finance 101 for your craft business jennifer dunn, outright
TRANSCRIPT
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!
ReconcileREDD
ExpensesREDD
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-the-cost-of-goods-sold/)
REDD
Write off a percentage of your mortgage payment or rent and utilities
Home Office Deduction
• 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)
REDD
Tips for using Outright’s free version
Outright.com/Etsy
Link Your Etsy Account
• Secure, Read-only connection• Outright imports and organizes your transactions
$51,453.42
$59,418.25
$51,453.42XYZ Sellers
$8,434.21
Etsy Account
$51,453.42 XYZ Sellers
$51,453.42 XYZ Sellers
Steven Aldrich
Mike Henderson
Mike Henderson
Steven Aldrich
01/01/2012
01/01/2012
01/01/2012
01/03/2012
Steven Aldrich
Mike Henderson
Mike Henderson
Steven Aldrich
Steven Aldrich
Mike Henderson
Mike Henderson
Steven Aldrich
$51,453.42 XYZ Sellers
01/01/2012
01/01/2012
01/01/2012
01/03/2012
$51,453.42 XYZ Sellers
Etsy
Etsy
PayPal
Etsy
USPS Shipping
Etsy Fees
Etsy Fees
PayPal Fees
Etsy Fees
$5.65
PayPal PayPal Fees
PayPal PayPal Fees
$51,453.42 XYZ Sellers
$51,453.42 XYZ Sellers
Etsy Fees
Etsy
PayPal
USPS
Etsy Etsy Fees
PayPal Fees
$5.65
$51,453.42 XYZ Sellers
$51,453.42XYZ Sellers $51,453.42 XYZ Sellers
Etsy Fees $1,522.49Cost of Goods Sold $3,512.47
$51,453.42XYZ Sellers $51,453.42 XYZ Sellers
$51,453.42 XYZ Sellers
$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-to-charging-sales-tax/
• Sales tax part of Outright Plus after September 2012
