Federal income tax on sold textbooks

The school experience. School related queries, discussions, and stories that aren't specific to a subject.

Moderators: gmalivuk, Moderators General, Prelates

WinstonChurchill
Posts: 6
Joined: Wed Aug 03, 2011 5:27 pm UTC
Location: Dallas, TX

Federal income tax on sold textbooks

Postby WinstonChurchill » Sun Sep 09, 2012 6:15 pm UTC

(I'm banking on the "if you put enough intelligent people in one place, somebody ought to know the answer to about any given question" theory here...)

I'm a college student, and I usually sell my textbooks on Amazon at the end of each semester. Apparently, Amazon has a new policy that if you sell more than 45 items, you have to submit a W9 or they'll terminate your account. So obviously I'll have to report the income on my taxes.

Getting taxed on it is somewhat problematic because over the past year I've sold many of my friends' books through my seller's account, not keeping any of the money for myself, and it would stink to pay taxes on that money because I'm a nice guy. I suppose I should have seen this coming, but it hasn't been an issue for the past two years... The revenue amounts to about $1200.

Can I call my selling of books on Amazon a sole proprietorship business and claim a business loss on Schedule C for the sale of my books? Even if I figure a cost-basis of zero for the books I sold for others, the loss on my own books alone ends up making an aggregate loss (the books are usually sold for less than half what I bought them for). The amount is low enough I wouldn't have to file Schedule SE and pay self employment tax, so that's not an issue.

If it makes it more justifiable as a business, I also sell other small things on Amazon, such as old CD's and electronic components.

Thanks!

User avatar
Bakemaster
pretty nice future dick
Posts: 8933
Joined: Fri Jul 06, 2007 2:33 pm UTC
Location: One of those hot places

Re: Federal income tax on sold textbooks

Postby Bakemaster » Mon Sep 10, 2012 4:59 am UTC

Since the membership of this particular group is self-selected, be prepared to receive many answers to your question, each of them wrong in a unique and non-obvious way.

I can't claim to offer sound tax advice. You would be better off finding a message board dedicated specifically to income taxes and asking your question there instead. But feel free to read on if you are ready with your grains of salt.

As a general rule the IRS seems to favor choices you make that result in your paying more taxes. Can you claim a business loss? Sure, you can claim whatever you want when you file your taxes. Will you get audited? Probably not, because most tax payers do not get audited in any given year. If you do get audited, will you get burned for claiming that business loss?

Based solely on those portions of the tax code I have read (and keep in mind that given the size of our tax code, we're talking about something like the preface and first few pages of a work the size of The Dark Tower or A Song of Ice and Fire) and my own experience researching legal and tax stuff, I would tend to believe you would be at the very least corrected. I have no idea whether you would be penalized, assessed late fees, punitive fees, whatever.

In your place I would be reading me some tax code on the IRS web site and not asking a group of people whose expertise tends to lie more in the computer science and My Little Pony: Friendship Is Magic arena.
Image
c0 = 2.13085531 × 1014 smoots per fortnight
"Apparently you can't summon an alternate timeline clone of your inner demon, guys! Remember that." —Noc

User avatar
freakish777
Posts: 354
Joined: Wed Jul 13, 2011 2:14 pm UTC

Re: Federal income tax on sold textbooks

Postby freakish777 » Mon Sep 10, 2012 4:42 pm UTC

Bakemaster wrote:Can you claim a business loss? Sure, you can claim whatever you want when you file your taxes. Will you get audited? Probably not, because most tax payers do not get audited in any given year. If you do get audited, will you get burned for claiming that business loss?


If you do not have receipts for these books proving the cost at which you bought them, you're going to have an extremely tough time convincing your auditor that you did not acquire them at zero cost.

One potential way around this with the friends that you sell books for, may be to have them sign a receipt of sale to you for the amount you sold it for, in order to get to zero profit on that particular book.

The best solution (in my opinion) would be to get below the 45 sales on Amazon to avoid reporting to the IRS on what is (essentially) your private sales.

User avatar
JBJ
Posts: 1263
Joined: Fri Dec 12, 2008 6:20 pm UTC
Location: a point or extent in space

Re: Federal income tax on sold textbooks

Postby JBJ » Mon Sep 10, 2012 5:18 pm UTC

According to this, the reporting limit is over $20,000 in gross sales and over 200 transactions. Amazon's policy is to collect a W9 from any individual seller with over 50 transactions. I suppose that this is so Amazon can cover their ass before sellers can exceed the reporting limit. If you don't exceed the reporting limit, you won't get a 1099. A W9 is just providing your taxpayer ID (SSN) to another entity. It doesn't automatically mean that they report what they pay you.

So, if you don't exceed the reporting limit, you won't have your sales reported to the IRS. This is noted under the section "Will I receive a Form 1099-K for my seller account?" in the above link.
For each calendar year, if you had at least $20,000 in unadjusted gross sales and 200 or more transactions, a Form 1099-K will be provided to you. If you did not meet both of these thresholds, you will not receive a Form 1099-K. We will track your unadjusted gross sales and number of transactions. You will also be able to tell if you have exceeded the thresholds by monitoring your unadjusted gross sales and number of transactions in your seller account.

Since your gross sales are only just above $1000, I'd say no worries.
So, you sacked the cocky khaki Kicky Sack sock plucker?
The second cocky khaki Kicky Sack sock plucker I've sacked since the sixth sitting sheet slitter got sick.

webgiant
Posts: 252
Joined: Mon Aug 17, 2009 5:36 pm UTC

Re: Federal income tax on sold textbooks

Postby webgiant » Sat Oct 20, 2012 3:29 am UTC

Bakemaster wrote:In your place I would be reading me some tax code on the IRS web site and not asking a group of people whose expertise tends to lie more in the computer science and My Little Pony: Friendship Is Magic arena.

Taxes can be done by computer science, and clearly you've never seen "My Little Pony Gets Audited".

User avatar
WanderingLinguist
Posts: 237
Joined: Tue May 22, 2012 5:14 pm UTC
Location: Seoul
Contact:

Re: Federal income tax on sold textbooks

Postby WanderingLinguist » Sat Oct 20, 2012 11:56 pm UTC

If you're in doubt, call the IRS ask ask them. They have an 800 number for tax questions. You may have to wait 15 minutes or so to talk to someone if the call center is really busy (the time of day at which you call matters -- avoid calling when it's lunch time somewhere in the US, because lots of people call on their lunch break). I've had a few tricky questions related to filing taxes for work I did overseas, and they were very, very helpful.


Return to “School”

Who is online

Users browsing this forum: No registered users and 5 guests