Mark Tew from Not Your Dad’s CPA answers common reseller tax questions. Don’t let taxes be a roadblock in your flipping journey!
Get $50 off the Reseller Tax Academy with the code: FLEAMARKETFLIPPER
Not Your Dad’s CPA website
Not Your Dad’s CPA YouTube
Reseller HangoutPodcast - Mark Tew
Rob: What's up, guys? On today's episode, we get to interview Mark Tew, super excited because it's everybody's favorite topic: taxes. We love talking about taxes. Absolutely not, but Mark is the expert and we are so blessed and so excited to have him here today that we can actually pull some information out of him, and help everybody get a better handle on taxes. Mark, thanks for jumping in here with us.
Mark: Absolutely. Yeah. Happy to be here and talk to you guys.
Melissa: I'm glad to have you. So before we jump into some of the fun tax questions, give us a little bit of background, how you got into reseller taxes and just tell us a little bit, a little bit about you.
Mark: Yeah, yeah. It's I dunno, I wouldn't, you know, I did corporate finance. I was a CPA, but I didn't, I didn't do taxes or anything on the side, but I just decided like, I should probably leave. You know, just to see if it's something I like, even though I never wanted to be like, you know, an owner of a CPA firm or something.
But, you know, I saw it was a good way to, to make some extra money. And then I eventually,, you know, started doing returns for people who are selling on Amazon and on eBay. And that's around the time when I started selling a little bit on Amazon as well, and it just sort of snowballed. And I said, I'm just, I'm just going to make this my area of focus, my niche.
And, it's just sort of grown from there.
Melissa: Awesome.
Rob: That's awesome. What a great niche, especially for us, because that is what we need help with is for sure on the taxes portion, for sure.
Melissa: I don't know if you've seen this. Like, it's one of the biggest obstacles I think resellers face when they're wanting to get into this is taxes. I think it's a huge obstacle.
Mark: Yeah. So Istarted, you know, I was like, I should probably start a YouTube channel. So I did like a year and a half ago. And I was posting consistently for, I think every week or every two weeks for awhile until this last, last tax season hit. And then I just stopped for months, months.
But I finally started up again, sort of, I posted like two or three videos. But, but just, just before then, I was like, okay, I need to figure out like what I'm doing with this channel. And I actually booked a consultation with, a pretty popular like YouTube coach guy on YouTube. And I'm just a, nobody for him.
But, but I, I shelled out the money and I did a consult for him. I told him what I was doing. He was like, yeah, I don't, I don't know if that's really gonna, it's like, I think you got to like expand what you offer. And I was like, I don't know. This is a pretty like engaged community. So. I dunno. So, so anyway, I recently posted this video that has just like, for me it's I mean, relative to my other videos, it's gone viral.
It's got, I think it's up to 150,000 views and I'm just like what?
Melissa: That's awesome.
Rob: That's awesome. Yeah, definitely. Since we're talking about YouTube, give us how people can find you on YouTube. You guys, mark is amazing. He's got some awesome, awesome advice. You do not want to miss it. If you can jump over to YouTube and check out some of his, definitely his videos, they will help you a hundred percent.
So Mark, how can they find you on YouTube as well?
Mark: Yeah, that's just, I'm not your dad's CPA is my channel on YouTube. And that wasn't to promote, that was just saying like how, how much of a marketer, how much of a need there is for reselling and taxes as painful as it is.
Rob: Absolutely. We know it, it is a big market out there for resellers.
So, no, we're, like I said, we're so happy that you're in that market. And yeah, that you provide all of us such great information at what you do. So, yeah, definitely. But we also want people to understand you do these videos as well. You, you try to give as much information as you can. We greatly appreciate that about you.
So yeah, we're very thankful for that and want people to be able to connect with you as well.
Melissa: Yeah. We'll definitely have those in the show notes too at the end. So, let's get to some of the questions. This is the second time we got to interview Mark which is really cool. So we got, I think we got to know you a little bit.
Last year we got to around tax season. I think it was right around tax season, the busy time for you. I'm sure. So one of the, big question, not a question, but like, can you tell us the difference, I think when somebody is starting in reselling, they get confused by okay the difference between income tax and sales tax.
