When managing the Bookkeeping for your resale side hustle, especially concerning older personal items, it is important to maintain accurate records for both tax purposes and business analysis. Here’s a detailed guide:
Documenting Sales and Income:
Create a spreadsheet or use Bookkeeping software to record the sale date, item description, sale price, and buyer information. This will help you track total sales and identify profitable items.
Ensure to separate your resale income from other personal income to avoid confusion during tax filing.
Determine Cost Basis:
Establish a cost basis for your items. Generally, if you’re selling personal items, the cost basis can be the original purchase price. If the item was received as a gift, the basis might be the item’s market value at the time of receiving it.
If the original purchase price is unknown, use a reasonable estimate based on current market values or conversion rates.
Track Expenses:
Record any expenses related to the sale, such as listing fees, shipping, packaging materials, and transaction fees. These can often be deducted as business expenses, reducing your taxable income.
Handling Taxes:
Consult with a tax advisor to understand your obligations. While selling personal items generally doesn’t incur income tax (if you sell them for less than their original value), consistent sales activity could classify your venture as a business or hobby for tax purposes, which may have different reporting requirements.
For a business, keep records of all sales transactions and expenses for accurate tax reporting. You might need to report profits and pay self-employment taxes more formally.
Separation of Personal and Business Finances:
Consider setting up a separate bank account for your side hustle to simplify tracking business income and expenses.
Inventory Management:
Keep an inventory list of items eligible for sale, noting the purchase price and estimated value. Update regularly to reflect sales.
Evaluate Business Viability:
Review Bookkeeping records periodically to assess which items or categories are most profitable, informing future buying and selling strategies.
By maintaining organized and comprehensive records, you will ensure a smoother process for tracking your resale side hustle’s financial aspects and fulfilling tax requirements.
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