Organizing Your LEGO Inventory into Presorted Quantities of 10, 50 and 100

Posted on June 11, 2015 by BrickingTips
Presorted LEGO nozzle pieces

These LEGO nozzles are presorted into bags with quantities 10, 50 and 1000.

Whether you’re a LEGO seller, a LEGO builder or both, presorting your pieces into quantities in advance can streamline the process of pulling pieces from your inventory, saving you time and headaches down the road.

Using the 10, 50, 100 Quantity Rule
If you’re not sure how many pieces to put into one bag, start by presorting LEGO pieces into quantities of 10. Then, group 5 bags of 10 pieces together into a larger bag (for 50 pieces total). Finally, group 2 bags of 50 pieces together into a bag that’s larger still (for 100 pieces total).

Preventing recounts: seal bags closed with tape
You may choose not to seal the bags of smaller quantities like 10, but sealing the bags of larger quantities like 50, 100, 1000, etc. can prevent unnecessary, time consuming recounting in the future. If the bag is sealed and the tape is intact, then you can be confident that you haven’t dipped into the bag of 50 to fill and order or to complete your LEGO creation.

Presorting brings flexibility
The beauty of presorting LEGO pieces is you can “break the seal” on the larger quantities on an as needed basis. So if a buyer purchases 42 LEGO pieces, break the seal on a bag of 50. Count out 4 bags of 10 pieces, then break open a bag of 10 and count out two more pieces. Easy!

* * *

Spending a little time presorting LEGO pieces now can save you a lot of time later. Keep in mind that counting thousands of pieces in one sitting can be mind-numbing and grueling. If you find your mind wandering, take a break and resume counting later.

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Become a Top Rated Seller on eBay, Save Money on Shipping and Final Value Fees

Posted on June 4, 2015 by BrickingTips

Becoming a Top Rated seller not only earns you a snazzy Top Rated Plus seal next to your username, but also entitles you to even snazzier final value fee discounts and USPS shipping discounts.

How to Qualify as a Top Rated Seller
To become a Top Rated seller, you need to have 100 transactions from U.S. buyers with a combined value of $1000 (during the past 12 months). If that sounds like a lot just think of it as selling 9 items worth a total of $84 each month. You’ll reach Top Rated Seller status in no time!

Top Rated Seller Listing Requirements
Top Rated Sellers need to offer a 14-day money back return policy (or longer) and 1-day handling (or faster). One day handling means that if a buyer pays for an item on Monday morning at 9:57 and 33.4 seconds, then you need to upload tracking information by 11:59:59 pm Pacific Time on Tuesday.

Top Rated Sellers Need Complete, Accurate Orders and Satisfied Buyers
In a nutshell, you need buyers who are happy with the shipping speed and the condition of the item (i.e. “item as described”). You need 98% percent of your transactions to be free of “defects” like negative feedback or low “item as described” ratings. For more information on seller defects, read eBay’s Becoming a Top Rated Seller and qualifying for Top Rated Plus.

Benefits of Top Rated Seller Status
While a 20% discount on an item’s final value fees* is nothing to sneeze at, the REAL savings can come from the shipping discounts on Priority Mail (domestic and international), Priority Mail Express (domestic), and First Class International packages.

A 2oz First Class International Package retails for $7.10, but Top Rated Sellers pay on $5.48. For more detailed information about shipping discounts, see the eBay page Saving from U.S. Postal Service.
* 20% discount applies to final value fees on the item, NOT final value fees on shipping charges

Top Rated Seller discounts ONLY apply to your eBay listings
Any items you sell outside of eBay (e.g. items sold on Bricklink, BrickOwl, Bonanza, Amazon, etc.) unfortunately DO NOT qualify for Top Rated Seller shipping discounts.

Final Thoughts
While many users find Top Rated Seller discounts attractive, the 1-day handling requirement may be too demanding for eBay sellers with other jobs, commitments and all around busy lives. The bright side is all eBay sellers using eBay labels qualify for some generally lower, but not insignificant USPS shipping discounts (see the shipping discount chart on eBay).

