2012 IRS Tax preparation for eBay sellers

By Tony Lam

  • SumoMe

While waiting for the Form 1099-K from Paypal, you can start early the 2012 IRS Tax preparation with relevant Paypal reports. Actually, Paypal has all the reports ready now for users to download and prepare 2012 IRS Tax Filing.  Here is my steps in preparation for the figures that required to be filled out at Form 1040 Schedule C.

2012 Financial Summary at Paypal

This is a new report provided by Paypal for your tax purpose. You can download the report at Paypal>History>Reports>Summary reports>2012 Financial Summary. The download copy is in pdf format and therefore it is impossible to check the details or edit. I believe the figure in Form 1099-K will be the same. If you want to reconcile data in the financial summary, you can download all activities of transactions to get the details for comparison.

2012 tax preparation

Paypal report download – All activities in 2012

The details of all Paypal transactions in 2012 are now available for download. At the Paypal page, click  History>download history>set dates from 1/1/12 to 12/31/12>choose Tab Delimited – All Activity. If Status shows completed, check the Recently Download Log and click “download Log”. You will then get a txt file. In order to work on the data in Excel format, you need to use Microsoft Excel editor to open the txt file. The Excel file contains all the transactions’ data including payment received, payment fees, and online payment sent. You can use the data to reconcile 2012 Financial Summary, making use of Excel Pivot table. Below table shows the set up for Excel Pivot Table. My calculation shows less than 0.6% error in the figures between two reports. The minor difference may be due to reversal, eBay voucher or disbursements. Paypal’s support confirmed me that  the Financial Summary data is correct but declined to disclose detailed calculations.

Pivot table setup for 2012 financial summary

Pivot table for payment received and fee

Online payment sent pivot table

Interpretation of payment received & online payment.

Please be careful about the payment received. It includes the sales tax that the sellers collected on behalf of BOE. It is not part of the income. As to the online payment figure, it consolidates all the expense that is necessary for the sales. They may be the expense of  Ebay shipping, eBay FVF, subscription fee, software /tools, office supplies, packaging materials, shipping insurance etc. The expenses are required to be categorized as required by Form 1040 schedule C.  In the coming article, I will show you how I categorize the expense items recorded in Paypal, other credit cards and bank accounts, based on sole proprietorship with cash basis accounting method.

Category: Online Business

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