We regularly see the question posed in eBay seller groups, on facebook, and on instagram, "Do I need to report my reselling income to the IRS?" Yes, yes you do. In fact, if you sell on eBay for the purposes of making money, the IRS will classify your hobby as a business, no matter how you view it (also, if you buy with the intent to resell you need a business license, but that's a story for another time). Whether you make a single dollar or a whole lot (or even lose money), you run the risk of getting audited and owing the IRS if you fail to file.
Our first year as part time sellers led to an atrocious tax season for us. We had just acquired a business license after already selling for a few months, and had no idea that we needed to be keeping all our receipts (let alone tracking our driving miles, etc). After hours of digging crusty receipts out from underneath our car seats and combing through our bank statements, we were finally pretty confident that we got it right. However, the experience left me with two lasting impressions: If you have to pay taxes on something, you sure as heck better take it seriously if you want it to be worth it, and you also better keep meticulous records. The real reason that we encourage people to keep records is not simply to protect themselves from auditing, but to maximize their deductions. Most small business miss out on thousand of dollars worth of deductions because they are simply unaware and don't track them.
So what were we to do for the next year? We found several eBay trackers online, but didn't really feel like paying for them if we weren't going to be selling full time. So I took an afternoon, and created my own in Excel. It wasn't pretty, it wasn't all-powerful, but it was functional and kept track of our sales/expenditures. Now that we've scaled-up our business operations several times, our simple tracker sheet has been left in the dust. If you're just starting out, however, and don't feel like paying for one, we contend that our EASY Tracker may be one of the best available!
- New sellers who want to keep track of their eBay inventory (and its locations). The inventory list is searchable in the tracker using the eBay item number, so you should never have the issue of lost inventory again!
- Sellers who need a lightweight way to track expenses. While we highly recommend using an online expense tracker that links to your bank account (see our recommendation below), we still use a very similar number listing system when we number and file our receipts.
- Anyone who needs a free inventory spreadsheet that can be modified for their purposes.
While there are better (more expensive) options, it's free, it's here, and you have nothing to lose by checking it out!
Tax tips for eBay Sellers & the best free tracking tools for small businesses:
What is tracked, improves.
The app that we use and recommend to all our reselling friends is MileIQ. It is free (if you track less than 40 individual drives per month), easy to use, tracks drives automatically (so you don't have to remember to start it), and creates official drive logs that are A-OK with the IRS! So if you see us swiping right, we're just categorizing our drives.