Taxes and Craig's List

InternationalMama · Jan 12, 2010

I hope this is the right forum to post this!

Ever since I started researching strollers I see people talking all the time about selling stuff on Craig's List, sometimes even for a profit. I'm wondering: If you sell something on Craig's List (or any way to sell a used item) do you have to declare that as income when you file your taxes? How does that all work? I'm curious if anyone has experience with this.

freqflyer · Jan 12, 2010

If you make a profit you are supposed to claim the profit as income.

rochelle · Jan 12, 2010

From a non-business tax form point of view
Alot of people sell items on craigslist, flea markets and garage/yard sales.
If you are selling all your excess items, there would be some that you make a loss and some that you might make a profit. The loss would probably be more than the profit unless you are only selling very few items.

For business, all items depreciate once its bought even if its never used. The depreciation is often booked as losses and if the item is sold, the fetching price is booked as profit.

InternationalMama · Jan 12, 2010

So for an individual selling things it only counts as income if you make a profit. That makes sense.

ketchupqueen · Jan 13, 2010

And only income over a certain amount actually needs to be reported as such since under a certain amount it is not taxable.

crunchierthanthou · Jan 13, 2010

ketchupqueen said:
And only income over a certain amount actually needs to be reported as such since under a certain amount it is not taxable.

any idea what that "certain amount" is? I may have made a bit reselling last year.

ketchupqueen · Jan 13, 2010

Well, my husband says technically you should report all income. But it's very hard to track, and the only way they would even notice is if you are audited and they check your bank statements and see lots of extra income. And yes, your losses can off-set your income.

He says the IRS is not interested if you make less than $600 in income from a source, and won't argue over it. (And he does tax resolution so he sees how the IRS works up close and personal every day.

)

Chrissy · Jan 14, 2010

Since most people deal in cash on CL it would be hard for the IRS to track your income unless you're taking that cash and putting it into the bank. If you take the $40 you made and go spend it at the grocery store, it is untraceable.

InternationalMama · Jan 14, 2010

Chrissy said:
Since most people deal in cash on CL it would be hard for the IRS to track your income unless you're taking that cash and putting it into the bank. If you take the $40 you made and go spend it at the grocery store, it is untraceable.

But if you do transactions via Paypal I think they can see those records just like they could look at any bank account.

I thought income is only not taxable from a total income perspective, so if you make less than, say $10,000 (I'm not sure of the exact number) it's not taxable, but if you already make over that amount in your daily job all the extra income you would get would be taxable even if it was only a small amount from each source.

I'm asking from a legal perspective. I realize that the IRS is unlikely to care about pretty much anything I do.

Chrissy · Jan 14, 2010

InternationalMama said:
But if you do transactions via Paypal I think they can see those records just like they could look at any bank account.

Why would you do CL transactions via PayPal? 99% of the things I sell on CL are sold in person, and people pay in cash.

InternationalMama · Jan 14, 2010

Chrissy said:
Why would you do CL transactions via PayPal? 99% of the things I sell on CL are sold in person, and people pay in cash.

Oh, I was thinking bigger than just Craig's List when I wrote that, like Diaper Swappers, Stroller Swap and Ebay (as examples) where people are often mailing things and accepting money from people they don't ever see in person. But yes, I see that for Craig's List specifically it would be harder to track sales.

vonfirmath · Jan 23, 2010

That's what is called the "black market" Chrissy. And if the IRS catches you, they will go after you.

MOST of what is sold on craigslist, though, is not for a profit. So it isn't an issue.

I know people used to think they didn't have to worry about income of stuff they were selling on ebay but the IRS took notice and started auditing these people running a business off of ebay.

Yes, you need to claim all profits you make selling stuff. And the amounts you get from jury duty, from baby sitting, from "renting" out your car, house sitting, etc. It is all income. Some of it is just easier for them to track than other. I guess it comes down to "What do you do when nobody is watching?"

Chrissy · Jan 23, 2010

I never said ANYTHING about defrauding the government of their tax money.

crunchierthanthou · Feb 19, 2010

bumping this up, because I'm trying to keep better track this year.

How do you all count it when you resell items you originally bought for personal use?

example, I bought a Marathon for $145 summer 08. I sold the cover right away for about $60. I got a replacement cover for $25. I used the seat off and on for about 1 year. I just sold it for $140. Do I count that I was into it for $110, and it's a $30 profit? or did I really make more than $30 if you account for any depreciation over the year I used it, which would be somewhat ambiguous?

vonfirmath · Feb 19, 2010

I believe you only get depreciation on business items. But you might want to call IRS and ask them about this.

freqflyer · Feb 19, 2010

Here is the response from a tax professional:

There is no depreciation since the “stroller” was not capitalized and depreciated. She has a profit and technically speaking (according to the Internal Revenue Code) she should report the amount gained as ordinary income since the item in question was personal property. The method of determining gain is questionable: Paid $145 and immediately sold the cover for $60. How much of the $145 should be allocated to the cover. Let us assume 10% is allocated to the cover – thus when she sold the cover there was a gain of $45.50 or $60 less basis of $14.50 (10% of 145). When she later sold the stroller for $140 her basis in the stroller would have been $130.50 or $145 less $14.50. A gain of $9.50.

mommy-medic · Feb 19, 2010

And only in the USA will the government spend $249,346.82 going after that $9.50

To clarify- rolling eyes at the gvt, not any poster here.

freqflyer · Feb 19, 2010

Totally agreed. I got some eye rolling for asking too. Personally, I wouldn't bother to report it but I wanted to answer the question.

crunchierthanthou · Feb 19, 2010

freqflyer said:
Here is the response from a tax professional:

There is no depreciation since the “stroller” was not capitalized and depreciated. She has a profit and technically speaking (according to the Internal Revenue Code) she should report the amount gained as ordinary income since the item in question was personal property. The method of determining gain is questionable: Paid $145 and immediately sold the cover for $60. How much of the $145 should be allocated to the cover. Let us assume 10% is allocated to the cover – thus when she sold the cover there was a gain of $45.50 or $60 less basis of $14.50 (10% of 145). When she later sold the stroller for $140 her basis in the stroller would have been $130.50 or $145 less $14.50. A gain of $9.50.

Hmm, I never thought to break it up like that. Maybe I should say that Britax sells new covers for $70+, so the $60 was actually a loss.

I know it's really nitpicky. You can go ahead and roll your eyes at me. I'm just trying to figure out how much I make with buying and reselling. I'm pretty sure I break $500/year, but I don't know by how much. Mostly, I'm trying to justify my Target clearance stalking habit.

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