Taxes Attorneys

Tax attorneys may be well-versed on tax law, and here is an opportunity for you to know more about capital gains taxes.  Not that this information will make you feel any better about paying them (!), but knowledge is power and it is key to know what you are paying in taxes and why.

The History Of Capital Gains Taxes In The United States

What are Capital Gains Taxes:

The money you made from the time of acquisition or purchase to the time of sale of a valuable asset is known as your capital gains. This profit has a tax levied on it, which is called a capital gain tax. Some common examples of capital include large investments such as real estate, stocks, bonds, or mutual funds. The capital gains tax rates strongly affect the economy. Any increase could negatively affect millions, including middle class families with some stock or entrepreneurs trying to open their own small business.

The Beginning:

Capital gains always remained below 7% from 1913 to 1921. It was not until the Revenue Act of 1921 when the tax made its first upward climb to 12.5%. The tax then waxed and waned, hiking up with the 1969 and 1976 tax reform acts, only to be reduced in 1978 by congress. More recently, the Taxpayer Relief Act of 1997 again, lowered the capital gains rate. Currently, the rate for most taxpayers is 15% on long-term capital gains (i.e. property held for longer than 12 months) and ranging from 10% to 35% on short-term capital gains (i.e. property held for less than 12 months). Individuals in the 10% and 15% tax brackets pay 0% on long-term capital gains.

 The Rise and Fall:

The opposition to cutting capital gains taxes is usually rooted in the belief that the tax cuts benefit only the wealthy. However, this is only partly true. While most wealthy people own stocks and other capital, there are plenty of struggling businesses and middle class families depending on capital just as much. In reality, the cutting of capital gains taxes has proven to benefit the economy when tried in the past on multiple occasions. Historically, when capital gains taxes were raised it tended to harm the US economy more than help it.

Election ‘08 and Capital Gain Taxes:

Controversy looms over the 2008 Presidential election with capital gains taxes in the spotlight. Sen. Barack Obama revealed his plan to raise capital gains taxes in order to make the distribution of wealth fairer. He cited 50 individuals benefiting from the tax sharing a $29 billion income between them. However, many experts strongly oppose Obama’s plan saying an increase will hurt the economy possibly knocking off almost 2% of Gross Domestic Product.

Unfair Tax:

When it comes to the legitimacy of capital gains taxes and increases, there are solid arguments from both sides. Those who support low capital gains tax rates claim that any increase would discourage investing and hurt the economy. However, groups that support an increase are quick to deem low rates as unfair. They claim that by taxing capital gains at a lower rate then income taxes is essential a tax benefit for just the wealthy. ‘Some people who are richer than Croesus are paying 15 cents in federal income taxes on the marginal dollar, while you may be paying 25 or 35 cents,’ claims economist Alan Blinder says on his blog, EconomistsView.

By: roni deutch

Article Directory: http://www.articledashboard.com

Tax attorneys can tell you that all too many otherwise honest tax payers underreport income as they are simply not sure what may or may not qualify as “income”.  If you profit from selling on Ebay, or other sites such as Etsy, you do indeed need to report that income to the IRS.  Ask a tax attorney for more information, and eliminate the risk of a costly IRS tax audit.

Income Tax On Ebay Profits

Several folks argued that just because their little eBay hobby generated a little cash, that didn’t make it a full blown business. It seems they consider the income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I’ve always been amused by folks who try to impress me with talk about their ‘little side business’ but when the subject turns to taxes they suddenly refer to it as ‘my little hobby.’

All arguments aside, the conclusion that I came to after reading each of the emails was always the same: while you may think selling on eBay is just a fun pastime and the money you’re making is not reportable as income, depending on the circumstances, the IRS would probably disagree with you.

 It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise, folks. If you’re going to come to the dance you have to pay the fiddler.

The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on Ebay.

In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 profit and therefore must report it as income and pay Uncle Sam his fair share.

In reality, if you are a casual seller who only sells a few items on eBay every now and then it’s doubtful the IRS is going to let loose an army of agents to collect taxes on the few bucks you make. However, if you consistently sell on eBay the IRS may deem your activities to be business oriented and you will be required to file a Schedule C and claim the income.

The IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business. These factors include:

Do you carry on the hobby in a business-like manner?

Do you spend considerable time working on the hobby?

Do you depend on income from your hobby for your livelihood?

If the answer to any or all of these question is yes, you’re running a business, not carrying on a hobby, and you are responsible for paying taxes on your income.

What’s eBay’s take on all this? Naturally eBay is vehemently opposed to anything that might rock the eBay boat. eBay does not issue 1099 tax forms to sellers, nor does it report seller’s sales figures to the IRS.

Ebay considers itself merely to be a facilitator, meaning that they provide a marketplace in which buyers and sellers come together to do business.

Furthermore, under its current system it would be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actually gets paid by the buyer, so eBay has no idea how much money - if any - actually changes hands at the end of each transaction.

On the bright side, if you do sell on eBay as a business you can deduct a number of business expenses, including the cost of inventory, listing fees, shipping, envelopes, packing materials, etc.

You might also be able to deduct things like the purchase of a computer for business use, office space (even if it’s a home office), office supplies, and more.

Talk to your accountant if there’s any doubt as to whether you should or should not be paying taxes on your eBay earnings.

By: mannchauhan

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