Cause you hear, you hear it's used the same, like, okay. Taxes. What does that mean? Like what is the difference in and yeah, just what's the difference between the two of those?
Mark: Yeah. I mean, those get confused all the time. I'll either do someone's taxes or I dunno, be in some type of discussion with them.
And then they'll send me a tax form and there'll be like, I got, I got this form, like didn't we do these? Or what is this? And I'll be like, oh, this is actually your sales tax is totally separate from income tax. So they're, I mean, they're two totally separate things. So your income tax is just. I mean, usually people are thinking of their federal income tax, like the IRS, you know, they're taxing you on your income, but sales tax is just, it's it's usually assessed at the local level.
So your state and that's just tax that you're supposed to collect, well tax that's supposed to be collected on your sales and then remit it to the state. But for the most part, that's all taken care of by the platforms now. So eBay's doing the collecting, Amazon, Poshmark, they're doing the collecting for you.
So most people don't have to worry about it. The only, the only time that you kind of have to worry about it is if you are registered for a sales tax permit in order to have a reseller certificate so that you don't have to pay sales tax on the purchase of your inventory, that you're going to sell to people or sell to your customers.
So if you are registered for a sales tax permit, even though eBay is taking care of it for you, or whoever. They're still going to expect you to file a sales tax return. You just won't owe any tax on that sales tax return. You'll just list basically, you know, your sales, but also you're going to deduct that same amount.
And then the, the taxable income is going to be zero. So I know I just said a lot, but that's like one of the most common questions people have, like what, why do I have to submit a sales tax form? I thought eBay does it kind of thing?
Melissa: Yeah. We've definitely, I've gotten hit with those, with fees for free for forgetting to do it because I think I'm thinking in my head, oh, I don't have it.
I don't owe anything because eBay is taking care of it. Like, oh, I still got to file it. So I I've missed a couple of days, which is not good. But, so for local sales, typically you would have to still do that. If you were doing more local sales, like a lot of local sales.
Rob: Yeah, I guess if you're like, if you're selling outside of a platform.
Melissa: Yeah, but we actually did it in Florida.
We just got to where eBay is starting to do that. So we've had to, to be, reporting that ourselves and paying it. So they just took, eBay just took over Florida, which is very helpful. So now I can just not have.
Rob: Yeah but it was only the sales that happened from us in Florida. It wasn't the sales all over the country, wherever. And typically we do not sell a lot of stuff in Florida. We ship our stuff out, the majority of it. So. So good to know for sure, absolutely.
Melissa: That you still have to do it if you have a seller certificate. So we've never even really used our certificate to get anything at wholesale. We don't really do a lot.
Rob: I think for me, I'd rather just pay the sales tax and be, yeah, I don't have any more issues for sure.
Melissa: So I actually asked our Instagram if people had questions for you. So I got a couple of questions that I wanted to ask from them to, somebody asked, how do you figure out, how do you figure out your income taxes if you don't get a W2? So.
Mark: Yeah, like if you don't, well, yeah, if you don't have W2 or if you just have reselling income, maybe?
Melissa: You, maybe you don't get a 1099 either.
Mark: Yeah. So, I mean, that's where record keeping comes in here. You know your bookkeeping. Yeah. So assuming you are assuming you do have some type of records of your income and your expenses.
I mean, the main thing you're gonna want to do is just get, an estimate of your profit for the year. And then you base your, that the profit is subject to self-employment tax, which is 15%. And then that profit is also gonna be subject to income tax. So there's two separate federal taxes. You're hit with the regular income tax and the self-employment tax.
The one that people sometimes aren't expecting if they're new. So it could be anywhere between 15 and 25%
Melissa: And that's on the?
Mark: On the profit.
Melissa: That's all calculated.
Mark: Some people, if you want to be real conservative could just say, okay, I'm going to set aside a third of my profits for taxes.
Melissa: Just to be on the safe side. Better, safe than sorry. Right. What do you find is the best way, for people to keep track of their records? So is there one way you should do it or what do you suggest?