If you can provide top-notch service and a fast turnaround, go for Top Rated Seller status. You’ll save money. Money saving aside, consistently fast shipping can earn you an even more valuable commodity–happy, repeat buyers.

Further Reading:
Becoming a Top Rated Seller and qualifying for Top Rated Plus (from eBay.com)
Savings from the U.S. Postal Service (from eBay.com)

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6 Deadly Sins of Bricklink Store Terms Pages

Posted on May 28, 2015 by BrickingTips
LEGO Sith Lord heads

Buyers who are confused or feel mislead can become angry. You won’t like them when they’re angry.

The store terms page in a BrickLink store is one of the most important pages for a buyer to read and for a seller to write. The seller describes their policies about order payment, shipping, returns, cancellation, etc. It’s vital that sellers keep Bricklink store terms as clear and concise as possible. The last thing you want is a confused buyer. At best, confusing store terms will earn you more questions from buyers. At worst, buyers will feel mislead and even angry.

1. Vague or Ambiguous Wording
Keep your store terms as clear and unambiguous as possible. I once bought from a Bricklink seller who wrote, “Orders above certain weight and price will need this service [Priority Mail].” What does a “certain weight” mean? Whatever the seller wants it to mean. The seller charged my 8 ounce order $5.99 for Priority Mail shipping (packages that are 13 ounces or under qualify for the cheaper First Class Parcel rate).

2. Hidden Fees
Buyers shouldn’t feel like a fee unexpectedly popped out at them. I once ordered from an Italian seller whose store terms said, “For payment by Paypal from Europe, the charges are 5%.” The terms made no mention of Paypal fees for buyers outside of Europe (like me). Surprise, my order got slapped with a 5% fee. The seller later changed his store terms to include the rest of the world.

3. Unnecessary Complexity
Keep your store terms simple and to the point. If the words are not absolutely essential, cut them out. Some Bricklink sellers will ramble on unnecessarily. For example, a Bricklink store terms page might say something like:

Due to rising fuel and envelope costs (who knew bubble mailers were so expensive?), I must add a $1.50 handing charge to every order over $20 or $3.00 for all orders under $20. The handing fee also covers the time it takes to sort, count, pull pieces from my inventory. Time is precious, don’t you think? On the first Wednesday of every month I will waive all aforementioned fees, but charge $1 toward the electricity cost for using my computer.

Instead of that long, meandering paragraph, just say something like, “I charge actual shipping plus $1.50 for handling.”

4. Negative Tone
Read through your store terms and count the negative words like no, not, never, etc. For example, some sellers will say, “Absolutely NO order cancelations. We are NOT responsible for uninsured lost packages. We NEVER accept returns, NO exceptions.” Try to minimize negativity.

5. Poor Layout and Visual Appeal
What do run on sentences, long paragraphs, and ALL CAPS have in common? They’re hard to read! The last thing you want to do is irritate your customers and hinder them from buying from you.

6. Outdated Information
I once placed an order in a store with terms that stated, “OUR STORE WILL BE CLOSED FROM AUGUST 1 TO AUGUST 19, 2013”. I placed that order in May 2015. Other stores highlight old shipping price increases, writing something like “Shipping rates will increase in January 2013”. Make sure that all of your store terms are up to date.

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The Missing Piece: How to Fix Incomplete LEGO Piece Orders on eBay, Bricklink, BrickOwl and Beyond

Posted on May 21, 2015 by BrickingTips

Your buyer’s order of LEGO parts is missing some of the pieces. What do you do? Counting mistakes mainly result either from human error or errors in inventory quantities. Whatever the reason, once a seller learns about a quantity mistake, they should immediately dive into problem solving mode for the sake of the buyer and for the sake of seller’s reputation as well.

