Tax Question

[just bob]

Suppose you knew a person that sold knives and a few misc. items last year that totaled about $20K and was getting a 1099 this year and had no receipts at all for any of his items. I know there are a lot of deductions to be had and I can get that information, but what I'm wanting to know is what is a reasonable net profit on $20K? If you say about $2K or about 10% is that reasonable or will that draw a red flag and cause an audit? From the members that run aapk stores or are big ebay sellers what percent net profit have you experienced from your efforts?

[just bob]

I should have added this in the op. I found this and it was kind of what I was going by.

I’ve been selling on eBay and Amazon for over 9 years, I was always working with commodities so the margins were not exceptional but from my experience anything above 10% net margin is very good.

[jlw257]

Bob, if you’re getting a 1099 you have count all of it as income, hope you have receipts showing how much you paid for them.
The IRS love to find these and will Red Flag this because most people won’t have the records to back it up.

Edit. Why would you get a 1099 for selling your knives? You only get a 1099 for work done or for commissions.

[peanut740]

Larry,Ebay I have been told sends out 1099s of you sell more than 200 items and have more Than $20000 in sales.Someone correct this if it is wrong.

[terryl308]

If you got a 1099, it is all considered income, I think, but you had better get a good tax guy to tell you, I know from my farming days, that 1099's get turned into the IRS. good luck, Terry edit/ I think you will need proof of what the items cost you, then you can deduct the cost from the income.

[Mumbleypeg]

If you got a 1099, it is all considered income, I think, but you had better get a good tax guy to tell you. good luck, Terry

Yep, I believe that’s right. You need the receipts to show what your expenses/costs were to create that income. See your CPA (his/her fee is deductible). With the new tax law now in effect, your standard deduction is significantly increased. For many people who used to itemize deductions, the standard deduction will now be a better deal.

Ken

[jlw257]

Found this on internet

I guess you’re independent contractor for EBay

[just bob]

Back to square one here. The question is not what to do after you get a 1099. The question is if you have ran an AAPK store or have been a small time ebay seller what percent profit did you net after expenses were taken out? From what I can find that tends to run 5% - 15% for most. What is your experience? You don't have to give your numbers - just your percentage.

You can look it up for yourself, but the chances for an IRS audit are extremely low. I intend on doing the right thing, but will have to estimate in some cases. My assumption is no one has 100% receipts and most, in some situations do estimate.

[Sharpnshinyknives]

Back to square one here. The question is not what to do after you get a 1099. The question is if you have ran an AAPK store or have been a small time ebay seller what percent profit did you net after expenses were taken out? From what I can find that tends to run 5% - 15% for most. What is your experience? You don't have to give your numbers - just your percentage.

You can look it up for yourself, but the chances for an IRS audit are extremely low. I intend on doing the right thing, but will have to estimate in some cases. My assumption is no one has 100% receipts and most, in some situations do estimate.

You are getting a 1099K not a regular 1099. I got one also. I don’t give tax advice, I’m required to say that. I don’t think anyone can answer your question accurately. It all depends on how you acquired your knives. If you are selling from your own collection then you are probably making a minuscule profit or maybe even a loss. If you bought a collection and know what you paid for it, then you can keep track of the amount of profit you made on the entire collection.
Don’t forget that all the fees that are paid, eBay or AAPK fees, shipping charges,if you included free shipping on your items, supplies for shipping and your office are a deduction in addition to the cost to you of the items.
I learned from Gary Harbour that if you include free shipping on your items, then you can deduct that from your total. If you don’t include free shipping then it isn’t a deduction. It made me change my mind about free shipping.
SSk

I added this info after the original post. Here is the IRS website for 1099k https://www.irs.gov/businesses/understa ... our-1099-k .

[just bob]

Back to square one here. The question is not what to do after you get a 1099. The question is if you have ran an AAPK store or have been a small time ebay seller what percent profit did you net after expenses were taken out? From what I can find that tends to run 5% - 15% for most. What is your experience? You don't have to give your numbers - just your percentage.

You can look it up for yourself, but the chances for an IRS audit are extremely low. I intend on doing the right thing, but will have to estimate in some cases. My assumption is no one has 100% receipts and most, in some situations do estimate.

You are getting a 1099K not a regular 1099. I got one also. I don’t give tax advice, I’m required to say that. I don’t think anyone can answer your question accurately. It all depends on how you acquired your knives. If you are selling from your own collection then you are probably making a minuscule profit or maybe even a loss. If you bought a collection and know what you paid for it, then you can keep track of the amount of profit you made on the entire collection.
Don’t forget that all the fees that are paid, eBay or AAPK fees, shipping charges,if you included free shipping on your items, supplies for shipping and your office are a deduction in addition to the cost to you of the items.
I learned from Gary Harbour that if you include free shipping on your items, then you can deduct that from your total. If you don’t include free shipping then it isn’t a deduction. It made me change my mind about free shipping.
SSk

I added this info after the original post. Here is the IRS website for 1099k https://www.irs.gov/businesses/understa ... our-1099-k .

