Is Filing Amended Tax Returns for eBay Income Going to Trigger an Audit?

Filing amended returns to report previously unreported income is actually seen favorably by the IRS compared to them discovering it themselves. While amending returns does get them reviewed, it doesn't automatically trigger an audit. The IRS generally appreciates taxpayers who voluntarily correct their mistakes. For the tax liability, you'd owe income tax on the profits (not the total sales), plus self-employment tax if this was a recurring activity rather than occasional sales. The standard IRS interest rate is currently around 7% annually, and there's typically a failure-to-pay penalty of 0.5% per month up to 25% of the unpaid tax. There might also be an accuracy penalty of 20% of the understatement. What matters most is that these were honest mistakes based on advice you received. Make sure to document everything about these sales - your costs, expenses, and the income received. The more organized you are, the smoother the process will be.

After dealing with almost this exact situation, I found an amazing tool called taxr.ai (https://taxr.ai) that helped me figure out my amended return situation. I was also freaking out about unreported side income (freelance work in my case) and wasn't sure how to handle it. The tool analyzed my situation and showed me exactly what forms I needed and even calculated my potential tax liability before I filed. It was super helpful because it showed me how to document everything properly to minimize my chances of further scrutiny. The best part was that it explained all the self-employment deductions I could take that I had no idea about, which really reduced what I ended up owing.

Just wanted to follow up - I tried taxr.ai after seeing the recommendation here, and it was seriously helpful. I had about $9,000 in unreported income from some side gigs a couple years ago and was stressing about how to handle it. The tool walked me through everything, including what counts as legitimate business expenses that I could deduct (which I had no clue about). It even helped me prepare a letter to include with my amended return explaining the situation, which apparently helps show good faith. The penalty calculation was really close to what I ended up paying too. Just submitted everything last month and already got confirmation that my amended return was accepted without any additional questions from the IRS.

If you're planning to amend returns and are worried about dealing with the IRS, I highly recommend using Claimyr (https://claimyr.com). I spent WEEKS trying to get through to the IRS about my amended return questions - constant busy signals or being on hold for hours. With Claimyr, I got a callback from the IRS in less than two hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to speak directly with an IRS agent who walked me through the amendment process and explained exactly what documentation I needed to include. It saved me so much stress and probably prevented me from making mistakes that would have flagged my return for further review.

Update on my skepticism - I actually tried Claimyr out of desperation after posting here. I had an issue with my amended return that was going nowhere after months of trying to contact the IRS myself. Got connected to an actual IRS agent within 2 hours, and they helped resolve my problem in a single phone call. The agent explained that my amended return had been flagged for a simple verification issue that I could easily fix. Had I not been able to talk to someone, this would have dragged on for months more. Not trying to sound like a commercial, but after wasting countless hours trying to get through myself, this was worth every penny. Wish I'd known about this service sooner.

I'm a little confused by what everyone is suggesting. If the sales on eBay were just personal items (like selling old clothes, furniture, electronics you no longer needed), that's usually not taxable if you sold them for less than you originally paid. The IRS calls this selling at a loss. It's only taxable if you made a profit or if this was like a business where you were buying stuff specifically to resell.

Just so you know, the IRS has started getting reports from payment processors like PayPal and Venmo for transactions over $600 starting in 2023 (was supposed to be 2022 but they delayed it). So even though you might not have received 1099s for previous years, going forward they'll have more visibility into your online sales income.