I have a question for y’all. How many of y’all sell on social media? I am talking about selling on Facebook, Twitter, Instagram, or Snapchat? I see a lot of “pop” up shops that open up on social media. They are doing one of two things:
Selling items on social media and accepting payment with one of the many cash apps that are available.
Posting where they will be at for a certain day and then opening up their pop shop and selling until they sell out.
I love the entrepreneurial spirit and the hustle behind this! That is the true definition of the being an entrepreneur. I know you can make some good money and have the temptation of not reporting it because it is just cash transactions but I will say that is not the correct route to take. Every person should be reporting all the of the income that they make during the taxable year along with every applicable expenses.
Now I know y’all are sitting here saying “But Jose, how will the IRS even know we are doing this?” Well right now they are not. They have no way of tracking it. But… and thats a big but, the IRS is working on something now to be able to track that. They National Procurement Office put out a request for a tool to mine social media accounts to be able to track those shops that operate directly on social media. They said that the tool would be used to assist with previous tax compliance cases and would not be used to create new tax audits.
This is strictly an opinion of mine but I find it hard to believe that once they have that information in hand that they will not use it. Again I want to emphasize this last statement is just my own personal opinion.
How does this affect you? If you do not have a previous tax compliance file then they say you will be ok but my recommendations is why even bother with it. You should prepare your taxes reporting all the income and expenses that are allocable. Do you need help with this? Let us know! We would love to help you out!