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01-09-2017
08:15 PM
Hi everyone!
We know that filing your taxes can certainly be complicated when you run your own business! So, this Thursday, January 12th, from 2:00 - 4:00 p.m. EST, we’ll be working directly with Veronica, a QuickBooks ProAdvisor and CPA, to answer all of your tax questions and offer some tips and tricks to help make this tax season a little less stressful. We’ll need you to submit your questions before the Q&A, so read on to understand how to get involved and tune in.
>>When: Thursday (1/12/17) from 2:00 - 4:00 p.m. EST
>>Where: Right here!
>>Who: You and Veronica, a QuickBooks ProAdvisor and CPA
>>How: Post your QuickBooks and/or tax-related questions here in this thread and vote for the questions you’d like to see answered. You can vote for specific questions by clicking the small thumbs up in the top right corner of the individual post. While voting is enabled, members may vote for up to three questions. If you vote a fourth time, your first vote will not count. Questions that are hostile, off topic, or unproductive won’t get answered.
Voting will close at 11:00 a.m. EST on Wednesday (1/11) to give Veronica a little time to research your questions. Then on Thursday we’ll be back here in this thread answering the top voted questions from 2:00 - 4:00 p.m. EST. Don’t forget to refresh the page throughout the session as we’ll be highlighting Veronica’s answers so they appear on the first page!
(Pro tip: Be sure to read through all of the questions before posting your own. It is possible it may have already been asked. If so, give it a vote!)
While we will try to get to as many questions as we can, this Q&A is mainly focused for those located in the US seeking tax advice and we may not be able to answer International tax-related questions.
Disclaimer: This Q&A is for educational and informational purposes only and should not be relied on for tax, legal, or accounting advice. Please consult your personal tax, legal and accounting advisors with questions about your finances. Etsy and the author disclaim all responsibility for any and all losses, damages, or causes of action related to use of this information.
Thanks and we look forward to your questions!
We know that filing your taxes can certainly be complicated when you run your own business! So, this Thursday, January 12th, from 2:00 - 4:00 p.m. EST, we’ll be working directly with Veronica, a QuickBooks ProAdvisor and CPA, to answer all of your tax questions and offer some tips and tricks to help make this tax season a little less stressful. We’ll need you to submit your questions before the Q&A, so read on to understand how to get involved and tune in.
>>When: Thursday (1/12/17) from 2:00 - 4:00 p.m. EST
>>Where: Right here!
>>Who: You and Veronica, a QuickBooks ProAdvisor and CPA
>>How: Post your QuickBooks and/or tax-related questions here in this thread and vote for the questions you’d like to see answered. You can vote for specific questions by clicking the small thumbs up in the top right corner of the individual post. While voting is enabled, members may vote for up to three questions. If you vote a fourth time, your first vote will not count. Questions that are hostile, off topic, or unproductive won’t get answered.
Voting will close at 11:00 a.m. EST on Wednesday (1/11) to give Veronica a little time to research your questions. Then on Thursday we’ll be back here in this thread answering the top voted questions from 2:00 - 4:00 p.m. EST. Don’t forget to refresh the page throughout the session as we’ll be highlighting Veronica’s answers so they appear on the first page!
(Pro tip: Be sure to read through all of the questions before posting your own. It is possible it may have already been asked. If so, give it a vote!)
While we will try to get to as many questions as we can, this Q&A is mainly focused for those located in the US seeking tax advice and we may not be able to answer International tax-related questions.
Disclaimer: This Q&A is for educational and informational purposes only and should not be relied on for tax, legal, or accounting advice. Please consult your personal tax, legal and accounting advisors with questions about your finances. Etsy and the author disclaim all responsibility for any and all losses, damages, or causes of action related to use of this information.
Thanks and we look forward to your questions!
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by
Former_Member
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01-12-2017
10:00 PM
Hi Everyone,
Thanks for being here today!
While you probably see me hanging out in the Etsy Forums for most of my day, I’ve gathered Veronica, a TaxPro and CPA from our partner QuickBooks, to answer your questions today.
