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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7880
Experience:  15years with H & R Block. Divisional leader, Instructor
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Ive been on SSDI for 8 years for a neurological disorder.

Resolved Question:

I've been on SSDI for 8 years for a neurological disorder. This is my only income.

Last year (2012) I started dabbling with selling on Ebay. Not regularly and ended up just under $4000 gross sales and showing a loss of at least $1000. Approx 25 sales.

The paper trail is; purchase from auction site (not ebay) using my personal CC. Selling on ebay with payments going thru Paypal and goi ng into my personal checking acct. then paying my CC with that.

Around tax time this year I was educated abouit the reporting of sales from ebay and filing Sch. C, hobby/ business etc ... . I am at $10k in Gross sales and showing a loss of at least $1700 on 62 sales.

I am going to stop selling on ebay at this time.

-Not worth the hassle dealing with the Sch. C
- Can't make money between shipping/ebay/paypal fees
- Sometimes I can't walk to drop off packages.



My question (s)...

Am I able to call it a hobby and would that benefit me?
or...
Should I amend 2012 with a Sch. C and go into 2013 carrying the loss over and dissolving the :"business" ?
or..
Shouild I ignore 2012 and and just file Sch. C for 2013?

or...
Should I just stop and not file any Sch. C's?

and what penalty for not filing a Sch. C even though they are losses?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Robin D. :

Hello and thank you for using Just Answer,
If you called it a hobby you would not be allowed to claim all expenses. In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business.
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year. You have shown a profit for the past 2 years. f an activity is not for profit, losses from that activity may not be used to offset other income.

If you did not file and report the activity in 2012 then you need to amend the 2012 return. You said you had a loss, I am not sure if you mean that after expenses were counted your Net income was a negative $1000 or you had true expenses that totaled $1000.

Robin D. :

If you claim that the activity was a hobby and you had a true loss of $1000, you could not carry that forward but you woudl still be required to amend and report the activity.

Robin D. :

Hobby expenses are shown on Schedule A.

Robin D. :

You should not ignore the activity and the reporting that is required whether you have a hobby or a business.

Robin D. :

You need to amend your 2012 and report the income then show your expenses either way. It is always better to make your own declarations of income then to have the IRS question you later.

Customer:

Filed with TurboTax. Amend with them also or get an acct at this point? Will it tell me penalties?

Robin D. :

Most penalties are based on the amount of tax owed. You can use TT to amend the return. If there are penalties the system would advise on the amount.

Customer:

Thank you for your excellent responses.

Robin D. :

You are most welcome

Robin D. :

You may wish to continue with the activity so reporting now is easier.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7880
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D.
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15years with H & R Block. Divisional leader, Instructor