Mark: Yeah, there's not one way it's not a one size fits all. Just kind of depends on what you're comfortable with and what makes sense based on your business.
I mean, some people really enjoy spreadsheets. Don't mind, you know, keeping track of stuff in spreadsheets. And I think spreadsheets are fine if that's how you want to do it. If you're like, no, that's not, for me. You can get something that's more automated. And there are, there are simpler, automated programs like GoDaddy bookkeeping or QuickBooks self-employed, or they're more robust bookkeeping programs like QuickBooks online.
And there's a bunch of them. But, but again, like I see people mess those up all the time. So then it's like, are you going to learn how to do it properly? Or do you want to hire someone that, so again, it's just, it just depends on your comfort level and like what, what the needs of the business are a lot of options.
Melissa: Would even a physical like pen and paper record, good record, as long as you're keeping good records, would that suffice?
Mark: Yeah. Yeah. I mean, some people do use like handwritten log books, which is fine if you're comfortable with that.
Melissa: So it was basically just keeping good records of your income and your expenses. No matter how you do it, just stay consistent and use something, right?
Mark: Yeah. That's probably one of the biggest differences between my wife and I like, whenever you want to talk about the budget, she like gets out some piece of some piece of scratch paper and just like starts writing and stuff. I'm like, no, no, no, no, no.
Let's sit. Get out the spreadsheet and she's like, that doesn't make any sense to me. So just depends.
Rob: Yeah, but that is a great point. If this is stopping you, if taxes or stopping you from your reselling business, do not let it, like Mark said, you can keep great records in a log book in a notebook, whatever you do that you keep great records at that.
And that will suffice. That's all that you need to do to keep track, to be able to do the taxes for sure.
Melissa: Okay. So the biggest question right now in the whole reselling arena at the moment is the new 1099 threshold. So can you explain what it is, what happened? And like, people are all nervous about it, but really it didn't change much.
You still have to keep records. So can you explain what it is and what's going on with all that?
Mark: Yeah. So that's my YouTube video that is getting a lot of views right now, actually. And I'm like, I think it's just like, people are so afraid and they think it's this new thing. And now they have to pay tax that they didn't have to pay before.
But like you said, that's not really the case. It just, well, yeah, just, I mean, before a lot of people had heard about the, the $20,000 threshold. Like, if you, if you sold more than $20,000 through your platform and 200 transactions, then you'd get a 1099. Now the, the misconception about that was that if you didn't get a 1099, that you don't have to pay taxes, but that was never the case.
Like, even if you sold less than $20,000 and didn't get the 1099, you still had to pay taxes. But with, with one of the recent stimulus bills, they reduced that $20,000 threshold down to just $600. So anybody who's selling over $600 on a platform or through a payment processor, those payment processors are required to send those individuals at 1099 and sent one to the IRS as well.
So the IRS is now going to know about anybody who has sold anything, you know, sold in excess of $600 online. So yeah. Yeah, nothing's changed if you already paying your taxes, but I think there were probably hundreds of thousands, maybe millions who weren't. So.
Melissa: Yeah, we, I mean, we used to think that back in the day, too, that if you didn't hit the threshold, that you didn't have to pay it.
Like, we didn't realize that that was years ago, but that's not the case, so you still have to pay it so I could see how people now, like you might not get away with it if you weren't paying.
Mark: Yeah. And one of the biggest questions I'm seeing now, like in the comments is people are like, does that mean I have to pay on my Venmo transactions on my friends and family PayPal, you know, when I send my mom a gift or something, and that's not the case, but I mean, some people are, think it is so they're rightfully freaking out if that were the case, but it's, it's not, it's just business transactions.
Rob: Good to know.
Melissa: So, is Venmo doing it to Venmo's giving you a 1099?
Mark: I don't, I think so, but I don't, I don't know. I think, if yeah, I don't know for sure. Cause doesn't Venmo do they have a way only if they have a way to ,distinguish, like what's for personal and what's for business. I know they have business accounts. Those will probably get 1099s
Melissa: I think I just have, I mean, I've only ever done personal.
