If you sell tickets to events as a business or side gig, you’ll need to report the income and expenses related to those sales on your tax return. This includes sales from concert, sports, theater, or other entertainment event tickets sold directly or through a broker. Reporting ticket sales properly ensures you pay the right amount of tax on any profits. It also allows you to deduct eligible expenses to reduce your taxable income. Keep reading for a step-by-step guide on how to report ticket sales on your taxes.
Do I Need to Report Ticket Sales?
Yes, you must report all income earned from ticket sales on your tax return, even if the income is considered “side hustle” or hobby income. The IRS requires you to report any money you earn through self-employment. This includes:
– Income earned from selling tickets directly to customers
– Commissions or fees earned from selling tickets through a brokerage or distribution service
– Any other revenue associated with ticket sales, such as service fees or shipping charges
The tickets can be for any type of event – concerts, sports, theater, conventions, festivals, etc. It does not matter if you are selling a few tickets on the side or running a major ticket brokerage. The income must be reported.
What Tax Form Do I Use?
Report income and expenses from ticket sales on Schedule C (Form 1040), Profit or Loss from Business. This form is filed along with your standard Form 1040 personal tax return.
If you operate your ticket sales activity under a business name, you may also need to file Schedule C-EZ, Net Profit from Business. Use Schedule C-EZ only if:
– You have no employees
– You have total expenses of $5000 or less
– You use the cash method of accounting
– You have no inventory
– You did not have a net loss from your business
If you do not meet all of those requirements, use the standard Schedule C.
How Do I Report My Income?
You’ll report your gross ticket sales income on Line 1 of Schedule C. This includes:
– The total face value of all tickets sold
– Any additional service, delivery, or processing fees
– The value of any non-cash transactions, like tickets given in exchange for advertising
Be sure to keep detailed records and receipts throughout the year to accurately calculate your gross income. Examples of records to maintain include:
– Sales invoices and receipts
– Bank and credit card statements
– Accounting system data
– 1099-MISC forms received from ticket brokers
– An inventory of unsold tickets
If you receive payments through third-party platforms like PayPal or Venmo, don’t forget to include those sales too. The income from every single ticket you sell, regardless of the source, must be reported.
Can I Deduct Expenses?
Yes, you can deduct eligible business expenses related to your ticket sales. Common deductions include:
– Fees paid to ticket brokers and distribution services
– Credit card processing fees
– Advertising costs
– Office supplies
– Professional services like legal or accounting
– Licenses and permits
– Websites and hosting
– Travel and transportation
– Telephone and internet expenses
– Ticket printing and distribution costs
You’ll report your total expenses on Schedule C, Line 28. You must keep receipts and records to prove all expenses claimed. If you use part of your home exclusively for the business, you may be able to deduct a portion of utilities, insurance, and other home office costs as well.
You can subtract eligible expenses from your income to determine your net business profit or loss for the year.
What About Sales Tax?
If you are required to collect sales tax on ticket sales in your state, you do not report these amounts as income. However, you do need to remit the sales tax you collect to your state’s taxation department. Generally, you will need to file periodic sales tax returns reporting how much tax you collected and remitted.
Check with your state to determine:
– If you are required to collect sales tax on ticket sales
– What sales tax rate(s) apply
– How often you need to file sales tax returns and remit payments
– Sales tax recordkeeping and reporting requirements
Keep good records of the sales tax you collect and remit so you can provide documentation if ever audited or requested by your state.
Can I Offset Losses?
If your ticket sale expenses are greater than your income, you will show a net loss on Schedule C. You can use a current year net loss to offset other income on your personal tax return, reducing your overall tax liability. You typically report the loss on Form 1040 Line 12.
However, the IRS limits how much loss you can claim if the activity is considered a hobby rather than a for-profit business. With a hobby, you can only deduct expenses up to the amount of income earned. Any additional loss cannot be used to offset other income.
To qualify as a business, you must show you are engaged in the activity to make a profit. Keep records that demonstrate your profit motive and time/effort devoted to the business.
Do I Owe Estimated Taxes?
When you have self-employment income, you typically need to make quarterly estimated tax payments to avoid penalties. Estimated payments are due four times per year:
– April 15th
– June 15th
– September 15th
– January 15 of the following year
You generally must make estimated tax payments if you expect to owe at least $1000 in taxes for the year after subtracting any withholding and credits. Use IRS Form 1040-ES to calculate and pay estimated taxes. If you do not make required estimated payments, you may have to pay penalties.
