Self-employed eBay seller - How to calculate gross income for Schedule C?

Thanks for this info. What about the cost of the actual items I sold? I bought most of them specifically to resell, but a few things were personal items I had for years. Do I list my purchase costs differently for the two categories?

For items you purchased specifically to resell, those would be considered inventory and the cost goes on Line 36 (Cost of Goods Sold). You'll need to complete the Cost of Goods Sold section at the bottom of Schedule C. For personal items you've owned for years and then decided to sell, the IRS generally considers those personal items. The cost of these items would also go into Cost of Goods Sold, but you might need to estimate their value if you don't have receipts. Just be reasonable with your estimates and keep good records going forward.

Does it work if I have sales from multiple platforms like eBay, Etsy, and Facebook Marketplace? Some didn't send 1099s because I was under their threshold.

I'm skeptical about these tax tools. How does it handle inventory that spans multiple years? I bought some items in 2023 but didn't sell them until 2024, and I'm not sure how to account for that on Schedule C.

It absolutely works with multiple platforms. You can upload documents from different sources, and it will consolidate everything correctly. It even helps track sales that didn't generate a 1099 so you're still reporting all your income properly. For inventory spanning multiple years, the tool has a specific feature for inventory tracking across tax years. It helps you properly account for items purchased in previous years but sold in the current tax year, making sure they're correctly entered in your Cost of Goods Sold section. This was actually one of the most helpful features for me as my inventory situation was similar to yours.

Wait, this lets you actually talk to a real IRS person? How exactly does that work? I thought it was impossible to get through to them.

This sounds too good to be true. I've tried calling the IRS dozens of times about my Schedule C questions and never got through. You're saying this service somehow gets you past the hold times? I'm skeptical that any service could actually do that.

Yes, it actually connects you with a real IRS agent. The service works by essentially waiting on hold for you. You enter your phone number, and when they reach an actual human at the IRS, the system calls you and connects you directly to that person. It's like having someone else wait on hold so you don't have to. I was skeptical too, honestly. I had tried calling the IRS directly about 5 times and never got through. I was desperate for answers about my eBay Schedule C situation, so I decided to try it. Within 15 minutes I was talking to someone who could actually answer my specific questions about online selling and taxes.

Is the home office deduction worth it? I've heard it's an audit trigger and I'm worried about dealing with that headache, especially since my eBay business is just a side hustle.

The home office deduction is absolutely worth it if you legitimately have a space used exclusively for your business. It's a common misconception that it's an automatic audit trigger - that was more true in the past, but not so much now, especially with so many people working from home. The key is that the space must be used "exclusively and regularly" for your business. So if you have a spare bedroom that's only used for storing inventory, taking photos of items, packing orders, etc., that qualifies. If you're using your dining table for packing but it's also used for family meals, that doesn't qualify.

I think TurboTax Self-Employed is good for simple situations, but I switched to an accountant after my eBay business grew. Found one who specializes in e-commerce sellers and she caught several deductions I missed, like section 179 expensing for equipment and properly accounting for inventory. Cost me $350 but saved probably $1200 in taxes.

This is excellent advice about record-keeping! I wish I had seen this when I first started. I'm curious - do you track your inventory using any specific software or just a basic Excel spreadsheet? Also, how do you handle items that don't sell within the tax year? Do you still count them as inventory purchases for that year's Schedule C, or do they roll over to the next year's cost of goods sold calculation?

@Malik Johnson Great question! I use a basic Excel spreadsheet since it s'simple and I can customize it exactly how I need. For unsold inventory, those items definitely roll over to the next year - you only include items in Cost of Goods Sold when they re'actually sold, not when you purchase them. So if I bought 10 items in 2024 but only sold 7 of them, only those 7 go into my 2024 Schedule C Cost of Goods Sold section. The remaining 3 items stay as inventory and won t'hit my COGS until I actually sell them in 2025 or (whenever .)This is why good record-keeping is so crucial - you need to track what you bought versus what you actually sold in each tax year. The IRS requires you to use this method once your average annual gross receipts exceed $27 million which (most of us eBay sellers don t'hit ,)but it s'good practice regardless since it gives you a more accurate picture of your actual profit.

For drop shipping on eBay, you still report the full sale amount as gross receipts on Line 1 of Schedule C, just like with regular inventory sales. The fact that you never physically handled the items doesn't change how you report the income. For Cost of Goods Sold, you would use what you actually paid the supplier for each item. This is your true cost basis regardless of whether you handled the inventory or not. The drop shipping model doesn't change the fundamental accounting - you're still buying goods (from the supplier) and selling them (to the customer), even if the fulfillment is handled differently. Regarding timing, you should generally match transactions based on when the sale occurred and when you incurred the cost, not necessarily when payments were processed. So if a customer bought an item on December 30, 2024, that sale goes on your 2024 Schedule C even if you didn't pay the supplier until January 2025. The supplier payment would typically be considered a 2024 business expense since it relates to a 2024 sale. This can get complex with cash flow timing, so you might want to consult with a tax professional who understands e-commerce businesses to make sure you're handling the timing correctly for your specific situation.

This is such valuable advice about tracking mileage and business expenses! I'm just getting started with eBay selling and had no idea that sourcing trips counted as business miles. Do you use a specific mileage tracking app, or do you just keep a manual log? Also, regarding the internet bill deduction - how do you calculate what percentage to claim as a business expense? I use my home internet for both personal and business activities, so I'm not sure how to split that fairly for tax purposes. The point about multiple 1099s is really important too. I use both eBay managed payments and PayPal for some transactions, so I'll definitely need to watch out for that double-counting issue when I file my Schedule C.