Can anyone tell me how to file income tax for domain sales

[zhisede]

I am in US. Last year, I backordered several names from snapnames and enom, which costed me about $3500, but I don't have any receipt for them, the money is charged directly from my personal creditcard. I sold three of them at sedo and afternic and get about $8000. Based on that, I have an income of $4500 from domain sales, but I don't know how to file tax for this, I don't have any receipt for my cost (the bid price is charged directly from my credit card). Also, I didn't receive any tax form from sedo, afternic or the buyers for the $8000 I received. Can anyone here tell me how to file tax on this kind of income? Thanks a lot.

 

[mis_chiff]

I live in Canada, but I never new we had to
claim sales like that?..Isin't is just possesions
that your selling. If your a business I think you have
to. But isin't someone who doesn't do it for a living
(business) just like selling your car for a profit?

 

[mcaricofe]

Your sales would be considered capital gains.

Consult your tax professional.

 

[spikedo]

Backorders = expenses
Domain sales = income

Assuming you are a sole proprietor, this is the simplest and only way I know to break things down for domains for accounting purposes. You're likely to wind up owing since you didn't pay taxes on any of those gains but it all depends on your overall income and expenses. It's my understanding you don't need to have a receipt to file, but if you get audited you'll need to prove you spent the amount. It's worth a little extra money to hire an accountant to make sure everything is done correctly. Each year, filing seems to get a bit more complicated, at least for me anyways.

 

[JMJ]

Your credit card statement is your receipt. Use a service such as turbotax.com to file. It walks you through the entire process. $9.95 for the basic I think. Mabey even free via irs.gov. Lastly consider yourself lucky alot of people are having to explain losses from the high prices they paid at auction. lol

 

[zhisede]

Thank you guys for the info. I learned a lot here . Through google, I find another post at webmasterworld talking about this http://www.webmasterworld.com/forum25/2225.htm

it's an old post and were talking about whether the income should be filed under capital gain or ordianry income. No official statements are found yet. People filed under different categories based on their understanding. It seems that filing as ordianry income is safer but more money is taken away.

 

[fonzie_007]

If you had the names less than a year, just include them into your earned income. There is a section on the 1040 form for you to put any extra income you earned. If you had the domains over a year before you sold, you should claim the profits as long term capital gains (which is taxed at a lower rate). If you are chosing to claim as LTCG, MAKE SURE YOU HAVE DOCUMENTATION TO BACK IT UP.

If you are really getting serious into domaining, you may want to look at incorporating. An LLC will give you limited liability (i.e. if you get sued your personal assets will not be on the line, it will be the corporations) and you will be able to deduct your expenses (purchase price for domains). The downside is that the tax work gets slightly more complicated.

 

[zhisede]

fonzie, thank you for the detailed info.

If you had the names less than a year, just include them into your earned income. There is a section on the 1040 form for you to put any extra income you earned. If you had the domains over a year before you sold, you should claim the profits as long term capital gains (which is taxed at a lower rate). If you are chosing to claim as LTCG, MAKE SURE YOU HAVE DOCUMENTATION TO BACK IT UP.

If you are really getting serious into domaining, you may want to look at incorporating. An LLC will give you limited liability (i.e. if you get sued your personal assets will not be on the line, it will be the corporations) and you will be able to deduct your expenses (purchase price for domains). The downside is that the tax work gets slightly more complicated.