If the seller notices missing pieces, contact the buyer immediately
If you know you’re short a few pieces, contact your buyer right away and tell them their options. Alerting a buyer to a shortage quickly is good practice and also gives buyer more time to order the missing pieces from other sellers.

Give the Buyer Options
The two most common fixes for missing pieces are: offering a refund or offering to mail the missing pieces. If you don’t have the pieces in stock, research the item and consider purchasing more from another seller. If you still have some of the missing pieces in stock, ask the buyer if they’d prefer a refund or if they’d rather you mailed a second shipment to them with the missing pieces.

How much should you refund?
At minimum, refund the cost of the missing pieces. I strongly encourage refunding more than the minimum–how much more is up to you. Unfortunately, many sellers will only refund for the bare minimum, which often equates to $0.10 or $1 or so.

Don’t mail coins or concealed cash
Some Bricklink sellers think it’s a good idea to mail the buyer a quarter or a dime along with an order to compensate for missing parts. Don’t do it! Buyers don’t want coins or concealed cash. I’ve even heard stories of sellers mailing United States buyers other currencies like Canadian Dollars or Euros! Instead, send the buyer a partial refund on Paypal (if they paid with Paypal). A Paypal refund, even a partial one, will also refund you a portion of your Paypal fees.

Judgement Call: Minor vs Major Shortages
If a buyer gets 1014 black 1×2 plates, a shortage of 4 plates may not be that big of a deal to the buyer (unless their project demands EXACTLY 1014 black 1×2 plates). Maybe the buyer ordered extras and 4 missing plates wouldn’t be a big problem. If a buyer gets 50 minifig shortswords, then a shortage of 2 swords might deprive 2 minifig knights of a weapon. That could be a bigger problem for the buyer.

Precise quantities can be vital to a buyer’s MOC (My Own Creation). If the the order’s missing parts, then the buyer may need go out and buy the parts from another seller and they will NOT be happy with you! That’s why I strongly recommend offering to send replacement pieces or to refund the buyer beyond the cost of the missing pieces.

Missing Pieces in International Orders
Missing pieces are never fun for buyers or sellers, but missing pieces from international orders are by far the worst. Shipping replacement parts internationally is not only costly (the minimum USPS First Class International package rate is $6.55 retail) but also takes anywhere from a week to a month for delivery.

Consider offering a generous refund to international buyers, or at least one that’s a bit more than the minimum. If the missing piece quantity is large or high value–maybe you accidentally forgot to pack all 100 pearl gold minifig greatswords–consider offering to mail the replacement parts.

A few words about offering store credit
Some Bricklink sellers will offer store credit for missing items. If you were the buyer, would you prefer store credit or a refund? Refund. If you’re dead set on offering store credit try, at least offer a higher value than the value of the missing parts.

When in doubt, put yourself in the buyer’s shoes
If you were the buyer, how would you like the seller to handle a missing pieces problem in your order? Make a list of things you would like the seller to do if you were in the buyer’s shoes.

Always strive to fill accurate and complete orders. Accurate orders not only make buyers happy and more likely to return, but also save buyers and sellers the time and hassle of finding an acceptable solution. Accurate orders are a win win and who can say no to that?

Oh, I’m lookin’ for my missin’ piece
I’m lookin’ for my missin’ piece
Hi-dee-ho, here I go
lookin’ for my missin’ piece
— Shel Silverstein (from The Missing Piece, 1976)

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Worth the Upgrade?: Comparing Domestic USPS First Class and USPS Priority Mail

Posted on May 14, 2015 by BrickingTips
USPS Priority Mail Small Flat Rate Box

A USPS Priority Mail Small Flat Rate box cost $5.95 in retail postage (as of May 15, 2015)

USPS Priority Mail is often touted as a premium shipping method that’s faster and superior to the less expensive USPS First Class.

Packages weighing 13 ounces and under qualify for USPS First Class shipping, a cheaper shipping method than USPS Priority Mail. Sometimes sellers opt to “upgrade” to USPS Priority Mail, often passing along extra costs to buyers. But is mailing a package through USPS Priority Mail actually a better value than USPS First Class?