I've never seen an option to do business, so maybe it is just if you have a business account. Yeah.
Mark: And I'm sure that'll mess it up too. Like I'm sure people will get 1099s for, just like friends and family payments. So that's just a matter of. I mean, you, you don't have to pay tax on that.
That's just a matter of clearing it up with the IRS.
Melissa: So that, that brings a good point. So if you get a 1099 and say, you get a 1099 from Facebook marketplace and half the stuff you sold was personal, but as long as you have the records of like, what was actually profitable and what wasn't like, what your expenses were, then you won't be paying taxes on that, correct?
Mark: Right. Yeah. There, you would be able to account for that on your taxes in a way that makes it simple. You only pay tax on what you should.
Melissa: I saw one example going around, somebody was confused or asking about say, they said, okay, so say I sold, I bought a couch for $700. I used it. I sold it for $600 now, am I getting taxed on that $600?
So how would you like you wouldn't get taxed on that because you paid $700 for it. Right?
Mark: And then you sold it for six?
Melissa: And then you sold it for six. So it would be a loss of a hundred dollars.
Is that correct?
Mark: Yeah. And if, and if you don't ever sell anything on eBay, like if you don't, if you're not already a reseller and you don't sell that through your store, then that's just like a personal loss.
Non-deductible, there's nothing you can do there, but if you were already a reseller and you're like, hey I'm going to put this for sale in my store then it becomes like business inventory, and then you can actually take that loss as part of your business, you know, to reduce your overall tax.
Melissa: Gotcha. That would actually help in that situation.
Yeah. But if you only ever sold personal and you weren't a reseller, like say on marketplace or whatever, like, are you only selling your own personal stuff and you get a 1099 for something over $600. Like if say I sold a thousand dollars, but it was all my personal stuff and I'm not a reseller.
How would that affect somebody?
Mark: I mean, even if it's your personal stuff, if you're selling it often and like, if, if you're doing it for profit, the IRS might say, well, This is your personal stuff, but you're, you're basically a sole proprietor. If it wasn't at a profit, then it doesn't matter anyway. And if puts out a loss, then it's only going to benefit you actually to report it.
Melissa: Okay. So yeah. So you won't get any, you won't get penalized for selling personal stuff. That is that a loss? So it's only if you're making money?
Mark: Typically at a loss. So yeah, there's no impact.
Melissa: Okay.
Rob: For sure.
Melissa: That bring up any questions for you?
Rob: No. It makes sense though, for sure. I mean, most people who are selling their own stuff, they are taking a loss at it because you're spending usually more for it using it and then selling it.
So you, yeah, that's a, that's definitely a good thing to know.
Melissa: Yeah, cause that has been the biggest one right now. I'm not surprised that that video went viral because that is a huge question right now in the reseller arena. So you don't have to freak out that it was a $600 threshold, unless you weren't paying your taxes before, then maybe you have some reason to, for you.
Rob: Now you got to, no matter what.
Melissa: Gotta just keep good records though. And that brings us to the next question. So as a, if I'm doing this as a business, even as a side hustle, what can resellers write off? What can I write off for our taxes?
Mark: Yeah, I mean, the, the biggest one is just like the cost of the thing you're selling itself.
So like, you can deduct the inventory that you purchased. That's your cost of goods, sold deduction. That's typically your biggest deduction. So you definitely want to know how much you're paying for all that. And then pretty much, I mean, you can adapt almost anything that you, any expense that you incur, as part of the operation of your business.
So like, you know, office supplies, shipping supplies, shipping, software, like a bookkeeping software. The, do you have contractors, legal fees, registration fees, like pretty much, pretty much. Well, not anything. I mean, some things are just like partial deductions, but most of them are pretty straightforward.
Melissa: So that's where keeping good records again, falls into play.
Rob: What about mileage or gas? For us typically when we find something we have to go drive sometimes 10 miles, sometimes 20 miles, to pick it up. Is that a write-off off for mileage and gas for that item that we pick up to resell?
Mark: Yup. Yup. So you can deduct either your mileage or your gas.
