your taxes, but you do have the right to avoid paying any more than you are required to pay.
Keep good records and avoid paying excess taxes unnecessarily.
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