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Hello Money community,

A quick tax question for NY/USA.

Say an online shop sends me a 5k check in my name and not under a corporation, to order 300 glass cups.

And I'm sort of the middle man and I will be using 4k that I got to order the 300 cups from the factory in China. That would leave me with 1k profit after all expenses are paid.

Since I'm receiving the money as a personal entity, will I be taxed on the 5k or 1k?

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You are in business for yourself. You file Schedule C with your income tax return, and can deduct the business expenses and the cost of goods sold from the gross receipts of your business. If you have inventory (things bought but not yet sold by the end of the year of purchase), then there are other calculations that need to be done. You will have to pay income tax as well as Social Security and Medicare taxes (both the employee's share and the employer's share) on the net profits from this business activity.

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  • I agree with this answer but would like to add that when you are in business for yourself, it is probably best to get a CPA, unless you know a good deal about taxes.
    – ninja coder
    Aug 3, 2012 at 13:59
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    @user4358 If the business is small, it is possible to manage without a CPA even for people who don't know a good deal about taxes. There are several user-friendly software packages available for managing small businesses, and tax return preparation software packages that integrate with the accounting packages to make life easier for the small business owner.
    – Dilip Sarwate
    Aug 3, 2012 at 14:47
  • I do agree, but I have found it much easier to ask a CPA about what qualifies as a fixed asset and what expenses can be written off versus a piece of software. I think it depends on the complexity of your business, how confident you are with taxes, and how much you are willing to spend.
    – ninja coder
    Aug 3, 2012 at 14:51
  • I know several people who thought they could do as Dilip said. At least until the IRS came knocking on their door. Get a CPA, if you are really small it won't cost much because they won't have much to do. As you get bigger it'll cost more but then that's a good thing, because it means your business is growing. You should be spending your time managing and marketing your business, not bookkeeping. I'm sure you will lose out on far more money by spending your time bookkeeping when you could have been out getting more business instead than how much you'd pay a CPA.
    – Dunk
    May 14, 2013 at 18:52
  • @Dunk Does "I know several people who thought they could do as Dilip said. At least until the IRS came knocking on their door." mean that you want readers to infer that what I suggested above is tax fraud?
    – Dilip Sarwate
    May 15, 2013 at 13:18

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