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The Basics of Taxes for Online Sellers

August 20, 2018

Online Income Taxes for Online Sellers

Just remember while you're raking in that online cash: taxes for online sellers can be mandatory.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

The internet is thriving now more than ever, which is good news for online sellers. If you’re a seller on eBay, Amazon or another online retail platform, you’re reaping the benefits of society’s online fixation. Just remember while you’re raking in that online cash: taxes for online sellers can be mandatory.

You need to pay income tax on profits from sales if they surpass a certain threshold. Beginning in 2011, online businesses such as Amazon are required to file 1099-K forms for those who earn beyond $20,000 in gross sales or have 200 transactions in a calendar year using their platform.

Have you only sold a few lower-priced items on a whim this year? Maybe you posted a Beanie Baby (and not even a rare one!) on eBay and got some cash for your troubles? You don’t need to worry about taxes for online sellers if you only sell occasionally and don’t make a substantial profit from your sales. And did you sell items for less than their purchase price? Then you need not report the sales on your return.

Who Needs to Pay?

Do you have consistent or recurring sales? And do you run the activity like a business with an intention to make a profit? Then you need to pay income tax on your sales!

The income you earn is considered ‘income from self-employment’. Therefore, you must file Schedule C, Profit or Loss from Business of Form 1040. You use Schedule C to report profit or loss from a sole proprietorship. If you don’t run a registered corporation, then you must use Schedule C to report your profits or losses.

Sales Taxes for Online Sellers

Along with income tax, you also need to pay sales tax. Especially when you sell in multiple states, you are responsible for collecting and remitting sales tax in each state. And the complex rules of each state can be wildly confusing.

Want to ensure you’re not making unnecessary payments or unknowingly neglecting your sales tax responsibilities? Our SalesNexusSolverTM is designed to analyze your sales tax responsibility and validate awareness of where in the U.S. you have nexus and the corresponding requirements.

Paying Estimated Taxes Quarterly

If you haven’t been paying taxes on your online income, you may pay estimated taxes quarterly to avoid IRS penalties and collection actions for non-payment of taxes. If you think that you’ll owe more than $1,000 in taxes in a year, the IRS prefers that you pay your taxes every quarter. The deadline for making quarterly payments for this quarter will fall on September 15. The remaining three deadlines will fall on January 15 (2019), April 15 (2019), and June 15 (2019).

To pay your estimated taxes quarterly, you may electronically file and pay your taxes through the Electronic Federal Tax Payment System (EFTPS), or fill Form 1040-ES and mail it to the IRS. You may also pay taxes over the phone.

If you have any questions about taxes for online sellers, contact one of our tax professionals who can help you optimize and save on taxes throughout the year.

7 Things S Corporations and Partnerships Need to Know for the Tax Deadline

February 16, 2018

7 Things S Corporations & Partnerships Need to Know for the Tax Deadline

If you’re a business owner, you know taxes are a part of the gig. Let’s unpack what S Corporations and Partnerships need to know for filing.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

If you’re a business owner, you know taxes are a part of the gig. And for S Corporations and Partnerships, the spring tax deadline is even earlier than for most (hint: it’s soon). Let’s unpack what these business entities need to know for filing by March 15.

1. Filing the correct forms

S Corporations file taxes using Form 1120S while Partnerships file Form 1065. Spouses who own an unincorporated business that is not treated as a Qualified Joint Venture also file Form 1065. File a Schedule K-1 of your designated return to report on information for each partner/shareholder, including the income, losses, deductions, and credits. This information is also reported on your separate, individual tax returns.

2. When Partnerships don’t have to file

If there was no income or expenses for the Partnership, you don’t need to submit Form 1065.

3. Avoiding the Failure to File penalty

We get it – sometimes, it can be hard to hit those tax deadlines. By filing on time by March 15, you can avoid penalties and interests later down the road. The IRS will issue a “Failure to File” penalty of $200 for each month the return is late.

4. Applying for an extension

Don’t panic if you’re not ready to file. You can submit a completed Form 7004 by March 15 to request a six-month extension of your business taxes (putting the due date at Sept. 17). Note that this will not extend your time to issue Schedule K-1s.

5. Filing electronically

Filing electronically is preferred by the IRS. In fact, Partnerships with more than 100 partners are required to e-file their forms. The same goes for S Corporations with $10 million or more in total assets or that file at least 250 returns a year.

6. Dodging an IRS audit

Just like filing individual taxes, businesses must ensure their returns are accurate to avoid audits and penalties. If you do find yourself or your business in a rut with IRS issues, a tax professional can help solve it.

7. Asking for help

If you need help preparing your return or figuring out your tax-related documentation, it’s easy to get help from a tax preparer. These professionals can help file any type of tax forms for S Corporations and Partnerships and meet quickly approaching deadlines.

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