Tax Preso for Hello Craft

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Finance 101 for Your Craft
Business
Jennifer Dunn, Outright
Agenda
• Quick Overview of Annual Taxes
• Tax changes for crafters… and what to do about it!
• Minimizing your Taxes
• Expenses & Costs of Goods Sold
• Deductions: Common deductions taken by crafters
• Tips for using Outright’s free version
For the purposes of this presentation, we are assuming you are a sole proprietor or LLC
Disclaimer (Our lawyers made us do it)
•
This publication is designed to provide general information regarding the subject
matter covered. It is not intended to serve as legal, tax, or other financial advice related
to individual situations. Because each individual’s legal, tax, and financial situation is
different, specific advice should be tailored to the particular circumstances. For this
reason, you are advised to consult with your own attorney, CPA, and/or other advisor
regarding your specific situation.
•
The information and all accompanying material are for your use and convenience only.
We have taken reasonable precautions in the preparation of this material and believe
that the information presented in this material is accurate as of the date it was written.
However, we will assume no responsibility for any errors or omissions. We specifically
disclaim any liability resulting from the use or application of the information contained
in this material.
•
To ensure compliance with requirements imposed by the IRS, we inform you that any
US federal tax advice contained in this communication (including any attachments) is
not intended or written to be used, and it cannot be used for the purpose of (i) avoiding
penalties under the Internal Revenue Code or (ii) promoting, marketing, or
recommending to another party any transaction or matter addressed herein. Always
seek advice based on your particular circumstances from an independent advisor.
Annual Income Taxes
Income Tax Filing is due April 15th
(if you file for a tax extension, your tax filing is due 10/15/12)
When do you pay your income tax?
Estimated Taxes = 1/4th of your annual income tax
Due Dates (2012):
• Jan 17
• Apr 17
• June 15
• Sept 17
“Quarterly Estimated taxes” are just
your annual income taxes paid
quarterly.
What’s changing for crafters?
1099-K!
The 1099-K is a form that your CC processor
sends to you and to the IRS to report your
revenue
Who gets a 1099-K?
• 1099-K’s sent between 1/25-1/31
• You got one this year if your 2011 sales met or
exceeded:
• $20,000 or more in sales AND
• 200 or more items sold
Notes:
• All sales through one processor count towards limits
All of these were included in the total!
• Shipping revenue
• Sales tax collected
• Fraudulent payments received
• Sales that were returned
What do I do with my 1099-K?
• Reconcile… make
sure it’s right
• Expenses… lower
your taxes
• Deductions… lower
your taxes
• Double Check…
your gross receipts
REDD It!
REDD
Reconcile
REDD
Expenses
REDD
Deductions
• Make sure that you are taking all of the non-cash
deductions you can
• Let’s talk about common deductions for crafters
REDD
Cost of Goods Sold
Things that go into
making the items you sell
(More info: http://www.etsy.com/blog/en/2010/tax-tips-thecost-of-goods-sold/)
REDD
Home Office Deduction
Write off a percentage of your mortgage
payment or rent and utilities
• Follow the IRS rules, like
“exclusively and
regularly”
• Take a picture of your
home office
REDD
Contribute to Retirement
• Retirement plans aren’t just for “big
company” employees
– Individual 401(K)
– SEP IRA
• Both allow you to defer your profits (and
taxes) until retirement
REDD
Mileage
• Tracking Mileage:
– Download Mile Bug for your smart phone
– Track your odometer at the start and end of business
trips… and start and end of the year
• Choose one:
– Deduct $0.55+1/2 cents per mile driven for business
OR (not and)
– Actual vehicle expenses (gas, maintenance, repairs),
based on percentage of annual mileage used for
business
REDD
Double Check
Double check that amount on
Schedule C Line 1d matches or
exceeds your 1099-K reported
sales (Box 1)
Tips for using Outright’s free version
Outright.com/Etsy
Link Your Etsy Account
• Secure, Read-only connection
• Outright imports and organizes your transactions
XYZ
Sellers
XYZ
Sellers
$59,418.25
$8,434.21
Etsy Account
$51,453.42
$51,453.42
$51,453.42
XYZ Sellers
01/03/2012
Steven Aldrich
01/01/2012
Steven Aldrich
01/01/2012
Mike Henderson
01/01/2012
Mike Henderson
$51,453.42
XYZ Sellers
01/03/2012
Steven
Aldrich
Steven Aldrich
Steven Aldrich
01/01/2012
Steven Aldrich
01/01/2012
Mike Henderson
Mike Henderson
01/01/2012
Mike Henderson
Mike Henderson
$51,453.42
XYZ Sellers
$51,453.42
PayPal
PayPal Fees
PayPal
PayPal Fees
USPS
Shipping
Etsy
Etsy Fees
PayPal
PayPal Fees
Etsy
Etsy Fees
Etsy
Etsy Fees
$5.65
XYZ Sellers
XYZ Sellers
$51,453.42
$51,453.42
Etsy Fees
USPS
$5.65
Etsy
PayPal
PayPal Fees
Etsy
Etsy Fees
XYZ Sellers
$51,453.42
XYZ
Sellers
XYZ
Sellers
$51,453.42
$51,453.42
Cost of Goods Sold $3,512.47
Etsy Fees $1,522.49
XYZ
XYZSellers
Sellers
$51,453.42
$51,453.42
XYZ Sellers
$51,453.42
$508.38
Outright Mobile….Available for iPhone!
Final Note: Sales Tax 101
• Must have “nexus” in a state to charge sales tax (for now)
• Your state may require a sales tax or seller’s permit if you sell
physical goods
• Learn your state’s sales tax system
- Different tax rates
- Some are complicated and require you to pay
based on the buyer’s tax rate
• More Info: http://outright.com/blog/the-simple-but-sweet-guide-tocharging-sales-tax/
• Sales tax part of Outright Plus after September 2012
Thank You!
Questions?
Contact us at:
[email protected]
[email protected]
[email protected]
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