We’ll start by posting some answers to the top voted questions you’ve asked over the past few days. Some of the questions heed the same answer, but were asked in different ways. If we don’t answer your specific question, I encourage you to read through all of the posts we’re about to respond to as it may have been covered. We’ll highlight Veronica’s answers so that they will appear on page one of this thread for easy viewing, but don’t forget to refresh the page to see responses as they are posted. (Fun fact: if you want to jump to the page of the actual post, click the timestamp of the highlighted post).
We will be in this thread live until 4:00pm EST.
Our goal is to provide answers and keep a productive conversation going. Let’s stay on track so we can get the most from the discussion. While this particular discussion is focused on tax-related questions, if you have questions that are related to other topics, feel free to discuss them with other members in a new Forums thread or reach out to our Support Team here: https://www.etsy.com/help/contact
Simple guidelines for this chat: be kind, productive and ask questions!
Disclaimer: This Q&A is for educational and informational purposes only and should not be relied on for tax, legal, or accounting advice. Please consult your personal tax, legal and accounting advisors with questions about your finances. Etsy and the author disclaim all responsibility for any and all losses, damages, or causes of action related to use of this information.
Thanks for being here today!
While you probably see me hanging out in the Etsy Forums for most of my day, I’ve gathered Veronica, a TaxPro and CPA from our partner QuickBooks, to answer your questions today.
We’ll start by posting some answers to the top voted questions you’ve asked over the past few days. Some of the questions heed the same answer, but were asked in different ways. If we don’t answer your specific question, I encourage you to read through all of the posts we’re about to respond to as it may have been covered. We’ll highlight Veronica’s answers so that they will appear on page one of this thread for easy viewing, but don’t forget to refresh the page to see responses as they are posted. (Fun fact: if you want to jump to the page of the actual post, click the timestamp of the highlighted post).
We will be in this thread live until 4:00pm EST.
Our goal is to provide answers and keep a productive conversation going. Let’s stay on track so we can get the most from the discussion. While this particular discussion is focused on tax-related questions, if you have questions that are related to other topics, feel free to discuss them with other members in a new Forums thread or reach out to our Support Team here: https://www.etsy.com/help/contact
Simple guidelines for this chat: be kind, productive and ask questions!
Disclaimer: This Q&A is for educational and informational purposes only and should not be relied on for tax, legal, or accounting advice. Please consult your personal tax, legal and accounting advisors with questions about your finances. Etsy and the author disclaim all responsibility for any and all losses, damages, or causes of action related to use of this information.
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Hi everyone. I’m so excited to be here with you today. I’m a long time member of the Etsy community. I am the team captain of the “Etsy U.S. Tax, Bookkeeping, QuickBooks, and Business License Topics” Team. I blog at http://5MinuteBookkeeping.com where I share tips on minimizing bookkeeping and maximizing profits. I’m the founder and CEO of VM Wasek CPA - a team of modern accountants and advisors specialized in QuickBooks and cloud apps. My creative interests fiber arts - especially anything that involves yarn and fabric. I look forward to answering your questions.
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Melissa Harden from EveryDayJoyFineArt 6:59pm Jan 9, 2017 EST
Hi there!
As a new business owner, this will be my first year filing taxes for my Etsy business. My questions are:
1. What would you consider the most important things for new business owners to know when filing for the first time, based on the most common mistakes you are aware of for that group of people?
2. What habits would you encourage new business owners to practice throughout the year that will better prepare them for filing their taxes?
Thank you so much!
Melissa H.
Owner, Every Day Joy Fine Art
-----Hi Melissa. Great questions.
I’ll answer both questions together - the most important things for new business owners to know and do are:
*Keep business income and expenses separate from your personal finances. It’s best to have separate bank and credit card accounts.
*Keep track of receipts for expenses. You can snap copies of receipts with tools like QuickBooks Self-Employed and the QuickBooks Online mobile app.
*Stay on top of your business finances - don’t wait till a year has passed to get organized. I recommend regular appointments on your calendar (once a week or once a month). I’m also a big believe in 5 Minute Bookkeeping - just spend 5 - 10 - 15 minutes a day working on your business finances.
