He didn't started a company anyway. Selling old clothes and old toys in ebay doesn't make us a company, does it ?! What if we sold $200k worth in old toys ?! Paypal would take our money anyway...
Yes, selling old clothes and toys on eBay makes you a business. If you do it under your own name, you are a sole proprietorship. In the US, your business (the sole proprietorship) will attach a Schedule C reporting its business income (the proceeds of those eBay sales) with your federal tax return. If you sold $200k worth of old toys, PayPal would ensure the IRS knows you owe taxes as it'd report the income on a Form 1099-K, as they're required to do for any account holder with over $20k in annual sales.
No, PayPal would ask for your ssn to make sure you're paying the taxes on the 200k you just made. Yes, if you sell 200k in old toys on eBay, you owe the IRS a pile of money.
why ? I thought you pay tax by residence in most cases.
I know when I worked in US I elected to pay taxes in Canada because I wasn't moving to states (there is tax treaty)
I'm assuming you're selling the toys in the US. If you're selling them in somewhereelseistan, then you probably don't have a US paypal account and none of this matters. Unless you are using a US paypal account, in which case, whoopsie, should have sorted that out ahead of time. Don't funnel money through a country if you're not doing business in that country.
If you buy $1000 of toys and then sell them on eBay for $200 later, then you won't owe tax because you had a loss of $800. However, if you were audited, you might have to prove that the toys originally cost you $1000. If this is the only unusual item on your return, it's unlikely that an auditor will bother with it.
However, if you went to, e.g., China and bought $200 of toys and came back to the US and sold them for $1000, then you will have to pay tax on the $800 of profit.
