Forgot to include side hustle income on taxes. Advice please?

Submitted by RevolutionaryBill285 t3_11difrq in personalfinance

So for context I sell my used clothes on eBay/through PayPal invoices and have been doing so since 2018, I’ve occasionally bought an item just to sell it, but it’s not often. I always assumed that since I didn’t ever get a 1099, I wouldn’t have to declare it on my taxes. (I know I’m an idiot) I already have plans to amend these returns and I made probably 1-2k each year in profit. For the earlier years (2018-2019) I have no receipts of anything I sold (therefore idk if I can deduct expenses for any of these) and for all years I never kept any records of sales. I’m really anxious right now as I did not mean to commit fraud and am scared about possible jail time. How screwed am I?

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shadracko t1_ja8skni wrote

Don't worry about it. Do a thorough job with 2022 taxes and declare everything. But I'm not even sure I'd bother updating prior years for that small amount. Up to you, and certainly there's no rush here.

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RevolutionaryBill285 OP t1_ja8zfe9 wrote

Wouldn’t that technically be tax evasion at that point?

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Engineer-Daddy t1_ja91o7f wrote

Tax evasion is when you are knowingly avoiding paying taxes. At this point, you don't even know if you owe taxes. So I think calling yourself a tax evader is a bit of a stretch.

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1eh88rrj7uch t1_ja8uoll wrote

What kind of used clothes are you selling where your sales price of the used goods exceeds what you paid for them originally?

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puddinfellah t1_ja8wl09 wrote

Yeah, OP, are you actually turning a profit compared to what you bought the clothes for?

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RevolutionaryBill285 OP t1_ja8yqu0 wrote

I was about half of the time. One of my hobbies is to collect rare vintage clothing, so it’s natural that lots of it would retain/increase in value. Yes I was turning a profit

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turbospartan t1_ja99dwc wrote

I think you would also be able to factor in "business costs" to yourself. Driving to/from thrift shops, shipping charges, taxes/fees, etc.

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nozzery t1_ja8sdjo wrote

You can only amend 3 years back. Do that. Then you can stop worrying. Expenses net out with income, so you will pay taxes on less than your amount of income, if you had expenses (even just what you paid for the items). Recreate records as needed before you lose that data

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RevolutionaryBill285 OP t1_ja8z2nm wrote

I think (correct me if I’m wrong) the 3 year rule is only for getting a refund from the irs, right? And the problem with deducting expenses such as what I originally paid for the items is that I don’t have a huge portion of the receipts for those items. Do I have to just declare all of what I received as a payment at that point?

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nozzery t1_ja8zlo2 wrote

You do not need receipts. Records are in your email, sale notices from eBay, etc. It's going to be an hour or two of work for you to put it all in a spreadsheet. Suck it up and do that, you'll thank yourself later if you ever get audited. You need to track cost basis for each sale.

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RevolutionaryBill285 OP t1_ja93azm wrote

That’s part of the problem, I did a sort of spring cleaning of my email a while back and don’t have a lot of those purchase confirmations :/

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shadracko t1_ja93lbj wrote

Nor does the record of past sales exist in your eBay account?

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RevolutionaryBill285 OP t1_ja95fh7 wrote

The sales of items I sold are on record, but the prices I paid for each item BEFORE selling are what’s lost to the void

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nozzery t1_ja96ts1 wrote

Look back through credit card statements. You are also allowed to estimate. Don't just throw up your hands and pay unnecessary taxes

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RevolutionaryBill285 OP t1_ja99wwb wrote

Okay, I’ll try the best to dig through my bank statements and estimate some things. Appreciate your help!

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IHadTacosYesterday t1_jaac9ka wrote

> an hour or two of work for you to put it all in a spreadsheet

More like multiple weekends of hell

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nozzery t1_jadqvj9 wrote

Try coming unprepared to an audit, and see how that goes then.

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Phylah t1_jab2zk3 wrote

Honestly call a tax lawyer, they may help ease your mind. I believe they can only go beyond the 3 years if there was intent…but again: call ;)

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