*Schedule a consultation with a tax accountant so that they can advise you on important topics like business structures, how to pay yourself, and paying estimated taxes and sales taxes.
*Know what kind of taxes you need to pay and stay on top of tax deadlines.
Hi there!
As a new business owner, this will be my first year filing taxes for my Etsy business. My questions are:
1. What would you consider the most important things for new business owners to know when filing for the first time, based on the most common mistakes you are aware of for that group of people?
2. What habits would you encourage new business owners to practice throughout the year that will better prepare them for filing their taxes?
Thank you so much!
Melissa H.
Owner, Every Day Joy Fine Art
-----Hi Melissa. Great questions.
I’ll answer both questions together - the most important things for new business owners to know and do are:
*Keep business income and expenses separate from your personal finances. It’s best to have separate bank and credit card accounts.
*Keep track of receipts for expenses. You can snap copies of receipts with tools like QuickBooks Self-Employed and the QuickBooks Online mobile app.
*Stay on top of your business finances - don’t wait till a year has passed to get organized. I recommend regular appointments on your calendar (once a week or once a month). I’m also a big believe in 5 Minute Bookkeeping - just spend 5 - 10 - 15 minutes a day working on your business finances.
*Schedule a consultation with a tax accountant so that they can advise you on important topics like business structures, how to pay yourself, and paying estimated taxes and sales taxes.
*Know what kind of taxes you need to pay and stay on top of tax deadlines.
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Denise Smith from HipLittleSquares 6:14pm Jan 9, 2017 EST
Hi!
I use the same credit card to pay for all shop-related supplies and don't use it for anything else. Most supplies are ordered online. Do I still have to save receipts or are my credit card statements sufficient?
Thanks,
Denise
-----
Hi Denise. It’s always best to keep receipts for all purchases. In case of an audit, the IRS does not accept credit card statements as documentation (evidence) of purchases. However, you generally don’t need to keep receipts for purchases under $75. I make it a point to track all receipts. You can snap copies of receipts with tools like QuickBooks Self-Employed and the QuickBooks Online mobile app. I use an app called ReceiptBank.
Hi!
I use the same credit card to pay for all shop-related supplies and don't use it for anything else. Most supplies are ordered online. Do I still have to save receipts or are my credit card statements sufficient?
Thanks,
Denise
-----
Hi Denise. It’s always best to keep receipts for all purchases. In case of an audit, the IRS does not accept credit card statements as documentation (evidence) of purchases. However, you generally don’t need to keep receipts for purchases under $75. I make it a point to track all receipts. You can snap copies of receipts with tools like QuickBooks Self-Employed and the QuickBooks Online mobile app. I use an app called ReceiptBank.
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Danni from TheHenPen 8:11am Jan 11, 2017 EST edited
What is your opinion on small businesses tracking inventory for sake of reporting COGS at the end of the year versus taking the item purchase as an expense at the time it is purchased? I've heard advice both ways from different CPAs and have struggled with which method I should be using. Thank you!
------
Excellent question. Everybody seems to struggle with this.
There are many rules that pertain to tracking inventory. However, I’ll summarize to keep it brief. I recommend that you consult with your tax accountant so that they can provide you with advice that fits your particular situation.
Generally, if you “manufacture” goods then you are required to track inventory - regardless of the amount of inventory.
For federal income tax purposes, you don’t get a deduction for inventory until you sell it.
Inventory consists of “raw materials” - the items that it takes to manufacture an item.
Inventory includes:
-Products not sold yet
-Raw materials (materials used to make the things you sell)
-Work in process (merchandise that is not completed yet)
-Supplies used to make the things you sell (unless they are “incidental” or insignificant)
Here is an easy way to track your inventory:
-Track your inventory on or around the last day of the year (around December 31)
-Gather items that would be considered inventory
-Make a list (quantity, description, and what you paid for it)
-Add up the total cost that you paid for it
To determine what you paid for it – look at the invoices or receipts. If you don’t have these then look up the current cost online and keep records of how you obtained these amounts. Otherwise make your best estimate and write down that it’s an estimate. The total of the year-end inventory is entered in the Cost of Goods Sold worksheet of Schedule C.
