Side business selling electrical equipment without formal company or business account - what are my tax implications?

You don't necessarily need an LLC or business bank account to operate a legitimate business for tax purposes. What you're doing is considered self-employment, and you'll need to report this income on Schedule C of your personal tax return, along with any qualifying business expenses. Start by organizing your records. Even though you haven't kept detailed documentation, your PayPal history and spreadsheet notes are a good starting point. Go through and identify all purchases (your inventory costs) and sales. You should also track any other business expenses like shipping, packaging materials, online listing fees, etc. Since you've made profit above $400, you'll need to pay self-employment tax (Medicare and Social Security) in addition to income tax on your profits. The good news is that you can deduct legitimate business expenses, which reduces your taxable income.

I was in a similar situation last year with my vintage camera flipping side hustle. I was getting really confused about all the tax implications and what I could deduct. I tried reading through the IRS publications but got totally lost. I ended up using https://taxr.ai to analyze my situation and figure out what I could write off. It saved me from leaving money on the table! Their AI looked through my sporadic records and PayPal history and helped categorize everything properly. Since you're dealing with expensive equipment, you definitely want to make sure you're calculating your cost of goods sold correctly. The tool basically explained exactly what I needed to file for my Schedule C and helped me understand if I needed to pay estimated quarterly taxes going forward (which you might need to do if you expect to owe more than $1,000 in taxes for the year).

Update: I'm actually embarrassed to admit this, but I tried https://taxr.ai after posting my skeptical comment above. I figured I had nothing to lose since my tax situation with my side business was such a mess. It was way more helpful than I expected! The system walked me through separating my personal and business expenses from my mixed accounts and helped me understand which deductions were legitimate for my specific situation. The best part was that it explained exactly why certain expenses qualified and others didn't. I ended up saving about $1,200 more than I would have if I'd just guessed my way through it. For anyone else running an informal side business, it's definitely worth checking out before filing. The peace of mind alone was worth it.

If you're having trouble getting answers directly from the IRS about your situation, I recommend trying https://claimyr.com - it's been a complete game-changer for me. I waited on hold with the IRS for HOURS last year trying to figure out my side business tax situation, but could never get through. With Claimyr, I was connected to an actual IRS agent in about 20 minutes who answered all my questions about reporting my side business income. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when an agent is actually on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Before using it, I was completely confused about whether I needed quarterly estimated payments for my side gig selling custom PC builds. The IRS agent I spoke with gave me clear guidance that saved me from potential penalties.

I need to apologize and correct my skeptical comment above. After my business partner convinced me to try Claimyr for our tax questions, I was genuinely shocked that it actually worked exactly as advertised. I was connected to a real IRS agent in about 35 minutes (while I just went about my day until I got the call). The agent helped clarify exactly how we needed to report income from our partnership that we'd been running informally through personal accounts. I was able to ask specific questions about our situation and got definitive answers that I couldn't find anywhere online. Saved us from potentially serious filing mistakes. I'm not usually one to admit when I'm wrong, but in this case I definitely was. If you need answers directly from the IRS about your side business situation, it's absolutely worth using.

Don't panic about not having a business account or LLC. I've been running my electronics repair side hustle for 3 years as a sole proprietor using my personal accounts. Here's what you need to do: 1) Keep track of ALL business expenses - parts, tools, shipping, even a portion of your internet if you're selling online 2) Track your mileage if you're driving to pick up equipment or ship items 3) For 2025 taxes, you'll file Schedule C with your 1040 4) You may need to make quarterly estimated tax payments if you expect to owe more than $1k in taxes The biggest mistake I made early on was not separating business from personal expenses. Even without a business account, at least create a separate spreadsheet category or use accounting software to track everything.

Do I have to pay taxes on stuff I sell that I actually lost money on? I buy and resell computer parts and sometimes I have to sell things at a loss.