Plus other actual expenses like your maintenance, repairs, insurance. So it's like mileage or your actual expenses. You just have to choose a method and stick with it pretty much.
Melissa: And if you like, say most people work from home, if they're doing this as a side hustle, or, I mean, obviously we could write off, we have a warehouse that we pay rent on.
So that's obviously an expense. But what about somebody doing this just out of their house? Like, is it a percentage of their house or how does that work?
Mark: Yeah. So if you work out of a space from your home and you use that, that space or that office, exclusively and regular live regularly for your business, then you can take the home office deduction, which yet basically gives you, allows you to deduct a portion of your home expenses through your business.
Melissa: Yeah. So you can do a portion. Yeah. What do you see as some, one of the, like, what do you see as common questions that people have as a reseller? Like what are some of your big blocks that people come to you?
Mark: Yeah. I mean, it's a lot, a lot of the questions are similar. I mean, one big one I get is like, do I need to save all my receipts? That's a pretty common one. And yes. So the answer to that one is not necessarily, I mean, you definitely don't need to keep the physical receipt.
The IRS does want you to have, ideally you'd have some type of substantiation or proof for every transaction that's in your, in whatever books that you have. It doesn't have to be receipt. It could be, an invoice or a bill or potentially a bank statement. You know, some forms of substantiation are stronger than others.
So as long as you have something it's going to be fine. And the next, the next question is, well, I do a lot of garage sales and they don't give me a receipt. So what do I do then? And I mean, I think, I think the IRS knows that they're not going to like force you to produce the receipt when it's impossible.
So I think as long as you create your own record, like maybe you have a log book, you just write down what you purchased that day, where you purchased it, how much it was. If you're really nervous, you could take a picture. You know, so it's, it's not, not nothing to worry about too much.
Melissa: Well we do a lot of the flea market and yard sales. Those are really hard to you. You don't really want to ask people for receipts. Like, why do you need a receipt? So that's not typically something that, but you keep a running log before we put it in a spreadsheet. We just a running tally on note section and the phone of the date in the item, what we paid for it.
So we have two small records, so yeah, cause receipts. And that does stop a lot of people. We, I know that people get nervous about not having a receipt, but yeah if you keep your good records, that shouldn't be an issue.
Mark: And it's just so unlikely that anybody ever drills down and looks at that level of detail.
Like even me, like I just. Yeah. For the, for the small stuff, you know, you'll get like a, a receipt email or something and half the time I'll just delete all that stuff. Cause, cause I'm just so confident. There's no way anybody's ever going to audit me to down to that, like $15 level or whatever. So yeah, it's definitely not something stress too much.
Rob: Yeah, good to know.
Melissa: Yeah. But yeah, we just keep those, keep those other good records. Yeah. So somebody now is a new reseller. They're going to file taxes for the first time. It was a recent, like maybe they're using, can they still use like TurboTax or how does that work? Do you, at what point do you recommend working with somebody or what is, what are your thoughts on that?
Mark: When you do start some type of business and have, have self-employment income, that is a milestone that should, should at least cause you to ask the question, because it's an additional layer of complexity that you have to deal with on your tax return.
You know, same thing. Like if, if you get married or if you have an inheritance or all these different, like life events, but, but, but it's not a hard rule that you necessarily needed to CPA that it comes down to your comfort level again, I think, cause even if, even if you can do a good job with turbo tax, which a lot of people can just the peace of mind.
I mean, I know a lot of people that just like are sweating as they like click through the questions and stuff and they're like, I hope I'm doing this one. Right. Am I supposed to put that there for ending inventory? Why is it asking me that? So, and if you prefer. Yeah. Yeah, yeah. Just, it just depends. Cause some people are like, oh yeah, this makes sense.
And yeah, TurboTax can do a good job, but still, if you do TurboTax, you just want to make sure you get the right version. I don't know the exact name, but if you just get the regular individual package, it doesn't even ask you questions that are going to account for your business. You have to get like the self-employed version.
So it actually incoporates that schedule C that you need for business on your tax return.
Melissa: Yeah.
