11-13-2011, 09:56 PM
Janit wrote:
Doing taxes on sales can be complex. To do it properly, you need to keep accounts for inventory held, cost of goods sold, etc, and calculate your profit accordingly. If you don't hold inventory, but sell immediately, the calculation is simpler.
Yes, technically if you have inventory you must go to the accrual (instead of cash) method of accounting. For occasional sales of unique items, I would assume that's not necessary.
If your sales are very small, the IRS will likely not care if you consider this sideline to be a "hobby" that you don't report. If your gross sales are above $20K, then the IRS definitely does care.
I think the IRS will still want you to report any "hobby" income as "extra income," but you might not have to file a schedule C (unless you want to deduct expenses). Get the IRS publication on business rules.
/Mr Lynn