The IRS made an adjustment to my previous tax return and said I owe big due to unfiled eBay/PayPal earnings. Am I screwed?

You some options. First verify their adjustment is correct. The people at the IRS don’t know everything and the vast majority can barely do their job. A huge part of my job is going to the IRS on behalf of my client and proving their position is incorrect and my client doesn’t owe any additional tax.

Then even if you do owe the additional amount assessed you can file for an installment plan (pay over time), offer in compromise (pay lump sum because you don’t have enough money to pay the tax before the SoL expires), or as to be classified as currently not collectible (I’m broke go away).

You should also do some tax planning if you’re going to continue to have this type of income.

The worst thing you can do is take the letters you keep receiving and ignore them. Pick up the phone and call the IRS or hire a professional to deal with them for you.