If you are concerned about taxable income and your consignment selling, finding answers can be a bit challenging. I wanted to share a quick link to the IRS.gov fact sheet about Reporting Auction Income and the Tax Gap. Here is an excerpt from that document that outlines what is taxable. ----------------------------------------------------------------------- The tax gap,
or the amount of tax that goes unpaid each year, results from taxpayers
underreporting their taxable income. Fortunately most people want to
pay their fair share of taxes and many simply need a better
understanding of their obligations. What’s Taxable All income from auctions, traditional or online, and consignment
sales is generally taxable unless certain exceptions are met. This
income is usually considered either “business” or “ordinary” income. In
certain circumstances such income can qualify for capital gain
treatment. There are also some exceptions where income can be excluded
from taxable income. Business income resulting from an auction or consignment sale is
subject to the same taxes as the income of any other retail or service
business. That may include income tax, self-employment tax, employment
tax, or excise tax. A retail or service business owner must include this
income in his or her business income. A person must report a gain from a sale whether he or she operates a
business or not. A reportable gain is the income above the original cost
or basis of the item. These gains may be business income or capital
gains. Income resulting from auctions akin to an occasional garage or yard
sale is generally not required to be reported. However, there may be
exceptions. If an online garage sale turns into a business with
recurring sales and purchasing of items for resale, it may be considered
an online auction business. Some people sell a product or service online as a hobby. This income
generally must be reported and deductible expenses are limited. The
deductions cannot total more than the income reported and can only be
taken if deductions are itemized on Form 1040, Schedule A, Itemized
Deductions. ----------------------------------------------------------------------- You may also want to check out: Business or Hobby? Answer Has Implications for Deductions Disclaimer: The information provided on this site is not legal or
accounting advice, but general information on
issues commonly encountered by consignment sale owners & participants. You should always seek the advice of a qualified professional.
Note: You should ALWAYS consult a tax professional with questions! This post will just help you become more informed and ask the right questions!
Many people don’t realize the income they earn from auctions and
consignment sales may be taxable. This fact sheet, the 16th in the Tax
Gap series, will help taxpayers better understand what income they are
required to report and what deductions they may be entitled to take.
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loan and it opens new opportunities.