So I checked out everything tha thad to do with the business acount, I was going to upgrade and then I was like...TAXES...eff that noise so hard. I saw that tax documentation needed to be filled out and I'm like dude I want to sell some cards on the side not open a bloody small business.

Can anyone tell me (that is currently selling cards) how involved the business side of things is? What is required for paperwork, taxes, etc etc. I would like to be a seller but not if that complicates my next year's tax return.

Thanks in advance!



*EDIT* - I did check out the FAQ but it only (understandably) addresses the deckbox side of things, I'm looking for info on the paypal side of things.

Nobody has any thoughts here?

I think most sellers, myself included, simply ignore taxes. No, that is not a good idea, but until the federal government comes up with a way to enforce it people will continue to ignore it. Also, IIRC, sales tax only applies to sales made to a buyer within the same state as you. I'll see if I can find a reference for that.

Edit: I've been selling on TCG since they opened it to individuals and selling a small amount on ebay for a little while and have never filled out any tax forms nor done anything related to becoming a legitimate small business.

Thank you for the response, I appreciate your time here, and that alleviates a lot of my worries.

I'll be making a seller account soon then =P

It's kind of a pain to keep records and run a business. I did it for a few years with jewelry, and it made taxes a major headache. I sell cards, but I consider the game a hobby. Here is what the IRS is looking for if you want to claim something as a business instead of a hobby. (There are benefits to this, and if you devote a portion of your home as part of your business, it gets complicated).

Here are some things to keep in mind.

Earning a profit
The IRS expects that if you start a business, you intend to make money at it. If you don't, your business is likely to be a hobby. To determine if your business is a hobby, the IRS looks at numerous factors, including the following:

• Do you put in the necessary time and effort to turn a profit?
• Have you made a profit in this activity in the past, or can you expect to make one in the future?
• Do you have the necessary knowledge to succeed in this field?
• Do you depend on income from this activity?
• Are your losses beyond your control?

Practical standard for business classification
The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby. This may be extended to a profit in two of the prior seven years in the specific case of horse training, breeding or racing. This is, presumably, because these endeavors involve a great amount of risk.

source

Wow gumgodMTG that is a great piece of information, I didn't realize that things that are nominally businesses could be considered hobbies by the IRS. Makes me breathe a lot easier because frankly any money I make selling cards will just go into buying other cards lol...in their eyes it's a total loss! =P

Just because it's a hobby doesn't mean you don't owe taxes on your gains:

http://www.hrblock.com/free-tax-tips-calculators/tax-help-articles/Small-Business/Hobby-Income.html?action=ga&aid=27154&out=vm

Hobby income is very easy to report, but you can't deduct a lot of expenses that you otherwise would if you treated it like a business.

But it still sounds like if you have a hobby, it is no really consequence, I'm not angling for profit, just to off load cards. And if you consider magic as a whole part of the business I think my expenses vs my income would be 90/10, I buy waaaaaaaaay too many booster boxes. And I barely ever sell anything, I prefer trading.

Lol, most of you seem to be viewing it the wrong way. If the IRS audits you and discovers your mtg selling activity, you would WANT them to classify it as a business and not a hobby. Getting audited and having it discovered are extremely remote possibilities for most people, which is why they tend to just ignore the issue.

bactgudz wrote:Lol, most of you seem to be viewing it the wrong way. If the IRS audits you and discovers your mtg selling activity, you would WANT them to classify it as a business and not a hobby. Getting audited and having it discovered are extremely remote possibilities for most people, which is why they tend to just ignore the issue.

Why is that?

So that they can see the loss and have it as a tax write off? Seems a bit dishonest to me? I'm not trying to really push it as a business, just trying to get cash to buy the singles I want or need.

You are still supposed to report when you buy and sell stuff online. It's actually a benefit to you if you can claim it as a business, but it's also a lot more work if you want to claim the deduction to say your electric bill due to part of your home serving as part of your business.

See if you own a business, portions of your overhead/expenses are deductible, and if you're operating at a loss for any period you can actually reduce what you owe significantly. However on the other hand if you're just buying and selling things on the internet, then the government wants part of your dollar every time it changes hands. I know in my state if you buy more than a certain $ amount (I think it's $100) online from an out of state vendor and don't pay sales tax, there's a place on your tax forms where you're supposed to put that. PayPal helps in keeping track of this part of it if you export your history as CSV files and then you can look at what you're making and spending in Excel and filter that to get good data. But this part is no different from buying and selling things on e-bay.

