biz chat: being prepared for tax time

Craft Inc. Worksheet
(Photo of one of the worksheets in the Craft Inc. Business Planner)

 
Last week I received several emails asking for tax advice, prompting me to re-visit this tax post idea I had. Taxes can be scary and not very fun. I paid my quarterly sales tax earlier this month, which is made easier by my strict rule of putting aside sales taxes for when it comes time to pay “the man”. I know some people don’t do that, they spend all their income, and struggle come quarterly tax time. That’s a good sign that you are not pricing your goods properly. Here’s a refresher on pricing. Just because your business is based on creativity, that doesn’t mean you don’t have to operate as a real business. If you want to do this full time, you need to have a pricing structure that pays your costs and you for your time, and you need to keep accurate records to protect your business, and keep you informed on the costs of running your business.

The best advice I can give you in regards to doing your taxes is to find a CPA. Ask your local friends if they have any recommendations for one, because there are some duds out there. I love my current CPA, but my last one was not so great. You want someone that understands your position, especially if you are self employed. Last year I was really busy when tax time came, and I didn’t want to deal with getting all my receipts together (I didn’t have a good system in 2012), after my CPA worked on everything, I got a call. She said “you don’t have as many deductions as last year, what changed?” I was busted, she caught me being lazy. She filed an extension so I could get everything together. I may have been busy, but it’s more important to keep good records and take advantage of the options available to small business owners, if you want to do this full time. Having a CPA is so valuable, they will know of deductions you may not. They can also handle the researching of depreciation value on your electronics. It’s a better use of your time to let a professional handle this while you continue creating, they will most likely do a better job.

Some of these tips might be better suited to keep you on track for this year, but they will also help you get prepped for you to process your taxes from last year.

 

TAX TIP TIME!

GET ORGANIZED
Find a way to have 12 folders, a folder for every month. You could use a filing cabinet, an accordion style folder, a binder, a notebook full of pockets, file folders on your computer, etc. You want to have a file folder/pocket for every month to file away receipts and records of mileage. Choose the way that works best for you to keep organized.

>>In my monthly files I keep invoices, monthly sales data, receipts, and records of mileage. I keep digital and paper records, to keep things backed up in case of fire or digital data loss.

KEEP YOUR RECEIPTS
Something incredibly important to remember about receipts is that a lot of them can fade. Here are some ways you can keep your receipts that will last come tax time.
– The Expensify app is pretty fab! >>This is what I use, and I LOVE it.
– Scanner Pro on iPhone and link to a receipts folder in Dropbox (this tip brought to you by Meredith of smallerbox.net)
– Scan your receipts in as soon as you get home, print out and staple the original to it and put in a file folder for that month.

WHAT CAN I WRITE OFF?
So much! Here’s a little checklist of things you might forget (remember to keep receipts for everything listed):

Supplies, marketing materials, packaging, displays, etc.
Business meeting meals, meals you eat while selling at a show, and meals you eat on a road trip to a show.
Parking, toll, and gas (if you choose to write off gas vs mileage). I prefer mileage deductions. I write the name of the event I’m attending on these receipts. If you do mileage, don’t forget those local shows!
Booth payments.
Advertising payments.
Studio rent.
Utility bills.
Banking fees and credit card processing fees (for example PayPal, Stripe, Square, etc)
Shop fees from places life Etsy, BigCartel, Shopify, etc.
Services fees – web design (if you paid someone), or the cost of a site template, your CPA (hint hint), HootSuite (or other business related apps), web hosting, domain name fees, newsletter fees, etc.
Rental car.
Airfare.
Business books (e-books and e-courses count) I am even able to write off some magazine purchases. Most of the magazines I buy are $12+ and cover design, web development, business, and crafts. I write these off and the September issues of magazines (since the September issues show the fall trends).
Conference fees (don’t forget the food you ate during the conference!).

Whenever I am checking out of a place I do a quick run-through in my mind to see if my purchase is tax deductible. Don’t be too shy to ask for a receipt, often I have to irritate parking garage attendants asking for one. A Beautiful Mess has a list with more things to consider.

EXTRA BIZ TIPS!

GET REWARDS
If you get a business credit card you can get rewards for your purchases. I use American Express, and love them. I have a friend that loves Capital One. Do some research and find one that’s right for you.

READY TO CALL IT QUITS?
I’m not sure if it’s the same for other states, but in Texas, you just call the Comptroller office and tell them you are no longer in business. If you don’t do this in a timely manner you will have to pay a small fine.

Recap:
Make sure you are pricing to afford to run a business and pay your sales tax
Get Organized
Keep Receipts
Look for Rewards

Craft Inc. Business Planner

I strongly suggest you find a CPA, but understand that it’s an added expense that is not easy to pay for when you are first starting out. Definitely buy the Craft Inc. Business Planner, it’s great for starting out! If you have any questions or tips of your own, leave them in the comments below. I hope this was helpful and encourages you to keep better monthly records to make tax time easier.



Related Posts Plugin for WordPress, Blogger...

renee