Shipping Time
First Class (1-3 business days) 
Priority Mail (1-2 business days)
Priority Mail packages will usually arrive in the same amount of time or possibly one day faster than First Class. Priority Mail typically arrives in 1-2 business days. First Class packages typically arrive in 1-3 business days. Delivery times through both First Class and Priority are estimates only and not guaranteed by the post office.

Affordability
First Class ($4.12 maximum retail rate)
Priority Mail ($5.95 minimum Flat Rate retail rate)
A 13 ounce package costs $4.12 (retail rate) with USPS First Class while a Priority Mail 2-Day Small Flat Rate Box costs $5.95 (retail rate).

Packing Material
First Class (use your own box or envelope)
Priority Mail (FREE USPS boxes and envelopes; option to use your own box or envelope [variable weight packages only])
One of the perks of Priority Mail is the free shipping supplies that you can pick up in the post office or order online at USPS.com. You can also use your own box or envelope for variable weight Priority Mail packages only (not applicable to Flat Rate).

Insurance
First Class (no insurance provided; purchase your own insurance)
Priority Mail (Free insurance up to $50 or up to $100 for eBay Top Rated Sellers)
Priority Mail provides some free insurance. First Class does not provide any free insurance. Consider that many new sellers overestimate the importance of insurance. Statistically, lost USPS packages are very, very rare. Over thousands of transactions as both a buyer and seller, I’ve only experienced a handful of lost packages. Some packages might take the scenic route, but nearly all USPS packages arrive safely at their destination.

Free USPS Carrier Pickup
First Class Packages (qualify for FREE carrier pickup)
Priority Mail Packages (qualify for FREE carrier pickup)
Both First Class packages and Priority Mail packages qualify for free USPS carrier pickup. See the USPS.com Schedule a Pickup page for more information.

* * *

The Verdict? Priority Mail adds some convenience for sellers; increases shipping costs, adding minimal value to buyers
Shipping packages 13 ounces and under with USPS Priority Mail primarily benefits sellers. Sellers enjoy the convenience of the free shipping materials and flat rate pricing (no postal scale required) and the security of the built in $50 of insurance (or $100 for eBay Top Rated Sellers). Priority Mail retail costs $1.83 to $3.88 more than First Class retail packages. If a buyer’s order costs $20 (including First Class shipping), a $3.88 Priority Mail upgrade would raise the buyer’s price by nearly 20%.


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A 7 Step Guide to Buying LEGO Internationally on BrickLink.com

Posted on May 7, 2015 by BrickingTips

Buying LEGO from other countries on BrickLink.com may sound intimidating, but some international sellers, particularly in Germany and Poland, offer fantastic prices and higher quantities than United States sellers. International sellers may also offer rare or out of production LEGO parts not available from sellers in the United States.

Ready to take the plunge and buy from an international seller? Great! I know it’s scary, but many new things are scary, aren’t they? Let’s walk you through some key things to consider when buying from an international seller.

1. Finding out shipping prices
Yes, international shipping is often more expensive than domestic shipping. Make sure you have a sense of what you will be paying for shipping. Shipping prices vary vastly from country to country. Many sellers post shipping charts in their store terms. Leave several ounces of buffer weight for packing material–typically the weight shown in shipping charts INCLUDES packing material. When in doubt, contact the seller in advance and ask them for a shipping quote.

2. Spotting Paypal or Handling Fees
Legally, United States sellers CANNOT charge buyers a “Paypal fee” for paying with Paypal. The same laws do not apply in other countries, so some international sellers on BrickLink charge buyers for paying with Paypal. Common Paypal fees from international sellers range anywhere between 2 and 5%. Look for Paypal fees in the seller’s “Store Terms & Conditions” section as well as their “Payments Accepted” and “Payment Methods” sections.