However when you're trying to claim a portion of your house as part of your business (such as having a jewelry studio in your basement) things get complicated, you can claim a certain percentage of your utilities for example based on what square footage of your home is set aside for that purpose. Some instances you can claim the wear/tear on your vehicle ect. I'm not sure how this would relate to MTG, but I'm sure it could get pretty complicated. Also to be a business though you need to get a local business license and comply with local laws as well.

Things get complicated when you have a business in your home.

Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs. You may not deduct expenses for lawn care in general or for painting a room not used for business.

So there's a lot of crap you can write off if you're a business that you can't if it's just a hobby. That's why you have to justify having a business, and there are rules differentiating a business from a hobby.

AmarusCameron wrote:

bactgudz wrote:Lol, most of you seem to be viewing it the wrong way. If the IRS audits you and discovers your mtg selling activity, you would WANT them to classify it as a business and not a hobby. Getting audited and having it discovered are extremely remote possibilities for most people, which is why they tend to just ignore the issue.

Why is that?

So that they can see the loss and have it as a tax write off? Seems a bit dishonest to me? I'm not trying to really push it as a business, just trying to get cash to buy the singles I want or need.

Because, you would have to pay taxes on your profits each year either way, but if you had a year where you had a loss, you couldn't deduct it. Additionally, you can deduct expenses that contribute to your ability to sell for a business, but not a hobby. So if you bought a booster box for $100, traveled to a GP paying $20 for travel to sell the contents for $150, you would pay tax on $50 profit if hobby, $30 if business.

This gets somewhat complicated quickly.

I see all the points and I understand everything everyone is saying, I'm just not certain where my legal duty starts and ends. And whether or not I'm willing to take the additional burden so I can probably sell a hundred dollars worth of magic cards a year (maybe more I dunno)



As for the state online tax, I consider that a voluntary tax because states have not been allowed to enforce taxation over the internet in general for a while, only if distribution centers are in your state. Like for instance I pay VA state tax on Amazon purchases because as part of the deal for VA to allow them to build distribution centers here (yup they begged the state since DC and its environs are a gold mine) was for them to charge state tax through the website. that is the only type of way that states can currently tax you for your internet purchases (doesn't mean they aren't trying to change it lol) so I say screw you every time I see that little box.

bactgudz wrote: Because, you would have to pay taxes on your profits each year either way, but if you had a year where you had a loss, you couldn't deduct it. Additionally, you can deduct expenses that contribute to your ability to sell for a business, but not a hobby. So if you bought a booster box for $100, traveled to a GP paying $20 for travel to sell the contents for $150, you would pay tax on $50 profit if hobby, $30 if business.

I believe you can also claim the milage and depreciation on your car (if you're a business).

AmarusCameron wrote:This gets somewhat complicated quickly.
I see all the points and I understand everything everyone is saying, I'm just not certain where my legal duty starts and ends. And whether or not I'm willing to take the additional burden so I can probably sell a hundred dollars worth of magic cards a year (maybe more I dunno)

This sounds like it falls under a hobby rather than a business, but I am just guessing. I'm not a tax advisor or anything like that, so everything I'm referencing are just from the online resources, and experience of trying to run a business for a few years. :)

My point is I don't have the time to treat this as a business, I have a normal well paying software dev job, and I'm a part of two start ups. Adding this as a small business would be a headache. Frankly if I could just sell cards like I do on ebay it would be much easier. Just one person selling to another person, not one person who needs to be an entity to sell to another person, it just annoys me.

AmarusCameron wrote:My point is I don't have the time to treat this as a business, I have a normal well paying software dev job, and I'm a part of two start ups. Adding this as a small business would be a headache. Frankly if I could just sell cards like I do on ebay it would be much easier. Just one person selling to another person, not one person who needs to be an entity to sell to another person, it just annoys me.

No one is saying you can't do what you seem to want.

bactgudz wrote:

AmarusCameron wrote:My point is I don't have the time to treat this as a business, I have a normal well paying software dev job, and I'm a part of two start ups. Adding this as a small business would be a headache. Frankly if I could just sell cards like I do on ebay it would be much easier. Just one person selling to another person, not one person who needs to be an entity to sell to another person, it just annoys me.

No one is saying you can't do what you seem to want.

I guess I'm just trying to get all opinions and information available before jumping in =P

If you're already selling on e-bay, it is basically the same but without having listing fees. :)