Income Tax - declaring ebay income to Revenue Canada

[urban_legend_101]

I would like to hear what everybody does about declaring ebay income for income tax. This is assuming your don't have an official business, but need to declare as personal income.

I am very worried about the next tax time. To really legal sell stuff I should have some sort of business license, shouldn't I? How should I declare my ebay income? I mean if I'm audited, they will look at my bank and see a large amount of cash going in and out every month. It will look like 100% profit and they will want to tax it as that, but really most of that goes back into expenses like inventory and shipping. I know business probably don't have to income tax on expenses.

So What can I do? Is there a way to fill out the tax form like put in so and so for extra income and just deduct the expenses? I know I should see a consultant but I'm based over seas. Maybe when I come home for xmas.

What do you think? What do you do?

[whoscloset]

Keep all your expense records if you plan to claim anything!

You should be keeping a set of books just as if you were a business. Technically you are a sole-proprietor and if the government comes knocking they are going to want to see these records.

I didn't keep them properly the first year I "did" ebay, but quickly bought Quickbooks and started keeping everything perfectly. The odds of the government auditing you within your first 5 years of business are really high when you are a work-from-home sole-proprietor.

Monique

[vesivus]

Definitely keep records, if you expect to claim any write-offs. Monique is absolutely correct.

And you are, technically, a business. The government doesn't require a business license -- they just require a name-search at any registry. This costs about $50, and "voila". You're now a business. It is that easy. If the municipality discovers you have a business, however, there will be a big fine and they'll shut you down. This is what a business license is for -- and it varies from city to city.

But, if you expect to get the "benefits" of a home business (writeoffs against your income), you better start treating yourself as a business.

John

[recped]

Registered or not you are a business if you buy and sell goods or services with the intent to profit (even if you don't).

If you are ONLY selling "personal effects" up to a certain limit CRA don't care (not sure of the amount, possibly $2000) and actually under normal circumstances people take a loss when selling personal goods (example, you are moving across the country and you sell all your furniture etc.)

There are a number of guides available on the basics of operating a small business and how to properly do the required accounting.

In the most basic terms it good like this...

Sales less cost of goods less expenses equals taxable income, there is a line on your tax return where you report your Gross Sales and Net Income, you need to support these claims with detailed financial statements. Don't be scarred by the "detailed" part, a small sole proprietor business could have financial statements on a couple of sheets of paper.

In reality accumulating the numbers is the only way you really know if what you're doing is worthwhile, always interesting to calculate your real hourly pay just to see how working at McDonalds while not as "personally rewarding" might be better financially!

Ben
"What else could I do? I had no trade so I became a peddler" - Lazarus Greenberg 1915

[auctiondropnship]

Talking as a person whom has been audited due to Ebay
Keep all your records

It's not fun having to explain Ebay to them
Todd

[phoebescollectables]

There is a very good thread here on registering for GST and/or PST. http://forums.ebay.ca/thread.jspa?threadID=100022996&tstart=200&mod=1119398177737 There are pros and cons to registering for GST if you don't have to.

If you are a business you should be seeking the advice of a tax accountant. There may be additional expenses that you can deduct that you should be aware of. If you work out of your home you may be able to deduct some of your utilities, mortgage interest and property tax. You may also be able deduct some computer costs, internet access and car expenses. It depends on how you run your business.

Remember when it comes to accounting there are only 3 types of people in the world. Those who can add and those who can't!

Michael

[muminlaw]

Michael, that last line still makes me laugh!

Good advice in this thread - I can't think of anything to add except, maybe, set aside a few hours every month to keep the bookkeeping up-to-date - that way it's not such an onerous task. (can you tell bookkeeping is NOT my favorite part of business?)
. Glenda
To Golf or Not To Golf? What a stupid question!