The Lowdown on Taxes    for Etsy Sellers
Agenda    • Quick Overview of Annual Taxes    • Important Form: Your 1099-K    • Minimizing your Taxes        • Expenses &...
Disclaimer (Our lawyers made us do it)•   This publication is designed to provide general information regarding the subjec...
Filing your annual income tax return    Income Tax Filing is due April 15, 2013   (If you file for a tax extension, your t...
Paying your income taxesEstimated Taxes = 1/4th of your annual income taxDue Dates:•   Jan 15, 2013•   Apr 15, 2013•   Jun...
ProfitProfit = Revenue - Expenses       You pay tax on this
ProfitProfit = Revenue - Expenses   Revenue includes ALL sales and other income!
Revenue: Form 1099-KThe 1099-K is a form that PayPal and Etsy send  to you and to the IRS to report your revenue
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 ...
All of these are included in the 1099-K total!• Shipping revenue• Sales tax collected• Fraudulent payments received• Sales...
How to handle the 1099-K• Reconcile… make  sure it’s right• Expenses… lower  your taxes• Deductions…  lower your taxes• Do...
REDD       Reconcile          Carol Brady
Reminder…. ProfitProfit = Revenue - Expenses       Now, we’ll talk about this
REDD       Expenses
REDD         Cost of Goods SoldThings that go intomaking the items yousell
REDD                Deductions• Make sure that you are taking all of the  non-cash deductions you can•Let’s talk about com...
REDD           Home Office Deduction Write off a percentage of your mortgage payment or rent and utilities• Follow the IRS...
REDD       Contribute to Retirement• Retirement plans aren’t just for “big  company” employees – Individual 401(K) – SEP I...
REDD                      Mileage• Tracking Mileage: – Download Mile Bug or Outright for   your smart phone – Track your o...
REDD       Double Check               Double check that amount on               Schedule C Line 1 matches or              ...
Automating your work with Outright  Outright is Etsy’s preferred bookkeeping tool. It helps   you see how you are doing an...
Link Your Etsy Account• Secure, Read-only connection• Outright imports and organizes your transactions• Repeat this proces...
Import Your Business Income                                XYZ Sellers   $51,453.42  01/03/2012   Steven Aldrich  01/01/20...
View Income Detail                              XYZ Sellers   $51,453.4201/03/2012   Steven Aldrich             Steven Ald...
Import Your Business Expenses               XYZ Sellers     $51,453.42      PayPal       PayPal Fees      PayPal       Pay...
Slot into IRS-Approved Expense Categories                                    XYZ Sellers   $51,453.42                     ...
Get an Overview of Biz Performance                                         XYZXYZ Sellers                                 ...
Review your Profit and Loss             XYZ Sellers   $51,453.42
Analyze Spending Categories               XYZ Sellers             XYZ Sellers     $51,453.42                              ...
Review Schedule C Worksheet             XYZ Sellers   $51,453.42                             $508.38
Pay Your (Quarterly) Taxes                             XYZ Sellers     $51,453.42               XYZ Sellers      $51,453.4...
Get Outright on the iPhoneOutright Mobile….Available for iPhone!
Managing your sales tax obligation
Sales TaxNexus: Where do you have a physical location?   • Your house or office   • Selling at out-of-state craft shows   ...
Collect and RemitCollection is the easy part:http://www.etsy.com/help Track and Remit Payment:
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The Lowdown on Taxes for Etsy Sellers

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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.

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  • Hi Jesse, you'll have to download the presentation to your computer and then open it in Powerpoint to print it. To download it, click on the 'Save' button above the slides. If you have trouble doing this, feel free to email me at lynette@outright.com. Thanks for your interest!
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  • 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
  • The Lowdown on Taxes for Etsy Sellers

    1. 1. The Lowdown on Taxes for Etsy Sellers
    2. 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. 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. 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. 5. Paying your income taxesEstimated Taxes = 1/4th of your annual income taxDue Dates:• Jan 15, 2013• Apr 15, 2013• June 17, 2013• Sept 16, 2013 “Quarterly estimated taxes” are just your annual income taxes paid quarterly.
    6. 6. ProfitProfit = Revenue - Expenses You pay tax on this
    7. 7. ProfitProfit = Revenue - Expenses Revenue includes ALL sales and other income!
    8. 8. Revenue: Form 1099-KThe 1099-K is a form that PayPal and Etsy send to you and to the IRS to report your revenue
    9. 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 soldNotes: •Etsy and PayPal calculate this independently • The limits are based on the total of all of your accounts through one provider
    10. 10. All of these are included in the 1099-K total!• Shipping revenue• Sales tax collected• Fraudulent payments received• Sales that were returned
    11. 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 receiptsREDD It!
    12. 12. REDD Reconcile Carol Brady
    13. 13. Reminder…. ProfitProfit = Revenue - Expenses Now, we’ll talk about this
    14. 14. REDD Expenses
    15. 15. REDD Cost of Goods SoldThings that go intomaking the items yousell
    16. 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. 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. 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. 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. 20. REDD Double Check Double check that amount on Schedule C Line 1 matches or exceeds your 1099-K reported sales (Box 1)
    21. 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. 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. 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. 24. View Income Detail XYZ Sellers $51,453.4201/03/2012 Steven Aldrich Steven Aldrich Steven Aldrich01/01/2012 Steven Aldrich Mike Henderson Mike Henderson01/01/2012 Mike Henderson01/01/2012 Mike Henderson
    25. 25. Import Your Business Expenses XYZ Sellers $51,453.42 PayPal PayPal Fees PayPal PayPal Fees USPS Shipping $5.65 Etsy Etsy Fees PayPal PayPal Fees Etsy Etsy Fees Etsy Etsy Fees
    26. 26. Slot into IRS-Approved Expense Categories XYZ Sellers $51,453.42 XYZ $51,453.42 Sellers Etsy Fees USPS $5.65 Etsy PayPal PayPal Fees Etsy Etsy Fees
    27. 27. Get an Overview of Biz Performance XYZXYZ Sellers Sellers $51,453.42 $51,453.42 $59,418.25 $51,453.42 $8,434.21 Etsy Account
    28. 28. Review your Profit and Loss XYZ Sellers $51,453.42
    29. 29. Analyze Spending Categories XYZ Sellers XYZ Sellers $51,453.42 $51,453.42 Cost of Goods Sold $3,512.47 Etsy Fees $1,522.49
    30. 30. Review Schedule C Worksheet XYZ Sellers $51,453.42 $508.38
    31. 31. Pay Your (Quarterly) Taxes XYZ Sellers $51,453.42 XYZ Sellers $51,453.42 $4,423.27 1,911.65 9,873.97 2,433.56 4,423.27
    32. 32. Get Outright on the iPhoneOutright Mobile….Available for iPhone!
    33. 33. Managing your sales tax obligation
    34. 34. Sales TaxNexus: 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 circumstancesInvestigate 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/
    35. 35. Collect and RemitCollection is the easy part:http://www.etsy.com/help Track and Remit Payment:

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