Small Business Year-End Tax Tips: How eBay Sellers Can Prepare for Tax Season

With the end of the year fast approaching, to avoid penalties and fines, it's time to ensure that your small business is in order.

Year- End Tax Tips for eBay Sellers and Small Business Owners

Count Your Inventory

Don't wait until the last minute to take an inventory of your eBay products and address any damaged, obsolete or faulty products. Instead of trying to sell these items at a loss, save time and money by simply writing them off. Just be sure to get a detailed receipt for any products that have been donated.

Locate Your Expenses

From supplies to business mileage, before the year ends you'll need to tally your small business expenses and ensure that you have a receipt for each item claimed. Verify that your mileage matches your records and that all of your small business receipts have been accounted for. If you haven't detailed the reason for the expense on each receipt, do so now.

Double Check Tax Payments

Before the year is up, collect all of your small business tax payment receipts and detail these in a spreadsheet, if you have yet to do so. Ensure that you have paid all SUTA, FUTA, withholding, FICA or self-employment tax. If you missed a month or underpaid, send a payment ASAP.

Pay Yourself

Don't forget to reimburse yourself for rent and utilities.

Increase Expenses

If your eBay business was particularly profitable, one way to lower any potential tax liability by year's end is by purchasing supplies and equipment for your business or increasing your retirement contributions. If you are in need of any office supplies, inventory, equipment repairs or equipment, purchase them now.

Evaluate Your Profits

If your business was significantly more profitable than you expected, you may need to make an estimated tax payment to account for the excess and avoid penalties. Deferring income from the sale of goods or equipment until next year is another way to keep your profits low. Once you've deducted your expenses, the anticipated costs for new inventory and purchased your supplies and equipment, any excess funds may need to return to you as either a distribution or taxable income. Speak with a tax professional about what, if any, portion can be returned as a distribution or dividend. Then submit an estimated tax payment for the remainder.

These year-end tax tips are a good place for an eBay seller or small business owner to start. When in doubt, always speak with a tax professional.