If you are selling your crafts online, whether on eBay, Etsy or anywhere else, you should be reporting your sales to the IRS. The upside of reporting your additional income to the IRS is that you can also write off expenses and as we know, there are many–materials, space in your home that you use specifically for your craft, computer equipment, etc.
It’s not the best idea to run your business online and think the IRS will never catch up to you because you’re just a little guy.
It was recently announced that Paypal will be required to report payments to the IRS each year, starting in 2011. Paypal is one of the easiest shopping carts to use, and if you are selling on eBay or Etsy, I would be really surprised if you aren’t using it.
Under the new legislation, PayPal will be required to report to the IRS the total payment volume received by PayPal customers in the U.S. who:
- receive more than $20,000 in payment volume in a single year; AND
- receive more than 200 payments in a single year.
Both requirements must be met for Paypal to be required to report payments. And I would think that this is just the beginning.
If you are doing business online, be smart and safe and report your income. And then take the deductions that come along with being in business too!
To read more about these changes, go to https://www.thepaypalblog.com/2008/08/proposed-irs-reporting-requirements-become-law/
Iris & Lily Insights 
Interesting news. Thanks!
Hi Diane,
First of all, love the blogs you put out! Great info.
This one will probably save a lot of headaches for many entrepreneurs.
Keep up the great info.
Maybe you can be Iris & Lily and Sherlock Holmes!
elizabeth
Great information! This is the kind of insight crafters need-My wife and i have our own site at http://www.cicilyscrubsandstuff.com, and this is our first year doing this full-time. Taxes and the IRS is extreemly important subject matter for us little guys. The less IRS audits, the better!
I would love it if you could post this blog on our site at http://www.rummagepad.com within our RummageTalk section.
I thot you might want to know this:
For some odd reason, there is a group of women who formed a sort of government spy service and have made it there mission to report to the IRS and the local governments of sellers on eBay, Etsy, Anglefire, and Paypal. They go thru sellers and then look up the following information: If they have a state business license to sell and if they are paying state and federal taxes. Including if they are selling food items (all proper licensures and permits re food, food handling, and food productions as well as state approved kitchen, and comply with all FDA regulations on handling food, cooking and production of food, and ingredient listings.)
They have been doing this over the past several years, and their activity has increased and increased as to the people they look into, and report.
They also report on art copyright infringements, and fraud. Sellers who claim they products are authentic, or homemade, or whatever. They many times will find sellers to investigate via blogger and blogspot. If a seller has been accused of resaling products as their own or as their own original art by incorporating hand made items they purchase from another seller into their own work, they will be investigated by this group. Blogged about, reported to the their State’s tax commissioner, State’s business license, the IRS and reported to Etsy, Ebay or whatever.
They also watch for lots of copyright infringements on long deceased artists whom may have sold their brand/work to a publishing company whom still may have a copyright hold on their works — even if they have been deceased for over 50 years. (altered artists/assemblage beware)
A friend of mine was listed as a favorite or link or something of someone who bought glass beads on Etsy and made jewelry and called it her own art/jewelry/work. The original seller found her glass beads for sale, and reported it to Etsy. Then, Blogged about her as a fraud, and fake. Somehow this group caught wind of her. She was also on Anglefire, Ebay and had her own blog. ALL of her favorite sellers, bloggers, ebay transactions were also investigated. My friend who was selling homemade soaps, and other things had a state and federal tax audit. paypal, ebay, etsy accounts frozen and siezed. Told that she had to comply with proper FDA regulations on productions of any such items, and because she didn’t have tested products, or proper labeling her soap business was over. Even though she had purchased FDA regulated and approved ingredients that she used in her soaps.
She and I looked up this group who is out there spying on everyone — making sure they are compliant in every which way we found they are increasingly investigating others.
No need to wait for the IRS to come cracking down in 2011….there is a secret society of little whistle blowers watching and waiting to pounce!