3. Dealing with a Language Barrier
If you’re afraid of running into a language barrier, consider that many international sellers know at least some English. Also, although translating programs like Google Translate are far from perfect, they should work well enough for you to get your point across with a seller. In over 10 years of buying and selling items around the world, I’ve never experienced a total communication breakdown due to a language barrier with a buyer or seller.

4. Learning about Customs Fees
Currently, there are no customs fees for goods under $200 entering the United States. That said, I’ve ordered LEGO worth $250 or so and never been hit with extra forms or fees. But maybe I’m just lucky. For more information about customs fees, please read the U.S. Customs and Border Protection page about internet purchases.

5. Understanding Currency Conversion Fees
Whenever possible, pay for your Bricklink orders in U.S. dollars (or your local currency). Some sellers only accept payments in their own local currency (e.g. Pounds, Euros, Zloty, Kroner, Won, etc), so you don’t always have the option to pay in dollars. But if the seller does accept U.S. dollars, pay in U.S. dollars.

Here’s an example of why you should pay in your local currency. I made an order from a Polish seller. If I paid in U.S. dollars, the price is $146.30. If I paid for the same order in Polish Zloty, 555.93 PLN, that would cost me $157.13. Why are the prices different? If I’m converting my U.S. dollars into another currency like Polish Zloty, Paypal charges me currency conversion fees.

6. Coping with International Returns
International returns suck, plain and simple. Save yourself the expense and hassle of international returns by researching ahead of time and making sure you’re buying exactly what you want for the price that you want. I’ve made hundreds international orders over the years and never needed to return anything.

If the seller makes a mistake and sends you the wrong item or shorts you some pieces, it’s their responsibility to fix it. Since international shipping is expensive, many international sellers will offer a refund or store credit for missing items. Ask for a refund. Why should you be obligated to buy from that seller again? The seller is the one who screwed up.

If you’d like to return an item to an international seller because you don’t want it anymore or because you found it cheaper somewhere else, you typically must pay for return shipping. The cheapest international package rate, via USPS First Class International, is $6.55 retail (slightly cheaper online) for up to 2 ounces.

7. Allowing extra time for shipping and potential customs delays
Don’t ever count on speed when you order internationally. Most standard international shipments arrive anywhere between one week and one month after you pay for your item. On occasion you might have to wait even longer than one month. Even if you pay extra for expedited shipping, your order could get delayed in customs. If you need an item fast, you’ll probably want to stick with a U.S. seller. Domestic shipments through USPS First Class or USPS Priority Mail usually arrive within a zippy 1 to 3 days after mailing.

Further Reading:
8 Reasons NOT to Ship Internationally (BrickingTips.com article)
How Packages Can Be Delayed Beyond Your Control (BrickingTips.com article)

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A Scanner Brightly: The Pros and Cons of Using Scanned Images of LEGO Pieces in eBay Listings

Posted on April 30, 2015 by BrickingTips
LEGO Hoth Rebel Troopers

A scanner produces a highly detailed and professional image of these Star Wars Hoth Rebel Trooper LEGO minifigs.

If you’re selling LEGO pieces on eBay then chances are you’ll need to add your own photos to the eBay listing. Since most LEGO pieces are small, detailed, or both small and detailed, you might consider using a scanner to capture the nuances of the LEGO pieces you’re selling. Here’s a look at some of the pros and cons of scanning your LEGO pieces.

Pros of Using a Scanner
Scanners Produce Clean, High Quality, Professional Images
Scanners produce higher quality photos than many cheap point and shoot cameras or camera phones. Your buyers will be able to see everything from patterns and print details to the LEGO logo on a plate stud to prove that the pieces are genuine LEGO.
Tip: Some cheap scanners DO NOT provide high quality scans. I bought an inexpensive 3-in-1 printer, scanner copier. Although the scanner works fine for documents, scans of three dimension objects like LEGO pieces turn out blurry.

