2012 IRS Tax preparation for eBay sellers – Part 2

By Tony Lam

  • SumoMe

In the previous article, I explained how to get the detailed transactions of payment data from Paypal reports.  Here, I am going to share how I consolidate and classify the business expense as an eBay seller.  I tried to provide my best knowledge and believed to be correct. However, it is not intended as tax advice and may not applicable or suitable for your specific circumstances or needs. You may need to consult a professional tax adviser if necessary.

business expense

My business entity is sole proprietorship and the accounting method is cash basis. Employing cash method,  I count the income and expense only when the money is actually paid or spent, and it reduces my workload of keeping track of inventory at year end. I am using Turbo Tax Home & Business software to file my business income and expenses.  It contains step by step guides to let me go through all expense categories in IRS Form 1040 schedule C.  To prepare the expense data, I will follow the steps as below.

1)      Define a rough guideline for the classification of current expense as required by Form 1040 Schedule C, and amend and complete the table later on.

expense guideline

2)      In the “payment sent” Excel table from the Paypal transaction report, I added a column “Expense Cat.” and enter the expense category in each expense item and saved as my master expense spreadsheet ( items, expense cat, amount, data source)

3)      To make sure all the expense related are covered, download payment records from vendor websites and the spending reports from credit card accounts/checking accounts. Cut and paste related expense items into the master expense spreadsheet.  For some questionable expense items, check the guidelines in Turbo Tax or consult professional tax and then complement guideline in 1). Also, you may check out the Outright Tax Center or here to get more information about business taxes.

master expense spreadsheet

4)     To ensure no errors, spend a few minutes to double check all your spending reports for any overlooked or duplicated expense items. I always find some items to be corrected in my re-checking.  Finally, use Excel pivot table to consolidate the total expense in each expense category and ready for the data entry in Turbo Tax.

expense pivot table

Category: Online Business


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