I AM NOT ASKING FOR TAX ADVISE. PLEASE READ THE OP BEFORE POSTING AN ANSWER. THANK YOU

[bestgear]

Hi Bob - I believe what you are saying is that:
(a) you know your gross sales amount from the 1099 your receiving
(b) you don't have receipts for the cost of the goods you sold
(c) you don't have records or receipts for your business expenses
(d) you want to know what's a reasonable net profit margin from the formula (a-(b+c))/(a)

So if (for example) you had the following scenario for 2018:
(a) $20,000 1099 income
(b) $12,000 estimated cost of goods
(c) $5,000 estimated business expenses
(d) (20000-(12000+5000)) = $3,000 net profit or 15% net profit margin

If I'm understanding you correctly as illustrated above, then I think this would be representative of a situation that would not draw the attention of an IRS examiner with the one exception being the missing records or receipts for the cost of goods and business expenses. The good news is that those records or receipts don't get filed with your return but may be needed in the unlikely event of an audit. I think you would need to get into single digit net profit margins or even net losses to show up on an examiners desk.

Helpful?

[just bob]

Right that is exactly the type of information I was curious about, but I was wondering what experiences others had in their dealings. Is 5% - 15% typical of net profit or have you ran lower or higher? No need to go into dollar amount involved. Just the percentages that you've worked with. Thank you for posting that. Don't need to know the deductions or the process involved - just the percentage. I'm only curious about this.

[Sharpnshinyknives]

Right that is exactly the type of information I was curious about, but I was wondering what experiences others had in their dealings. Is 5% - 15% typical of net profit or have you ran lower or higher? No need to go into dollar amount involved. Just the percentages that you've worked with. Thank you for posting that. Don't need to know the deductions or the process involved - just the percentage. I'm only curious about this.

Bob, I think I understand your question fine. To give you a more concrete answer I crunched the numbers this afternoon on my eBay sales and my AAPK sales. Because I sold knives from a collection I bought years ago and knives from my own collection on AAPK, my profit was 32.6%. But my eBay profit was negative 5%. My volume was much higher on eBay but the higher selling fees and what I sold caused me to have a loss. I over paid for a collection of Keen Kutter knives I acquired last year. I actually made a little over what I paid on that collection but when you subtract eBay’s 10% and PayPal fees and shipping costs, I lost about 10% on that collection. So again, it comes back to how you acquired the knives you sold and which venue you sold on.
You may actually have a tax loss.
Maybe that’s too much detail and I am sorry if I am missing your point again.
SSk

[Dragline]

Right that is exactly the type of information I was curious about, but I was wondering what experiences others had in their dealings. Is 5% - 15% typical of net profit or have you ran lower or higher? No need to go into dollar amount involved. Just the percentages that you've worked with. Thank you for posting that. Don't need to know the deductions or the process involved - just the percentage. I'm only curious about this.

Bob, I think I understand your question fine. To give you a more concrete answer I crunched the numbers this afternoon on my eBay sales and my AAPK sales. Because I sold knives from a collection I bought years ago and knives from my own collection on AAPK, my profit was 32.6%. But my eBay profit was negative 5%. My volume was much higher on eBay but the higher selling fees and what I sold caused me to have a loss. I over paid for a collection of Keen Kutter knives I acquired last year. I actually made a little over what I paid on that collection but when you subtract eBay’s 10% and PayPal fees and shipping costs, I lost about 10% on that collection. So again, it comes back to how you acquired the knives you sold and which venue you sold on.
You may actually have a tax loss.
Maybe that’s too much detail and I am sorry if I am missing your point again.
SSk

Thanks SSK, you try to help the dude out but he didn’t dig what you were saying

[mrwatch]

While I cannot help, We did antique shows, and was in a antique mall many years. Bought many things at garage sales and flea markets, auctions etc. As soon as possible like back in the car, I would have my wife start a list of what we bought and paid for it. Auction sales usually give you a ticket per each item. Pay when leaving. most any antique show seller would give you a receipt often with their complete information. I used a universal receipt book. As said keep a list of shipping, commissions, the antique mall gave us the price tag plus a monthly print out. I knew dealers with out records slide by saying they had a 50% mark up. Like a $10 knife cost you $5. Not sure where that is in the tax laws? Back in the 1970's people said you can have three garage sales a year with out reporting it. True?