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  #1  
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Default Tax question

How do you show proof to the IRS that your stealth name deposits that you have made to your bank accounts was actually you making the deposits?

Also, in the event of audit and you have to show invoices of all the transactions how do you once again prove to them that it was you the actual person making the profits and selling the items?

Last question is, do you fill a 1099 form? or SCH-C 1040 form?
I work under a company but do ebay as a side job to make some passive incomes.

Thank you all in advance for all the support and help!
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Default Re: Tax question

Paypal issues a 1099k for you. You get a copy and the IRS does. It shows your total payments for the year.

For a single member LLC or sole proprietor you deduct all of your business expenses on a 1040 Schedule C. So both forms are used.

Quote:
How do you show proof to the IRS that your stealth name deposits that you have made to your bank accounts was actually you making the deposits?
Been selling for several years and that's never been relevant. Everything that goes into bank accounts is already reported on 1099k's.

Quote:
Also, in the event of audit and you have to show invoices of all the transactions how do you once again prove to them that it was you the actual person making the profits and selling the items?
I can't answer that one either, but I don't see why you'd need to prove who made what deposits as long as you've already reported them and paid the taxes they feel are due.
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  #3  
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Default Re: Tax question

if you are being audited,first ask the auditor which part of your return he/she plans to audit,some are full audit,some are not.
You need to show your bank statements ,month by month for at least 2 years,it does not matter who makes the deposits,as long as these are your bank accounts/
any deposit which is not your wage,inheritance,refund(tax,insurance,merchandise refund) .SS payments ,you would need to explain,unless it is small amount.
If he is looking into your small business,prepare to show vendor invoices,Paypal activities,if you have hired help,you will need to issue 1099 if it exceeds a certain amount.
if you are claiming home office deduction,he will be looking at your home office,the size and related expenses.
At one time,a home office must be strictly used for home business,not a den where you watch TV and play games after work.I dont know if it has changed.
You can prorate utility bill,property tax,homeowner insurance,maid cleaning,but not lawn mowing.
Your accountant will tell you more
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Default Re: Tax question

name of payee could matter,say you have a large deposit and the agent wants to know WHAT IS IT?
Then you have to show if it is not income related,then a copy of the check,say US treasury tax refund with your name on it.
or insurance claim check ,say if you sold something and it was broken,who is it make out to?
or your aunt sent you a happy birthday check,make out to?/
You pick up some expenses for your friend and he paid you back with a check?
Banks do keep your statement online for several years and also copies of checks you deposited,check with your bank,
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Default Re: Tax question

State sales tax audit is worse,it goes back 4 years for my state
They are still going with the traditional brick and mortar store audit,they want to see where you ship the orders,then you have to go to Paypal activities and show how many are shipped to fellow state buyers and rest are out of state.
if you did not collect state sales tax,then you pay sales tax.
then it gets worse,if they find some large amount in your bank account which do not correspond to your Paypal activities,they figure it must be cash sales,unless you can prove either it is cash sale but not to state resident OR it is not a sale.
Midwestern states and southern states hit hard by flooding and hurricanes and tornados are not able to raise revenue by raising property tax,so they are looking elsewhere for additional revenue.
dont forget use tax,did the seller charge you sales tax,if not,you pay.
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Default Re: Tax question

Quote:
Originally Posted by agent006140 View Post
State sales tax audit is worse,it goes back 4 years for my state
They are still going with the traditional brick and mortar store audit,they want to see where you ship the orders,then you have to go to Paypal activities and show how many are shipped to fellow state buyers and rest are out of state.
if you did not collect state sales tax,then you pay sales tax.
then it gets worse,if they find some large amount in your bank account which do not correspond to your Paypal activities,they figure it must be cash sales,unless you can prove either it is cash sale but not to state resident OR it is not a sale.
Midwestern states and southern states hit hard by flooding and hurricanes and tornados are not able to raise revenue by raising property tax,so they are looking elsewhere for additional revenue.
dont forget use tax,did the seller charge you sales tax,if not,you pay.
How many times you been audited? State and Fed?
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Default Re: Tax question