Here are some tips to make things simpler.:
- I would not bother to track inventory for small amounts (probably under $500).
(This is not a rule - just what I would do. Use your best judgment here).
-For tax purposes, remember that you only need to track the amount of inventory that you held as of the end of the tax year. You don’t need to worry about tracking inventory at any other time of the year (for tax purposes anyway).
-Be clear as to what constitutes “inventory” versus incidental supplies. For example. I used to sell designer handbags on Etsy. My raw materials inventory consisted of the fabric that I used to make the bags. In some cases I purchased bolts of fabric or several yards of fabric. I did not count the thread that I used to sew the bags as “inventory”. I considered thread as supplies. That’s because thread is inexpensive (an “incidental” cost).
For more information from the IRS about this topic, look at Publication 538 at https://www.irs.gov/publications/p538/ar02.html#en_US_201212_publink1000270702
What is your opinion on small businesses tracking inventory for sake of reporting COGS at the end of the year versus taking the item purchase as an expense at the time it is purchased? I've heard advice both ways from different CPAs and have struggled with which method I should be using. Thank you!
------
Excellent question. Everybody seems to struggle with this.
There are many rules that pertain to tracking inventory. However, I’ll summarize to keep it brief. I recommend that you consult with your tax accountant so that they can provide you with advice that fits your particular situation.
Generally, if you “manufacture” goods then you are required to track inventory - regardless of the amount of inventory.
For federal income tax purposes, you don’t get a deduction for inventory until you sell it.
Inventory consists of “raw materials” - the items that it takes to manufacture an item.
Inventory includes:
-Products not sold yet
-Raw materials (materials used to make the things you sell)
-Work in process (merchandise that is not completed yet)
-Supplies used to make the things you sell (unless they are “incidental” or insignificant)
Here is an easy way to track your inventory:
-Track your inventory on or around the last day of the year (around December 31)
-Gather items that would be considered inventory
-Make a list (quantity, description, and what you paid for it)
-Add up the total cost that you paid for it
To determine what you paid for it – look at the invoices or receipts. If you don’t have these then look up the current cost online and keep records of how you obtained these amounts. Otherwise make your best estimate and write down that it’s an estimate. The total of the year-end inventory is entered in the Cost of Goods Sold worksheet of Schedule C.
Here are some tips to make things simpler.:
- I would not bother to track inventory for small amounts (probably under $500).
(This is not a rule - just what I would do. Use your best judgment here).
-For tax purposes, remember that you only need to track the amount of inventory that you held as of the end of the tax year. You don’t need to worry about tracking inventory at any other time of the year (for tax purposes anyway).
-Be clear as to what constitutes “inventory” versus incidental supplies. For example. I used to sell designer handbags on Etsy. My raw materials inventory consisted of the fabric that I used to make the bags. In some cases I purchased bolts of fabric or several yards of fabric. I did not count the thread that I used to sew the bags as “inventory”. I considered thread as supplies. That’s because thread is inexpensive (an “incidental” cost).
For more information from the IRS about this topic, look at Publication 538 at https://www.irs.gov/publications/p538/ar02.html#en_US_201212_publink1000270702
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leahbadea 11:11am Jan 10, 2017 EST
What kind of deductions do people often forget about that they can include?
Do you have any tips for filing as partnerships vs individual?
------
A good example of deductions that people don’t realize they can include is the cost of books, courses, or webinars to educate yourself on being a business owner. I purchase a lot of Kindle books on small business marketing and selling and I deduct these for tax purposes because they are a legitimate business expense.
Generally all legitimate business expenses are deductible (there are some exceptions). So, it’s a matter of tracking all of your expenses. QuickBooks Self Employed or QuickBooks Online are great apps for tracking all of your business expenses.
As far as tips for filing as a partnership or individual. Iu are a partnership, you cannot file as an individual for tax purposes. I’m going to assume that you are asking me to contrast between choosing a legal entity of Partnership vs. Sole Proprietorship. These are very different from each other. The main difference is that in a Partnership, there is more than one business owner. A partnership has to file a separate tax form (Form 1065) and the partners have to include a Form K-1 in the personal tax return. An individual files their income and expenses on Schedule C of their personal tax return.
