Table of Contents
Introduction 13

Taxes and the Online Marketplace - What This Means for You 15

Chapter 1 A Hobby or a Business? 21

The Difference Between a Hobby and a Business 23

Establish Yourself as a Business 27

State Licenses 35

Select a Name for Your Business 37

Design a Logo for Your Business 39

Open a Bank Account 40

Get a Federal Tax ID Number 41

Get a Post Office Box 42

Online Marketplace Rules 42

Chapter 2 Recordkeeping - The Basics 47

Benefits of Recordkeeping 48

Type of Information to Record 51

Examples of Supporting Documentation 58

How Long to Keep Records 60

Organizing Receipts 61

Creating a Filing System 62

Bookkeeping 63

Online Marketplace Tools 70

Updating Your Books 72

Reconciling Your Account Statements 75

Protecting Your Business Records 75

Chapter 3 Taxes That Affect Small Businesses 79

Levels of Taxation 79

Types of Taxes 80

Tax ID Number (TIN) 87

Do You Need an Accountant? 88

Filing Your Taxes 89

Accounting Periods 95

Accounting Methods 96

Gains and Losses 105

Barter Income 106

Chapter 4 Business Deductions -A Lifeline for Sole Proprietors 109

Types of Income 110

Income Tax Brackets 114

Tax Deductions and Exemptions 116

Business Expenses 119

What You Cannot Deduct 120

What You Can Deduct 122

Finding Hidden Business Deductions 136

Chapter 5 Business Use of Your Home 139

Compliance With Local Zoning Regulations 141

How to Qualify 141

Figuring the Deduction 143

Deducting Your Expenses 145

Depreciating Your Home 147

Making the Most of Your Home-Office Deductions 151

Chapter 6 More Deductions 153

Phantom Losses 154

Alternative Motor Vehicle Credit (Form 8910) 155

Year-End Tax Deductions 156

Section 179 deduction 158

Vehicles 160

Homeowner Credits and Exemptions 161

Chapter 7 How to Value Your Inventory for Taxes 165

Cost of Goods Sold 166

Methods for Valuing Inventory 169

Garage Sales, Thrift Stores, Flea Markets, and Auctions 171

Personal Items and Collectibles 172

Chapter 8 Self-Employment Taxes 175

Who Pays Self-Employment Tax 177

How to Pay Self-Employment Tax 178

Calculating Your Net Earnings 178

Reducing Your Self-Employment Tax 180

Chapter 9 Quarterly Estimated Tax Payments 181

How to Calculate Your Quarterly Estimated Taxes 183

How to Pay Quarterly Estimated Taxes 184

Calculating Penalties for Underpayments and Late Payments 186

State Income Tax 186

Chapter 10 Sales and Use Tax 187

Federal and State Sales Tax Legislation 188

Nexus 190

Use Tax 192

Getting a Sales Tax Number 193

How to Collect Sales Tax 194

Sales Tax Service Providers 197

Chapter 11 Working with a Spouse or Family Member 199

Qualified Joint Venture 200

Employer/Employee Relationship 203

Family Members as Employees 203

Family Tax Breaks 205

Chapter 12 Long-Term Tax Breaks: IRAS, Roth IRAs, and SEPs 209

Contribution Limits 211

Contribution Deadlines 212

Traditional IRA 214

Roth IRA 216

Beneficiaries 220

Simplified Employee Pension (SEP) IRAs 221

How to Set Up an IRA 224

Investing in Your Online Sales Business with a Self-Directed IRA 227

Chapter 13 What to Do When Things Go Wrong 237

Avoid Trouble by Timely Reporting 238

If You Have Not Filed a Tax Return 239

If You Have Not Paid Your Taxes 239

Requesting a Waiver for Estimated Quarterly Tax Penalties 241

Taxpayer Advocate Service 242

If You Are Selected for an Audit 242

Free Tax Help 245

Unpaid Sales Tax 246

Chapter 14 Ten Biggest Tax Mistakes 247

Conclusion 251

Appendix A: Useful Websites and References 253

Bookkeeping 253

Data Storage 253

Business Plans 254

Family Business 254

Inventory 254

Licenses and Permits 255

Logo Design 255

Online Marketplaces 255

Sales Tax 255

Self-Employment Tax 256

Shipping 256

Social Security and Retirement 257

State Taxes 257

Taxes 257

Taxes: IRS Publications and Articles 260

Tax Forms 262

Trading Assistants 264

Troubleshooting Taxes 264

Websites and Domain Names 264

Appendix B Business Plan Example for Internet 265

Appendix C Glossary 271

Bibliography 279

Author Biography 283

Index 285