Scans are loaded directly onto your computer
Since scans are loaded onto your computer you don’t need to mess with loading the images from a memory card, like you may have to do with some cameras.

Ability to scan several items at once
You can easily scan several items at once–whatever fits on the scanning bed–then go back and crop the individual items later.

Cons of Using a Scanner
Limited Space on the Scanning Bed
A big constraint of using a scanner is that the pieces you’re scanning need to fit into the scanner (duh!). If all the pieces don’t fit in one scan, then you could divide the lot into two or three scans. But if the item is larger than the scanner, then you’ll need to photograph the item instead.

LEGO police helmets

These LEGO police helmets are not easily scanned. The helmets tip to side on the scanner bed and do not show the “Police” lettering, an important feature of the piece.

Some LEGO pieces are difficult to scan
Some LEGO pieces don’t balance on the scanner glass. The police helmets on the right would not show the “Police” lettering if they were scanned instead of photographed.

Medium Azure LEGO pieces

The top panel pieces show the dimensionality of the piece. Some of the bottom panel pieces only show one side, making the panel look like a tile. Watch out for deceptive “flatness” while scanning LEGO pieces.

“Flat” Images
Scanned LEGO pieces can sometimes look flat look compared to photographs. If you scan one side of a LEGO panel, for example, the piece might look more like a tile, which does not provide an accurate representation of the piece for your buyers.

Scanning May Take Longer than taking a photograph
Depending on your scanner settings and the resolution of the scan, taking a scan of a LEGO item may take longer than taking a photo. Scan multiple items at once to save time and crop individual items later.

Putting a piece of cardboard behind a white or clear LEGO piece creates a contrasting background.

Putting a piece of cardboard behind a white or clear LEGO piece creates a contrasting background.

Scanning Certain Colors May be Difficult
Scanning white or clear LEGO pieces can be a challenge due to the white backdrop on the scanner. Putting a piece of tan cardboard or colored paper behind the white or clear item may fix the problem by providing a contrasting color to the item.

LEGO Pieces May Scratch the Scanner Glass
If you’re planning on using the scanner for other things like photos, be careful because scanning LEGO pieces might scratch the glass over time.

 

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3 Easy Ways to Slash Your eBay and Paypal Fees

Posted on April 23, 2015 by BrickingTips
LEGO minifig katanas

Top Rated eBay sellers slash both shipping costs and final value fees.

Selling on eBay isn’t cheap. Many sellers have been grumbling about climbing eBay fees for years. Ebay sellers shell out cash for many things including: listing fees, store subscription fees, listing upgrades, 10% eBay final value fees, and 2.9% + $0.30 domestic Paypal fees, among others.

Despite high fees–and whether you like it or not–eBay still exposes items to a larger buyer market than many other cheaper selling platforms like Bonanza.com.

Although steep eBay and Paypal fees cannot be eliminated, there are three easy ways to cut your eBay and Paypal fees and keep more money in your pocket.

1. Become a Top Rated Seller on eBay
Save 2% on eBay final value fees
Top rated sellers on eBay enjoy a 20% discount on final value fees. For example, a typical final value fee is 10%. The 20% Top Rated Seller discount reduces the final value fee to 8%.

The basic requirements for becoming a Top Rated Seller include:
– at least 100 eBay transactions with U.S. buyers during the last 12 months
– at least $1000 in eBay sales with U.S. buyers during the last 12 months
– must have 1 business day handling time
– for additional requirements and the most detailed and up to date information on becoming a Top Rated Seller, see eBay’s official page, Becoming a Top Rated Seller and qualifying for Top Rated Plus

Top rated Sellers also earn discounts on postage
Beyond saving 2% in final value fees, Top Rated Sellers also earn Commercial Plus pricing when you use eBay labels for postage. See eBay’s page entitled Savings from the U.S. Postal Service.  