I recommend that you consult with a tax accountant who can help you select the right business structure and who can advise you on what would best fit your particular situation.
What kind of deductions do people often forget about that they can include?
Do you have any tips for filing as partnerships vs individual?
------
A good example of deductions that people don’t realize they can include is the cost of books, courses, or webinars to educate yourself on being a business owner. I purchase a lot of Kindle books on small business marketing and selling and I deduct these for tax purposes because they are a legitimate business expense.
Generally all legitimate business expenses are deductible (there are some exceptions). So, it’s a matter of tracking all of your expenses. QuickBooks Self Employed or QuickBooks Online are great apps for tracking all of your business expenses.
As far as tips for filing as a partnership or individual. Iu are a partnership, you cannot file as an individual for tax purposes. I’m going to assume that you are asking me to contrast between choosing a legal entity of Partnership vs. Sole Proprietorship. These are very different from each other. The main difference is that in a Partnership, there is more than one business owner. A partnership has to file a separate tax form (Form 1065) and the partners have to include a Form K-1 in the personal tax return. An individual files their income and expenses on Schedule C of their personal tax return.
I recommend that you consult with a tax accountant who can help you select the right business structure and who can advise you on what would best fit your particular situation.
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Dara C. from Hieropice 11:13pm Jan 9, 2017 EST
I'd love a primer on filing quarterly taxes for small businesses (sole proprietorships/LLCs). What are the quarterly deadlines for filing? What is the process for filing, and how should a small business estimate their quarterly taxes?
-----
Dara, that is the million dollar question!
Many small business owners get into trouble with the IRS because they do not make estimated tax payments or they do not have the funds to pay the IRS for taxes on their business when they file their income tax return. This is what you need to know:
1. If you are organized as a sole proprietor - your business profits are subject to federal income taxes and also self employment taxes (due to the IRS).
2. You have to set money aside to pay for federal income taxes and also self employment taxes.
The IRS wants you to make “estimated” payments on a quarterly basis for the taxes that you estimate you will owe. If you do not make estimated tax payment the IRS may charge a penalty. Estimated tax payments are due on April 15, June 15, September 15, (of the current tax year) and January 15 (of the following year). In other words, for 2017, you would pay estimated tax payments on April 15, June 15, and September 15 of 2017 and on January 15th of 2018.
You can make estimated tax payments online or on the phone using www.EFTPS.com – it’s easy and convenient.
It is extremely hard to advise anyone on how much they should be setting aside or paying the IRS for estimated taxes throughout the year. That’s because it’s based on your own individual tax situation. Many people set aside a percentage of their net income. I’ve know people who set aside anywhere from 20% to 30% of their net income. QuickBooks Self Employed has a feature to help you estimate your quarterly tax payments. You should check it out and see if it helps you.
When in doubt, the best thing to do is to consult a tax accountant for advice.
For more information, refer to Publication 505, Tax Withholding and Estimated Tax http://www.irs.gov/publications/p505/index.html.
I'd love a primer on filing quarterly taxes for small businesses (sole proprietorships/LLCs). What are the quarterly deadlines for filing? What is the process for filing, and how should a small business estimate their quarterly taxes?
-----
Dara, that is the million dollar question!
Many small business owners get into trouble with the IRS because they do not make estimated tax payments or they do not have the funds to pay the IRS for taxes on their business when they file their income tax return. This is what you need to know:
1. If you are organized as a sole proprietor - your business profits are subject to federal income taxes and also self employment taxes (due to the IRS).
2. You have to set money aside to pay for federal income taxes and also self employment taxes.
The IRS wants you to make “estimated” payments on a quarterly basis for the taxes that you estimate you will owe. If you do not make estimated tax payment the IRS may charge a penalty. Estimated tax payments are due on April 15, June 15, September 15, (of the current tax year) and January 15 (of the following year). In other words, for 2017, you would pay estimated tax payments on April 15, June 15, and September 15 of 2017 and on January 15th of 2018.
