Do I Need to Open a Separate Bank Account for My eBay Business?

Business Income
While you may think of your eBay sales as a simple sideline or a way to get rid of that old cuckoo clock, the IRS constitutes those sales as business income. Setting up a separate bank account makes it easier to keep track of that business income and keep it separate from your personal earnings.
Tracking Income
Tracking the income you make on eBay is essential, and a business account can make that a lot easier. When running your eBay business you need to account for the expenses imposed by eBay and by Paypal, since those charges can really add up. If you have a separate bank account just for your eBay business, you can easily determine how much you made, net of expenses, for each of your auctions.
Tracking Expenses
Tracking the expenses associated with your eBay business is essential, and it is much easier to keep track of your costs if you have a separate bank account. For instance, many sellers on eBay buy products specifically to resell on the site. By using a separate bank account to buy those items, you can easily track how much it costs you to host each auction.
Simpler Accounting
Setting up a separate bank account for your eBay business makes your tax planning and tax preparation a lot easier. No matter how small your eBay earnings may be, the IRS still considers those sales to be income. If you fail to report that income, you are inviting an inquiry, and possibly even an audit, by the IRS. Starting on January 1, 2011, Paypal is required to report transaction information for large account holders, currentlyl defined as those who do at least $20,000 worth of business and receive at least 200 transactions. If this new law affects you it is imperative that you establish a separate bank account for your eBay business.
Paypal Concerns
If you sell on eBay you receive payment for your auctions through Paypal. This payment system allows buyers to pay for their purchases using a bank account or credit card number, and it also provides buyers with protection from fraud and shoddy merchandise. While this is a good thing, if there is a dispute regarding one or more of your auctions, Paypal could temporarily freeze your account. If you have a separate account for your eBay business, you can link only that account to Paypal. That way if a dispute does arise, only that account is affected. If you link your personal account to Paypal, you could lose access to those funds while Paypal completes its investigation.