How Long Should I Keep Records?
The IRS requires taxpayers keep records that support income, deductions, and credits claimed on a tax return until the period of limitations expires for that return. For federal taxes, that time period is a minimum of 3 years from the date you filed your return. Some states may require you keep records longer.
It is best to keep supporting records for at least 5-7 years to be safe. This includes your sales documentation, receipts, canceled checks, accounting data, and any other documentation that shows your income and eligible business expenses related to ticket sales.
Are There Special Rules for eBay or PayPal Sales?
If you sell tickets through sites like eBay or PayPal, there are some specific things to note:
– eBay fees – Any listing, insertion, final value, or other fees paid to eBay to list or sell tickets are tax deductible as business expenses. Keep detailed records of all fees.
– PayPal fees – Transaction and other fees paid to PayPal are also deductible. Download annual statements showing your fees.
– Form 1099-K – If you had over 200 sales transactions and $20,000 in gross sales through either platform, you should receive a Form 1099-K reporting your gross sales. This amount may not match your actual income due to refunds or fees. Make sure to reconcile your records with the 1099-K.
– Sales tax collection – If you sell tickets on eBay or PayPal, you may be responsible for collecting and remitting sales tax. Check both platform’s rules carefully for sales tax compliance.
What About Foreign Sales?
If you sell tickets to events held in foreign countries, you still must report that income to the IRS. Whether you actually owe U.S. tax on the income depends on the source rules:
– Income from foreign ticket sales is not taxable in the U.S. if the sale was made while you were a bona fide resident of a foreign country.
– Foreign income from ticket sales is taxable if you have a U.S. tax home and meet certain other criteria classified under the physical presence test.
In many cases, you will not directly owe tax to the U.S. on foreign sales income if tax was paid to the foreign country. Just be sure to file the appropriate forms, such as Form 2555 for foreign earned income exclusion or Form 1116 for foreign tax credits.
Are There Any Special Reporting Rules?
Here are some additional special reporting rules that may apply:
– Form 1099-MISC – If you paid over $600 to any contractor or freelancer for services related to your ticket sales, issue them a 1099-MISC after year-end. Send copies to the IRS.
– Form 1099-NEC – Use form 1099-NEC instead of 1099-MISC if what you paid was non-employee compensation only.
– Form W-9 – Have contractors complete W-9 forms so you have their tax ID information for 1099 reporting.
– Cash payments – There are strict rules around reporting cash payments over $10,000 received for sales of goods or services. Research whether you have any cash reporting requirements.
– Ticket resales – You may receive Form 1099-S if you sell tickets through a resale marketplace or broker. Although proceeds are reported on 1099-S, you must still claim the income on your Schedule C.
What if I Only Sold a Few Tickets?
Even if you only sold tickets to a few events on the side, you still must report that income if it meets the IRS filing thresholds:
– Gross income over $400 from self-employment
– Net earnings over $400 from self-employment
Theself-employment income filing threshold is typically much lower than the standard minimum income threshold to file a tax return. Schedule C and Form 1040 must be filed to report even small amounts of income from ticket sales.
What About State Taxes?
In most cases, you will also owe state income tax on earnings from ticket sales in your state. Report the income on your state tax return similarly to your federal return.
However, requirements can vary widely by state. Research state filing thresholds, forms to use, allowable deductions, and other rules to ensure compliance. Many states have separate sales tax rules as well.
Can I Get Help with Reporting?
Reporting income from ticket sales properly can be complicated, especially if you are new to business taxes. Consider hiring a certified public accountant or enrolled agent for help. They can:
– Set up accounting systems to track income and expenses
– Determine the best methods for recordkeeping
– File your tax returns correctly, maximizing deductions
– Ensure you avoid common mistakes and do not underreport income
– Help you stay compliant with estimated tax and sales tax rules
– Advise you on the most advantageous business structure
Their expertise can save you time, frustration, and money in the long run. They can also represent you if you ever get audited. Professional help is a deductible business expense.
Conclusion
Reporting your ticket sales properly is critical for staying compliant and avoiding penalties from the IRS and state tax authorities. Be sure to report all income earned on Schedule C, keep detailed supporting records, deduct eligible expenses, and make quarterly estimated payments on your profits. Following the guidelines here will help you report your ticket sales activity completely, accurately, and on time. Reach out to a tax professional if you need extra help getting it right.