You can make estimated tax payments online or on the phone using www.EFTPS.com – it’s easy and convenient.
It is extremely hard to advise anyone on how much they should be setting aside or paying the IRS for estimated taxes throughout the year. That’s because it’s based on your own individual tax situation. Many people set aside a percentage of their net income. I’ve know people who set aside anywhere from 20% to 30% of their net income. QuickBooks Self Employed has a feature to help you estimate your quarterly tax payments. You should check it out and see if it helps you.
When in doubt, the best thing to do is to consult a tax accountant for advice.
For more information, refer to Publication 505, Tax Withholding and Estimated Tax http://www.irs.gov/publications/p505/index.html.
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Nickie Frye from SpunkVintage 12:21pm Jan 10, 2017 EST
1. CASH TRANSACTIONS: As a vintage dealer, a lot of my inventory purchases are with cash. What is the best way to record this (both in Quickbooks & in terms of having proof of purchase)?
2. PAYPAL REPORTING: I make a lot of sales & purchases with Paypal, but I find their reports to be very confusing since they include the same transaction multiple times.
For instance, these are all for ONE transaction & are individual line items in the report. Some are positive & some are negative #'s:
Payment Authorized
Authorized Funds Held
Funds Released
Preapproved Payment Completed
I end up doing a lot of sorting, cuting, & pasting in Excel to remove duplicative line items before I can even work with the data. Is there a way to streamline this process? What line items should I keep (I think I normally work with the Payment Authorized ones). It's such a pain. Any tips would be appreciated.
3. PAYING YOURSELF: What is the best way to do this? Should we be cutting ourselves an official check each week? Since sales vary from week to week, how do we determine how much we should pay ourselves?
-----
Nickie, for cash purchases, you should always ask for a receipt from the seller. If you don’t get a receipt, you should track cash purchases in a ledger and maybe even consider snapping a picture of what you purchased.
In regards to your PayPal purchases - I feel your pain. We’ve encountered similar issues in my accounting firm. Have you considered using a credit card instead of PayPal for purchases? That would make things so much simpler. If you use QuickBooks, you can connect QuickBooks to PayPal. Otherwise, you have to work with the PayPal statements and pick out the transactions that are Payment Authorized.
Paying yourself - that depends on how your business is organized for tax purposes. I’ll answer assuming you are a Sole Proprietor. Sole Proprietors are allowed to take “Owner Draws” from their businesses. Sole Proprietors should not pay themselves as an employee of a sole proprietorship.
The amount that you take out of the business (as an owner’s draw) is dependent on how much money you have available to pay yourself (welcome to small business ownership!). You pay taxes on the taxable earnings of the sole proprietorship and not on the amounts that you as the owner take out of the business.
1. CASH TRANSACTIONS: As a vintage dealer, a lot of my inventory purchases are with cash. What is the best way to record this (both in Quickbooks & in terms of having proof of purchase)?
2. PAYPAL REPORTING: I make a lot of sales & purchases with Paypal, but I find their reports to be very confusing since they include the same transaction multiple times.
For instance, these are all for ONE transaction & are individual line items in the report. Some are positive & some are negative #'s:
Payment Authorized
Authorized Funds Held
Funds Released
Preapproved Payment Completed
I end up doing a lot of sorting, cuting, & pasting in Excel to remove duplicative line items before I can even work with the data. Is there a way to streamline this process? What line items should I keep (I think I normally work with the Payment Authorized ones). It's such a pain. Any tips would be appreciated.
3. PAYING YOURSELF: What is the best way to do this? Should we be cutting ourselves an official check each week? Since sales vary from week to week, how do we determine how much we should pay ourselves?
-----
Nickie, for cash purchases, you should always ask for a receipt from the seller. If you don’t get a receipt, you should track cash purchases in a ledger and maybe even consider snapping a picture of what you purchased.
In regards to your PayPal purchases - I feel your pain. We’ve encountered similar issues in my accounting firm. Have you considered using a credit card instead of PayPal for purchases? That would make things so much simpler. If you use QuickBooks, you can connect QuickBooks to PayPal. Otherwise, you have to work with the PayPal statements and pick out the transactions that are Payment Authorized.
