the lowdown on taxes for etsy sellers
DESCRIPTION
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.TRANSCRIPT
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The Lowdown on Taxes for Etsy Sellers
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Agenda
• Quick Overview of Annual Taxes
• Important Form: Your 1099-K
• Minimizing your Taxes
• Expenses & Costs of Goods Sold
• Deductions: Common deductions taken by Etsy sellers
• 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
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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.
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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)
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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.
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Profit
Profit = Revenue - ExpensesYou pay tax on this
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Profit
Profit = Revenue - Expenses
Revenue includes ALL sales and other income!
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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
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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
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All of these are included in the 1099-K total!
• Shipping revenue
• Sales tax collected
• Fraudulent payments received
• Sales that were returned
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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!
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ReconcileREDD
Carol Brady
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Reminder…. Profit
Profit = Revenue - ExpensesNow, we’ll talk about this
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ExpensesREDD
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Cost of Goods Sold
Things that go into making the items you sell
REDD
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Deductions
• Make sure that you are taking all of the non-cash deductions you can
•Let’s talk about common deductions for Etsy sellers
REDD
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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
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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
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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
REDD
• 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
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Double Check
Double check that amount on Schedule C Line 1 matches or exceeds your 1099-K reported sales (Box 1)
REDD
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Automating your work with Outright
Sign Up at Outright.com
Outright is Etsy’s preferred bookkeeping tool. It helps you see how you are doing and get ready for taxes.
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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.)
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$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
Import Your Business Income
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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
View Income Detail
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$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
Import Your Business Expenses
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$51,453.42 XYZ Sellers
$51,453.42
XYZ Sellers
Etsy Fees
Etsy
PayPal
USPS
Etsy Etsy Fees
PayPal Fees
$5.65
Slot into IRS-Approved Expense Categories
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$51,453.42$59,418.25
$51,453.42XYZ Sellers
$8,434.21
Etsy Account
$51,453.42 XYZ Sellers
Get an Overview of Biz Performance
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$51,453.42 XYZ Sellers
Review your Profit and Loss
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$51,453.42XYZ Sellers $51,453.42 XYZ Sellers
Etsy Fees $1,522.49Cost of Goods Sold $3,512.47
Analyze Spending Categories
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$51,453.42
XYZ Sellers
$508.38
Review Schedule C Worksheet
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$51,453.42XYZ Sellers
$4,423.27
4,423.27
2,433.56
9,873.97
1,911.65
$51,453.42 XYZ Sellers
Pay Your (Quarterly) Taxes
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Outright Mobile….Available for iPhone!
Get Outright on the iPhone
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Managing your sales tax obligation
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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/
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Collect and Remit
Collection is the easy part: http://www.etsy.com/help
Track and Remit Payment: