I filed my small business tax return But have some questions, I'm not sure if I filed correctly Please help...

Question

I sell in ebay and made a total of $27,064.99 I did not make any sales in my state (California) Only out of state sales. So I don't owe any Taxes. Okay my question is that
Out of those $27K that I made in sales do I have to take away of what I had to pay for the item?
Example I sold a ring for $3,000 but it costed me $1,000 do I only claim $2,000?
Do I claim what I paid for shipping that I had to pay for sending the item to my customer?
What do they mean by deductions? Thanks

Answer 1

You probably should see professional.

Your returned is complex enough to have crossed the line from "do it yourself" to having a professional do it.

When you said you didn't sell in California, that means you don't owe any sales taxes to California. You will still owe income taxes to the feds and the state of California.

Answer 2

You might not owe any sales taxes to CA, but you very may well owe income taxes to both CA and the IRS.

The tax is levied on your net income. To figure your net income you must first figure your Cost of Goods Sold. You do that by starting out with the value of your inventory at the beginning of the year. You then add the cost of all purchases to that. Now you subtract the value of your inventory at the end of the year. That gives you your Cost of Goods Sold. Now subtract the Cost of Goods Sold from your Gross Income to get your Net Sales.

Now you need to figure your Net Income. Add up all of the costs you paid running your business. Fees to eBay, shipping charges, office expenses if any, phone charges if any, etc. Any of the legitimate expenses that you incurred in producing the income. Once you have that added up, subtract it from your Net Sales. That is your Net Income and that is what you'll pay income taxes on.

You can use Schedule C to calculate your Net Income for your Federal Form 1040 Return. You'll also need to file Schedule SE to calculate your self-employment tax at 15.3% of your Net Income from the business. The totals form Schedule C and the SE tax from Schedule SE transfer to the Form 1040 and you then calculate your total taxes from there.

CA has similar forms for calculating your taxes for CA. Go to the FTB website to research that.

One thing that you may have missed on is the requirement to make quarterly estimated tax payments using Form 1040-ES. CA has a similar form. You need to make payments throughout the year or you will be looking at penalties and interest for underpayment of your taxes.

Answer 3

On your return, you show your gross sales, and also show expenses such as what you paid for the items, and any selling expenses like listing fees. On your schedule C, you subtract the expenses from your gross income, and just pay taxes on the difference (net). You claim shipping as an expense, but claim the amount that the buyer paid including shipping as income.

You figure your self-employment taxes on schedule SE using your net income.