How To Value Your Ebay Inventory For Tax Purposes

How To Value Your Ebay Inventory For Tax Purposes

How to​ Value Your Ebay Inventory For Tax Purposes
One of​ the​ questions I​ hear most often from eBay sellers is​ how to​ value inventory for purposes of​ preparing their tax return,​ especially if​ it​ was purchased at​ a​ garage sale,​ or​ if​ you​ used the​ item before you​ sold it​ on​ eBay.
For new items that you​ purchase for inventory,​ make sure you​ keep all of​ your receipts .​
In addition,​ you​ might want to​ keep a​ spreadsheet with a​ description of​ the​ item purchased,​ date,​ and the​ purchase price,​ including shipping costs.
For items that you​ purchase from a​ garage sale or​ thrift store,​ you​ may not get an​ itemized receipt from the​ seller .​
So,​ I​ would encourage you​ to​ write up a​ receipt (carry a​ small notepad with you​ while garage sale shopping or​ thrift store shopping),​ while you​ are still at​ the​ garage sale or​ thrift store .​
Record a​ description of​ the​ items purchased,​ date,​ amount paid,​ and the​ location .​
Ask the​ seller to​ sign the​ receipt you​ wrote up.
The hardest inventory to​ value is​ inventory that you​ used for personal use before you​ sold it​ on​ eBay,​ such as​ clothes you​ bought for your children that they have outgrown .​
Before you​ sell these items on​ eBay,​ you​ should research similar items to​ see what they have sold for on​ eBay or​ similar auctions .​
For tax purposes,​ the​ value of​ your inventory is​ the​ average selling price on​ the​ similar items you​ researched .​
Print out your research,​ and be sure to​ enter the​ average selling price on​ your inventory spreadsheet,​ in​ case the​ IRS comes knocking.
If you​ clean out your garage and list the​ items on​ eBay for sale,​ you​ cannot claim a​ loss on​ their sale .​
The amount used as​ your cost basis in​ inventory converted from nonbusiness use can be no greater than its fair market value at​ their time of​ conversion .​
You also must be able to​ prove the​ property’s cost or​ you​ may be denied any basis (you’ll have to​ report the​ entire proceeds as​ gain).
The most important thing to​ remember is​ to​ keep good documents .​
If the​ IRS audits you​ and you​ can't provide documents showing how much you​ paid for an​ item,​ they may claim that your cost basis is​ $0,​ which means you​ will pay tax on​ 100% of​ the​ sale price instead of​ just paying tax on​ the​ profit.
To your financial success,​
Kristine McKinley

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