New Tax Codes Impacting your Dolly Dealings

Just a heads up, the new covid relief bill has a change to the tax code that will impact ANYONE using online selling and transaction platforms like eBay, paypal, etsy, etc...  It used to be that over 200 sales or $20,000 in transactions that would trigger a 1099-K (unless you lived in Mass. or Vermont and the threshold was $600).  Now in 2022...it will be $600!  So you should start planning to save some money back to pay income tax on NOW or you will get a very unhappy surprise.  As a freelance theatre designer, I have been getting 1099-Misc forms for years whenever I make more than $600 on a gig.  This is not new for me. But many people on etsy, ebay, and other gig workers (i.e. casual Uber eats delivery), etc have been able to operate under the radar because of the higher thresholds and were able to get away with not claiming that income on their yearly taxes. This will impact people who treated any etsy or ebay business as a hobby. This pretty much eliminates that angle and means you need to get serious about tracking everything now.

Some articles to read:

https://www.ecommercebytes.com/C/abblog/blog.pl?/comments/2021/3/1615153514.html 

https://turbotax.intuit.com/tax-tips/self-employment-taxes/selling-on-etsy-your-taxes/L27I196Wu

So, here is what you can do...I am no expert, but this is just some basic small business hygiene that will payoff when it comes to filing your taxes:

• Keep records of your purchases and sales. Log them ALL with the date and amounts.  Include the shipping cost as well (but indicate the amount as a breakout...as that is an expense.  Like if you sell a doll for $75 and it is $10 to ship...but your paypal amount might show the whole amount as $85 of income. You will later claim that $10 as a business expense.  I believe you can also claim the paypal transaction fee too.  Now if you are crafty and don't want to bother, using the invoice function on paypal can save you time because all of your sales info will be on there and you can go back and pull it up when it is time to file.  You can pull up your records on eBay as well. Also on the Integrity site in your account to see what you bought (though warning...looking at your yearly totals might make you faint).
• Create an Inventory of your doll collection.  I have two spreadsheets: dolls owned and dolls sold.  I used to have an "outfits" spreadsheet but that just became a lost cause after awhile...but one day I will go back to it and finish it.  Your spreadsheets should indicate what, when, where, how, and maybe even a why you bought it. I also use color coding to indicate if something is on pre-order (meaning I don't have it in hand yet).  I use another color to indicate if I am thinking of selling something nude, selling something complete, or customizing something.  For two or three doll gift sets, I list each doll from the giftset separately and then divide the total cost of the set between them (including the shipping divided as a separate column). I also include stats in my spreadsheet like the sculpt, skin tone, hair color, body type, special notes, anything that might be useful and hard to find later. When I sell a doll, I move that entire entry to the sold sheet and add when I sold it, how much, where I sold it, and the shipping cost, special notes etc.  If I sell and outfit but keep the doll...I make a note of the outfit sale on the current inventory sheet.  
• BONUS: this inventory tracking also important for insurance purposes!!! I also shared the link to the google spreadsheet with mom.  You might share it with a trusted friend...or put it in your paperwork for your will or whatever.  That way if something happens to you, someone can use this info to sell or do something with your collection.
• Thinking about your collection as "inventory" can be a little weird. But if you do a lot of buying and selling...this is now going to be very important. There are ways around this of course, but all of those would come with some risks. There is not the same buyer or seller protections if you use IT gift certificates, Venmo, Zelle, or Paypal friends and family...or go old school with money orders.  Cash at a convention during room sales would be the safest and you could decide to not claim those sales...but that would also technically be fraud...so...choose your poison I guess. 
• Tracking your collection as inventory and factoring in the expenses around each doll will let you have an idea of your COGS (cost of goods sold). That way you are factoring in your cost for purchasing the dolls (tax, fees, shipping) against your profit for selling along with those expenses (taxes, fees, shipping, packaging costs, insurance, etc). 
• You might also need to pay state sales tax.  Now both ebay and etsy do this automatically for you. But I am not sure about paypal. You might also have state income taxes to pay too...
• If you do a lot of selling in a year, you should definitely talk to your accountant to get some legit advice for how to handle things.  

Some tips:

• set up a separate account for your doll buying and selling.  This will help you track things. I have an online capital one 360 account that is linked to my etsy account. This can also be the account that you connect with eBay and paypal. I have this account linked with my regular bank account too, so that I can transfer money into it and out of it.  
• set up a separate account linked to this account that saves money just for paying income tax on your doll/craft habit.  You can have it set up to do regular transfers to save up money over the year. You can also manually transfer an amount every time you make a sale. I think 10-12% is the going income tax rate.  So if you sold a grail Poppy for $500, you would want to transfer $50 into the tax savings account. If you sell a lot in a month, you could do this on a monthly basis instead...just looking at what your monthly income was and then doing the transfer at the end of the month. I believe you can also pay your income taxes quarterly if you want to get that money out of your reach...but I am not sure about that.
• It will likely be easier to track if you sell dolls/items in the same year that you buy them. This is not always possible...but would make your life easier.  If you don't, you will likely need to be sure to have good inventory tracking so that you are bringing forward the starting inventory and ending inventory or each year from now on.
• Trading rather than selling. You should still keep a record...but there won't be a digital sale that would trigger a 1099k. 
• Sell as much as you can THIS YEAR...time to unload yall.

Take some small comfort in knowing that this is going to bite scalpers in the booty next year. Muahahahaaha.