2. Pay your eBay fees with a cash back debit card or credit card
Earn 1% Cash Back
If your monthly eBay fees are $500 and you pay using a 1% cash back debit card, that means you get $5 back each month or $60 back each year. Where can you get a debit or credit card that offers 1% cash back? The easiest place to look is Paypal–Paypal offers a 1% cash back debit card.

3. Enroll in the Paypal Merchant Rate Discount Program
Save 0.4-1% in Paypal fees
UPDATE: Paypal eliminated all Merchant Rate discounts on October 1, 2015
If you consistently get purchase payments of more than $3000 each month on Paypal, you may qualify for a Paypal fee discount of at least 0.4%. Paypal does NOT automatically enroll you in the merchant fee discount program–you must opt into the program yourself. Read the BrickingTips.com article The Hidden PayPal Merchant Rate for more details.

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Self Employment Retirement Accounts for eBay sellers: An Overview of SEP IRA, SIMPLE IRA and Solo 401(k) Plans

Posted on April 16, 2015 by BrickingTips
LEGO coin pieces

After maxing out a Traditional or Roth IRA, self employed eBay sellers may consider opening a SEP IRA or Solo 401(k).

Whether you’re selling part time or full time on platforms like eBay, consider saving part of your income in a retirement account.

This article is intended to provide a brief overview of some of your retirement investment plan options in order to whet your appetite to dive into additional research on your own.

Roth or Traditional IRA
The first type of retirement account a self employed person may consider opening is a Traditional IRA or a Roth IRA. For the 2014 and 2015 tax years, the maximum contribution to a Roth IRA or Traditional IRA is $5,500 (or $6,500 if you’re 50 or old).

Self Employment Retirement Funds: SEP IRA, Solo 401(k) and SIMPLE IRA
If you find yourself maxing out your annual Roth or Traditional IRA contribution limit, then it’s time to think about opening a self employment retirement fund. The three most common self employment retirement funds are: SEP IRAs, Solo 401(k)s and SIMPLE IRAs.

SEP IRA (Simplified Employee Pension IRA)
A SEP IRA, according to the IRS, allows you to “Contribute as much as 25% of your net earnings from self-employment (not including contributions for yourself), up to $52,000 for 2014 ($53,000 for 2015)”. If you’ve already got a 401(k) plan through work, you can still contribute to a SEP IRA for your side business selling on eBay.

Solo 401(k) (aka Individual 401(k))
A Solo 401(k), also called Individual 401(k), is similar to a 401(k) you would get through work. Opening a Solo 401(k) requires significantly more paperwork than opening a SEP IRA or SIMPLE IRA (Hint: That IRA even has ‘simple’ right in the title). A Solo 401(k) also offers a Roth option, while SEP IRAs and SIMPLE IRAs only offer traditional pre-tax contributions.

SIMPLE IRA (Savings Incentive Match Plan for Employees IRA)
A SIMPLE IRA, according to the IRS, allows you to “put all your net earnings from self-employment in the plan: up to $12,000 in 2014 and $12,500 in 2015 (plus an additional $2,500 in 2014 and $3,000 in 2015 if you’re 50 or older) in salary reduction contributions and either a 2% fixed contribution or a 3% matching contribution.” The penalty for early withdrawals from a SIMPLE IRA within the first two years of establishing the plan is 25% (if you’re under 59.5 years old). After two years, the early withdrawal fee drops to 10%.

Which retirement plan should I choose?
Generally, a Solo 401(k) allows for the highest contribution and also offers a Roth option. Solo 401(k)s also require the most paperwork to set up out of the three plans. SEP IRAs have minimal paperwork and can be set up online in minutes.

You’ll likely be choosing between a Solo 401(k) (if you’re eBay business is big) and a SEP-IRA (if your eBay business is medium or small).

Ignorance is NOT bliss: Don’t put off opening a retirement account!
When I started out selling LEGO on eBay I didn’t know the first thing about self employment retirement plans. In fact, I hadn’t even heard of any of the self employment retirement plans before! After I started maxing out my annual Roth IRA contribution, I began wondering about additional retirement plan options. I dove into research mode, did a fair amount of Googling and finally stumbled onto information about Solo 401K, SEP IRA and SIMPLE IRA options for eBay sellers and self employed people in general.