Rob: That sparks a question. If say I didn't want to do it by myself and I started reselling and I'm doing decent at it. What would I, and I don't know if you can answer this or not. I just thought of it, but what, what should I expect if I did go to a CPA or a tax person, for them to be able to do my taxes?
Is that a loaded question or, do you guys know, like how much would it cost me to go to somebody? Cause some people are going to be like, I don't want to take the, the risk or, you know, maybe I'm not doing it right. I want to go to somebody, but I don't even like how much should that cost somebody who's startingto flip in and in doing decent at it?
Mark: Yeah. I mean, it's, it's, it's gonna vary, I mean mine right now are typically around $450 probably average that's for like the regular tax return with that schedule C self-employment piece incorporated into it. You know, $300 or $400 maybe on the lower end $500 or $600 maybe even $700 on the high. It just, it just depends.
Rob: Okay. That's good. I just wanted a ballpark. Yeah.
Melissa: They didn't want the headache.
Rob: If you don't want to sweat while you're doing your taxes, that's typically, like Mark said is probably what you can expect to pay is that, that ballpark right there. So it's great information.
Melissa: Yeah. And Mark actually does this for resellers also, and we actually just lost our tax lady.
So we might be coming to you, Mark. We just got an email saying she's retired. Sorry, I'm retiring this year on like on the whim, I'm like, no, no. So we've been going to her for probably six or seven years now. Cause we used just TurboTax forever. And then once it's past to like getting a W2 for me to your jobs, I'm like, yeah, this is getting a little bit too complicated.
I just kinda keep my good records and bring them into somebody. So it makes it good peace of mind. Yeah. And then you also have your course reseller tax academy that help resellers if they want to do it on their own to learn what they're supposed to do. Correct?
Mark: Yup. Yup. So in, in it, a question I get about that is like, is this going to help me learn how to do my taxes?
And the answer to that is not necessarily like, you know, you can watch TurboTax tutorials on YouTube and stuff, but what it's going to help you to do. I mean, if you have somebody else do your taxes, it's going to help, you know, what's going on and have effective communications with a tax professional.
Or if you do to your taxes, you're not going to be sweating as much as you click through those questions are going to be like, oh, I know why it's asking me about my beginning and an ending inventory. I know why it's asking about, you know, my home office square footage. So it just, it just helps, you know, what's going on.
It helps, you know, the things you need to do during the year that are gonna help you optimize your tax situation, because there's only so much your tax preparer can do when you come to them at the end of the year with the stack, your stuff. Here, you can go send me a bunch of money and they're like, you know, it's like your dentist.
He'll be like, well, you should have been brushing and flossing all year long, but you didn't do any of that stuff. So there's not a lot I can do right now.
Melissa: Yeah. So it's being prepared to go to that appointment or for when you do it on your own or whatever it is or not somebody to do it. So, so where can they find that at?
Well, actually, we're going to put a link in the show notes, but it's resellertaxacademy.com? Okay. resllertaxacademy.com. And Mark has given us a code, fleamarketflipper. You can use that. And we get, what percentage off was it again, Mark?
Mark: $50.
Melissa: $50 off.
Rob: Awesome.
Melissa: Awesome. So yeah, so check out the link in the show notes if you're interested in learning more in depth of what you need to get your taxes prepared and do them correctly. So hopefully reduce the amount of stress in your life from taxes. So.
Rob: For sure. Awesome, Mark. Well, thank you so much for jumping on here. We greatly appreciate your time, your friendship, in this tax arena that most people are scared of and you've given us some great, great information to, to keep going forward with our reselling business. So thank you. Thank you. Thank you.
Melissa: And we'll link a YouTube in the show notes as well. Go find Mark on YouTube. Go check out his stuff. He's got a lot of great information. Check out the course. And if you want somebody to do your taxes, I pretty sure you're still doing that right? For our resellers? Are you maxed out?
Mark: Still doing it coming up against my max. So I got to figure it out if I'm going to expand my team or not. We'll see.
Melissa: Awesome. Awesome, awesome. That's good place to be good place to be. Well, thanks so much for hopping on here. Thank you.
Yeah. Thanks for having me.