This slide deck is from an educational seminar series that Etsy and Outright hosted for Etsy sellers throughout the United States. The focus is on helping Etsy sellers prepare for the 2012 income tax filing.
2. Agenda
• Quick Overview of Annual Taxes
• Important Form: Your 1099-K
• Minimizing your Taxes
• Expenses & Costs of Goods Sold
• Deductions: Common deductions taken by Etsysellers
• Automating your work with Outright
• Dealing with sales tax (time allowing)
For the purposes of this presentation, we are assuming you are a sole proprietor or LLC
3. 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.
4. Filing your annual income tax return
Income Tax Filing is due April 15, 2013
(If you file for a tax extension, your tax filing is due 10/15/13)
5. Paying your income taxes
Estimated Taxes = 1/4th of your annual income tax
Due Dates:
• Jan 15, 2013
• Apr 15, 2013
• June 17, 2013
• Sept 16, 2013
“Quarterly estimated taxes” are just
your annual income taxes paid
quarterly.
8. Revenue: Form 1099-K
The 1099-K is a form that PayPal and Etsy send
to you and to the IRS to report your revenue
9. Who will receive a 1099-K
• PayPal and Etsy will send 1099-K’s between 1/25/13
and 1/31/13
• You will get one if your 2012 PayPal or Etsy Direct
Checkout sales met or exceeded:
$20,000 or more in sales AND
200 or more items sold
Notes:
•Etsy and PayPal calculate this independently
• The limits are based on the total of all of your accounts through one
provider
10. All of these are included in the 1099-K total!
• Shipping revenue
• Sales tax collected
• Fraudulent payments received
• Sales that were returned
11. How to handle the 1099-K
• Reconcile… make
sure it’s right
• Expenses… lower
your taxes
• Deductions…
lower your taxes
• Double Check…
your gross receipts
REDD It!
15. REDD
Cost of Goods Sold
Things that go into
making the items you
sell
16. REDD
Deductions
• Make sure that you are taking all of the
non-cash deductions you can
•Let’s talk about common deductions for
Etsy sellers
17. 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
18. 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
19. REDD
Mileage
• Tracking Mileage:
– Download Mile Bug or Outright for
your smart phone
– Track your odometer at the start
and end of business trips… and
start and end of the year
• Choose one deduction:
– $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
20. REDD
Double Check
Double check that amount on
Schedule C Line 1 matches or
exceeds your 1099-K reported
sales (Box 1)
21. Automating your work with Outright
Outright is Etsy’s preferred bookkeeping tool. It helps
you see how you are doing and get ready for taxes.
Link your Import and See how
Import Prepare
business categorize you’re
income your taxes
accounts expenses doing
Sign Up at Outright.com
22. Link Your Etsy Account
• Secure, Read-only connection
• Outright imports and organizes your transactions
• Repeat this process for all your business accounts
(PayPal, credit card, bank, etc.)
23. Import Your Business Income
XYZ Sellers $51,453.42
01/03/2012 Steven Aldrich
01/01/2012 Steven Aldrich
01/01/2012 Mike Henderson
01/01/2012 Mike Henderson
24. View Income Detail
XYZ Sellers $51,453.42
01/03/2012 Steven Aldrich
Steven Aldrich
Steven Aldrich
01/01/2012 Steven Aldrich
Mike Henderson
Mike Henderson
01/01/2012
Mike Henderson
01/01/2012 Mike Henderson
34. Sales Tax
Nexus: Where do you have a physical location?
• Your house or office
• Selling at out-of-state craft shows
• Employee Locations (or helpers)
• Suppliers, in some unique circumstances
Investigate and Register: For your state(s), find out:
• Requirements
• Rates
• Exempt Items
• How to Register
http://outright.com/blog/sales-tax-resources-for-online-sellers-in-every-state/
Ask a few questions here:How many first time business tax filers?Sole proprietors or Single member LLCs? Corporations?
Basically says we are not accountants and can’t give you specific tax advice, And we aren’t liable for bad advice or if you blame us for trying to cheat the IRS
Taxes – due April 15… unless 15th falls on a weekend. Part of your personal income tax filing (Schedule C)Tax extension will get you 6 more months… but there’s a caveat (more time to file does not mean more time to pay)
IRS Is a “Pay as you go” system, and you’re supposed to pay taxes as you earn profits. Penalty is interest rate (approx 3% annual) + late payment penalty (.5% per month). You only need to pay to get up to the level you paid last year or 90% of this year’s amount.You only need to worry about this if you will owe MORE than $1k on your annual taxes
Who has heard of 1099K?Anyone know who will get them (qualifications)What numbers are reported?
This is how the government expects you to calculate your revenue for tax purposes.
Explain that 1099K is all about GROSS REVENUENot expenses and not deductionsAnd, you pay taxes on profits…. This applies to everyone, not just folks who receive the 1099-k
Understand what’s in it (it’s probably right… but you want to know what sales so you can get the associated expenses)
Don’t forget refunds and returns
COGS – keep track of what you buy! This is likely your biggest expense.Being profitable is great, until it’s time to pay taxes… then breaking even is great.
Explain roughly how it works… square footage math.Taking a picture – good for your accountant or CPA, good records in case of audit.
SEP IRA – generally easier to set up, but lower contributions Individual 401K – generally higher contributions for contribution and tax deduction… more administration, higher fees
One of the most missed deductions.Track miles… and keep all of your receipts (repairs, gas, maintenance). Then you can decide what method to use later.
The IRS has explicitly stated that mistakes with this will be an audit focus this year.
Preparing for income taxes is a matter of gathering your business-related income and expenses, and getitng it into a format required by the IRS.We will talk about each of these steps in more details.
This is the Money In screen, which shows all of your money coming in. You can see sales, shipping income, and even returns.
If you open any transaction, you can see which Etsy listing it corresponds to.
You can also see expenses.
You can also see expenses.
This is the “Overview” tab. You can see Profit and Loss, as well as Expenses. We’ve also added a bank account, so you can see how much money you have on the left. The left bar also shows how much is in your PayPal account and how much you owe. You can also click in on any of the bars to see the details. For example, if I click on October’s profits….
We have a number of reports. I will show you a few of them. This is the Profit and Loss. All of the bars are clickable, so that you can see the details. Also, you can change the parameters of the reports
You can also see your spending by category. Again, this is all clickable.
Show Schedule C
The Quarterly taxes screen gives you an idea of what your estimated taxes should be. It updates every time a transaction is added so that you always have a current running total of how much you owe
Mobile Screen Shot
Kansas, Kentucky, NY, N Dakota, Washington, Penn, Texas, CAFulfillment Center Locations: Arizona, Delaware, Indiana, Kansas, Kentucky, Nevada, Penn, S. Carolina, Tennessee, and Virginia