Investing in a retirement account is investing in your own future. If you’re just starting your eBay business, thinking about saving for retirement may seem overwhelming. Even if you can only set aside a small amount each month, start the habit of investing in your retirement.

Plan options may also seem overwhelming–honestly, many of the details are a bit complicated–but do some research online. Many websites thoroughly examine pros and cons of opening each type of self employment retirement account and can help you choose with type is the best fit. You can also call brokerage firms like Fidelity, Vanguard, Charles Schwab, etc. and they can help you open an account and answer your questions.

Self Employment Retirement Account Resources:
Retirement Plans for Self-Employed People (a web page on the official IRS website)
SEP vs. SIMPLE vs. Solo 401(k) (article on Oblivious Investor)
SEP IRA vs. Solo 401(k) – Which is Better? (article on Investor Junkie)

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Income Tax for eBay Sellers: Paying Your Estimated Taxes Accurately and On Time

Posted on April 9, 2015 by BrickingTips

Disclaimer: This article is meant for informational purposes only and does not constitute tax advice. For tax advice, please seek a tax professional. For the most up to date tax information, refer to IRS.gov.

The good news is your eBay business is starting to take off. You’re turning a profit this year. Awesome! But if you’re a sole proprietor or self employed, like many eBay sellers, and expect to owe the IRS $1000 or more in taxes this year, then you are required to pay estimated taxes.

What are estimated taxes? 
According to IRS.gov, estimated taxes are:

…used to pay income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty.

When you work for a company, your employer withholds your income tax for you. Easy. When you sell stuff on eBay and expect to pay $1000 or more in income taxes in a year, then you must send the IRS checks or electronic debits of estimated tax payments throughout the year (or in one lump sum in advance). If you expect to owe less than $1000, then you can wait until you file your tax return to pay.

How do I calculate how much I need to pay in estimated taxes?
Many accounting programs like Intuit or GoDaddy Bookkeeping will calculate estimated tax for you. Otherwise, use last years tax return as a starting point then estimate whether you expect to earn more or less money this year. You may adjust your estimated tax payments throughout the year if your income fluctuates. IRS Form 1040-ES can help you calculate your estimated tax payments as well.

What if I overpay estimated taxes?
There’s no penalty for overpaying estimated taxes. If you end up paying more taxes than you owe, then you might qualify for a tax refund when you file that year’s tax return.

What if I underpay estimated taxes?
Be careful, underpaying estimated taxes could land you a penalty! You need to pay at least 90% of the tax for the current year OR 100% of the tax shown on the previous year’s tax return (whichever is smaller). Any underpayment and/or penalties (if applicable) must be paid for when you file your tax return. High-income taxpayers ($75,000+ in 2014), must pay 110% in estimated taxes in advance to avoid an underpayment penalty.

Estimated Tax Payment:
Due April 15 (for income received Jan. 1 through March 31)
Due June 15 (for income received  April 1 through May 31)
Due Sept. 15 (for income received June 1 through Aug. 31)
Due Jan. 15 (for income received Sept. 1 through Dec. 31)

What if I pay estimated taxes late?
Paying your estimated taxes late could trigger a penalty. Please refer to the Estimated Tax Payment Calendar.

How do I pay estimated taxes?
The IRS accepts payments online, by phone or by mail. Please refer to the IRS website for more detailed instructions.

What about state estimated taxes?
Laws regarding estimated state income taxes vary from state to state. Please refer to your state government’s website for more tax information.

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No two taxpayers are alike. If you have questions about your specific tax situation, contact the IRS or consult a tax professional.

Resources:
Estimated Taxes (from IRS.gov website)
The Skinny on paying estimated taxes (article on Bankrate.com)

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