I am being audited by the state now,my accountant is representing me,the state auditor is a contractor,they are alloted 2 days and x number of hours,
he has exceeded that.
As a part time seller,I use my bank accounts for other activities,when rate starts to rise,I move some of my cash in my brokerage account to these bank accounts and then to banks which offer good interest ,say 2.8-3 %.
The reason why I need these banks as conduit is that my broker would only allow me to transfer fund to these banks.
Now the auditor saw these amounts and insist these are cash sales to fellow state buyers as they are not reflected in my Paypal history.
He prepared a list and insist I need to pay sales tax.
So I have to go back 4 years to find these amounts and prove they are not cash sales,some are US treasury tax refunds,(luckyme,my bank has copies of the checks I deposited,back and front with my name and amount and the picture of statue of Liberty),others are from my brokerage account and I have to show him the brokerage statement.
None is cash sales as he imagined,
But he did find from my Paypal shipping labels that some sales are from the state resident and I did not collect sales tax,but that amount is bearable .
THere will be a meeting with him and his superior to go over the results and negotiate a settlement.
I will not attend,my accountant will but I have provided all the proofs that those are not cash sales ,also the state auditors have made some mistakes on the date of the deposit,it looks like he just transposed the numbers.
My advice to all of you is
-set up bank accounts strictly for your business,do not mix your personal activities with your business activities .
-save your paypal files,ebay files,amzn file and bank statements and copies of checks and invoices,sales ledger ,my state rotates auditing retailers every 4 years,so I need to save 4 years worth of records.
Unlike the brick and mortar store,every customer who walks in pays sales tax ,how many of us sell much to state resident,mine is like 2 1/2%
These auditors need to adjust,it is such a waste of time and resources tryin to prove most of my sales is with 'out of state' buyers.
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Default Re: Tax question

With the depth of the questions, I would advise you find a accountant to help you with the finer points of your questions.

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Default Re: Tax question

Quote:
Originally Posted by phaz0rz View Post
Paypal issues a 1099k for you. You get a copy and the IRS does. It shows your total payments for the year.

For a single member LLC or sole proprietor you deduct all of your business expenses on a 1040 Schedule C. So both forms are used.



Been selling for several years and that's never been relevant. Everything that goes into bank accounts is already reported on 1099k's.



I can't answer that one either, but I don't see why you'd need to prove who made what deposits as long as you've already reported them and paid the taxes they feel are due.
Is there ever a problem with the stealth name being on the 1099?
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Default Re: Tax question

Quote:
Originally Posted by Lucynda View Post
Is there ever a problem with the stealth name being on the 1099?
Always show LLC name and stealth address.. but it's never been a problem.
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Default Re: Tax question

Quote:
Originally Posted by agent006140 View Post
I am being audited by the state now,my accountant is representing me,the state auditor is a contractor,they are alloted 2 days and x number of hours,
he has exceeded that.
As a part time seller,I use my bank accounts for other activities,when rate starts to rise,I move some of my cash in my brokerage account to these bank accounts and then to banks which offer good interest ,say 2.8-3 %.
The reason why I need these banks as conduit is that my broker would only allow me to transfer fund to these banks.
Now the auditor saw these amounts and insist these are cash sales to fellow state buyers as they are not reflected in my Paypal history.
He prepared a list and insist I need to pay sales tax.
So I have to go back 4 years to find these amounts and prove they are not cash sales,some are US treasury tax refunds,(luckyme,my bank has copies of the checks I deposited,back and front with my name and amount and the picture of statue of Liberty),others are from my brokerage account and I have to show him the brokerage statement.
None is cash sales as he imagined,
But he did find from my Paypal shipping labels that some sales are from the state resident and I did not collect sales tax,but that amount is bearable .
THere will be a meeting with him and his superior to go over the results and negotiate a settlement.
I will not attend,my accountant will but I have provided all the proofs that those are not cash sales ,also the state auditors have made some mistakes on the date of the deposit,it looks like he just transposed the numbers.
My advice to all of you is
-set up bank accounts strictly for your business,do not mix your personal activities with your business activities .
-save your paypal files,ebay files,amzn file and bank statements and copies of checks and invoices,sales ledger ,my state rotates auditing retailers every 4 years,so I need to save 4 years worth of records.
Unlike the brick and mortar store,every customer who walks in pays sales tax ,how many of us sell much to state resident,mine is like 2 1/2%
These auditors need to adjust,it is such a waste of time and resources tryin to prove most of my sales is with 'out of state' buyers.
How much have you made through ebay on that year that you had to be audited? and What was the cause of the audit? like what flagged them? was it the cash transaction they thought it was?
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  #12  
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Default Re: Tax question

Quote:
Originally Posted by wkang87 View Post
How much have you made through ebay on that year that you had to be audited? and What was the cause of the audit? like what flagged them? was it the cash transaction they thought it was?
It has nothing to do with how much I make or how much I have sold,state sales tax is different than IRS audit,they are only interested in collecting sales tax,you can lose money and still have to collect sales tax if sold to in state buyers.
My state rotates the retailers every 4 years,there is no other reason I am aware of.
I dont know which state you live in,you need to look up how they collect sales tax and how they audit retailers.
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Default Re: Tax question

stealth account -individual or EIN.You may have to think thru how you explain to IRS agent that you are showing him documents which is not in your name,if it is LLC and your name is not on it,if a check,you are not the payee?
anything which arouse his suspicion would prompt him to look further,dig deeper!
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