Keeping Track Of Yard Sale Purchases For Tax Reasons
Hi Terry,
My question is mundane & boring - sorry! BUT it’s an important detail.
My wife & I get a lot of the goods we sell on eBay from Garage / Yard / Estate / Tag Sales. For the tax man the cost of purchase is a legit deduction, but you need to have proof of purchase. Sometimes an estate sale is run by an auction company, and will provide receipts, but most are “home” run and do not. If you ask for a receipt, or pull out your own book an ask for a signature, you can get a really cool reception. Some won’t do it at all.
Any suggestions? Is there a better way to do it that still satisfies the IRS?
Phil
First of all, I am not an accountant or a lawyer. Your accountant can probably give you better advice. I can only share a few things done by other dealers with the same problems.
There are a few points here. First of all, you’ll have to have a cost for the goods sold. The IRS will not question that you actually purchased the tems you are selling.
After stating that, the problem becomes one of keeping track of your purchases in a systemized manner.
I keep a “receipts” of my purchases by writing the name, address and phone number on an index card along with the date and amount of the purchase.
One of my freinds writes checks from his business for the amount of every purchase. He just makes them out to cash and uses them to replenish his purchasing funds. This also serves to enter the cost of his purchases into his bookkeeping program.
Another dealer I know writes everything down in a log book from a office supply store. Someone else writes everything down in a spiral notebook. I know someone who writes everything on a large desk calendar, then files the pages.
Personally, I think keeping the records in a clear and consistant manner will be good enough in the event you are audited.
If you are also keeping receipts for gas, meals and other expenses incurred while shopping at garage sales, and doing everything as your accountant has instructed you, you should be fine.
One thing I find very helpful is an accordian file with a pocket for each month. Everything I need for my taxes goes into the right pocket.
Terry
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