Individuals who participate in online sales at auction sites such as eBay face a plethora of bookkeeping and tax issues regarding their entrepreneurial ventures. Some people choose to ignore the issues and simply not report their financial activity.Earlier this spring, the IRS completed a National Research Program study in which it was determined that an annual tax gap of more than $300 billion exists. The tax gap represents the difference between the amount of tax that should be paid and the amount actually paid in any given year.

Furthermore, the study found that more than $100 billion of the tax gap is a result of understated business income earned by individuals. No specific determination has been made regarding the amount of understated business income that might be derived from online reselling.

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