A well-liked method of earning additional money is to sell products on Facebook Marketplace. However, a lot of sellers might be curious about how much they can earn before taxes. This question’s response can differ depending on a few different variables.
First and foremost, it’s crucial to know that any income derived from selling goods on Facebook Marketplace is regarded as taxable income. This means that if you receive money from the sale of goods, you must disclose it on your tax return and pay income taxes. However, your filing status, income, and other deductions will all have an impact on how much you can sell for before paying taxes.
You might not have to pay taxes on the income gained if you sell things as a hobby and not as a business until you reach a specific threshold. If your annual hobby income is less than $600, you are exempt from reporting it on your tax return, according to the IRS. However, if your income exceeds $600, you must disclose it and pay taxes on it.
On the other hand, regardless of how much money you make from selling products as a business, you will need to report the income and pay taxes on it. In this situation, you might want to think about obtaining an EIN, or employer identification number, which serves as a business’s tax identification number. If you intend to hire staff members or submit business tax returns, you must have an EIN, which is different from a personal tax ID number.
The rate of sales tax can change based on where you live. For instance, the current sales tax rate in Utah County is 6.75%. This implies that if you sell something for $100, you will also need to charge the buyer $6.75 in sales tax.
It need not be expensive to obtain an EIN number because the IRS provides this service without charge. Applying for an EIN is possible online, by fax, or by mail. However, there are third-party agencies that can assist you with the process for a charge if you are uncomfortable filling out the application yourself.
Finally, it’s crucial to remember that creating an LLC (Limited Liability Company) may be a good idea if you offer goods as a business. The liability protection provided by an LLC allows you to keep your personal assets separate from those of your business. For tax purposes, it is regarded as a pass-through entity, which means that profits and losses are reported on your individual tax return.
In conclusion, your filing status, income, and other deductions will all have an impact on how much you may sell on Facebook Marketplace before having to pay taxes. You might not have to pay taxes if you sell things as a hobby until you reach a certain threshold. But regardless of how much money you make, if you sell things as a business, you must record the income and pay taxes on it. For hobby sellers, obtaining an EIN number is not necessary, but for business sellers, it might be. The amount of sales tax you pay can vary depending on where you live, and for commercial sellers, incorporating an LLC can provide further liability protection.