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It’s no question that online selling platforms are booming. Platforms like Poshmark are giving people more options for buying and selling online.
Many people engage in platforms like Poshmark as means to clean out their homes and still make a little money from it. Some treat it as a hobby. Others view selling online as a viable personal business.
If you’re one of the latter, then there are things to think about in regards to accounting and tax liability for your online business. The hard part is knowing where you fall and what your responsibilities are. At what point are your activities considered a business? Do you have to report earnings on your tax return? What do you have to do for record keeping ?
Enter Kreithchele Barnard of Kreithchele’s Academy!
What’s the difference between selling as a hobby and selling as a business ?
The IRS defines a hobby as an activity you engage in for sport or recreation, NOT for profit.
Selling as a business means you’re doing so for profit.
I’m a hobby seller, do taxes matter ?
The IRS requires that people report their taxes for any earnings, even if it’s a hobby – you have to report your income in 1040 line 21, other income.
You can deduct expenses BUT ONLY if you itemize and then it’s subject to the 2% of your adjusted gross income limitation.
As a business, you can deduct all expenses, but you have to take the pertinent steps to become a business. I outline these steps in my online course!
What are my responsibilities as a business ?
As a business, you have to renew licenses and permits, report and pay sales taxes, report and pay income taxes.
You report your income/activities on Schedule C of the 1040. If you’re an LLC / S-Corp there are other requirements. I also cover this in my online course in more detail!
Should I use a tax professional for filing and accounting ?
This is totally up to you! If you don’t understand or feel comfortable with the process, then yes. However, there is software like Turbotax that make things easy.
Where can I learn more?
I offer an online course on Accounting and Taxes for Your Fashion Resale or Boutique Business! It covers everything in detail, including the steps in becoming a business and your tax liability as one. I also talk about inventory, sales and expenses and how to account for them.
The course is available now! I’m offering a special discount for all thismommyisreal.com readers. Click on this link to register and receive your discount!
Thank you Kreithchele for the information! It helps to know that there are online resources for all of us entrepreneurs out there. Whether you sell on Poshmark or another platform, the course will definitely help. Don’t forget to sign up via the linkto receive your discount !