Paying yourself - that depends on how your business is organized for tax purposes. I’ll answer assuming you are a Sole Proprietor. Sole Proprietors are allowed to take “Owner Draws” from their businesses. Sole Proprietors should not pay themselves as an employee of a sole proprietorship.
The amount that you take out of the business (as an owner’s draw) is dependent on how much money you have available to pay yourself (welcome to small business ownership!). You pay taxes on the taxable earnings of the sole proprietorship and not on the amounts that you as the owner take out of the business.
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Ashley Moore from DrinkUpBudderCup 11:32pm Jan 10, 2017 EST
Can you pay yourself as a deduction? I just assumed anything left over after deductions would be my "profit/income"
-----
This is the same answer that I gave to Nickie.
Paying yourself - that depends on how your business is organized for tax purposes. I’ll answer assuming you are a Sole Proprietor. Sole Proprietors are allowed to take “Owner Draws” from their businesses. Sole Proprietors should not pay themselves as an employee of a sole proprietorship.
The amount that you take out of the business (as an owner’s draw) is dependent on how much money you have available to pay yourself (welcome to small business ownership!). You pay taxes on the taxable earnings of the sole proprietorship and not on the amounts that you as the owner take out of the business.
Can you pay yourself as a deduction? I just assumed anything left over after deductions would be my "profit/income"
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This is the same answer that I gave to Nickie.
Paying yourself - that depends on how your business is organized for tax purposes. I’ll answer assuming you are a Sole Proprietor. Sole Proprietors are allowed to take “Owner Draws” from their businesses. Sole Proprietors should not pay themselves as an employee of a sole proprietorship.
The amount that you take out of the business (as an owner’s draw) is dependent on how much money you have available to pay yourself (welcome to small business ownership!). You pay taxes on the taxable earnings of the sole proprietorship and not on the amounts that you as the owner take out of the business.
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Krista from PinkCottageStudio 4:27pm Jan 9, 2017 EST
Hi
Two questions:
1- may I ask you to briefly outline any NEW Schedule C deductions for tax year 2016?
2- may I ask you to outline the travel / mileage allowance guidelines for small business owners (i.e. Trips to the post office/ bank/ supply purchases etc)
Thank you
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Krista, there aren’t any new Schedule C deductions that I am aware of. Generally all legitimate business expenses are deductible for Schedule C purposes (there are some exceptions). So, it’s a matter of tracking all of your expenses. QuickBooks Self Employed or QuickBooks Online are great apps for tracking all of your business expenses.
Travel Mileage rules:
According to the IRS, you can deduct the actual expenses of operating your car or truck for business purposes or take a standard mileage deduction. It is easier to take the standard mileage deduction. Either way you have to keep track your business use. To take the standard mileage deduction you must track the business (not personal) miles that you drove in a car or truck that you owned. You can use a mileage log to track your business miles.
Commuting miles (travel between your home and your studio or office are not considered business miles and are not tax deductible.
The amount of the deduction equals to the IRS Standard Mileage Rate in effect for the year times the number of miles driven. You can look up the IRS Standard Mileage Rate online – it’s subject to change from year to year.
I highly recommend using QuickBooks Self Employed to track your business miles. It tracks the mileage for you as you drive. All you have to do is swipe on the mobile app to indicate whether the mileage is “business” or “personal”.
Hi
Two questions:
1- may I ask you to briefly outline any NEW Schedule C deductions for tax year 2016?
2- may I ask you to outline the travel / mileage allowance guidelines for small business owners (i.e. Trips to the post office/ bank/ supply purchases etc)
Thank you
-----
Krista, there aren’t any new Schedule C deductions that I am aware of. Generally all legitimate business expenses are deductible for Schedule C purposes (there are some exceptions). So, it’s a matter of tracking all of your expenses. QuickBooks Self Employed or QuickBooks Online are great apps for tracking all of your business expenses.
Travel Mileage rules:
According to the IRS, you can deduct the actual expenses of operating your car or truck for business purposes or take a standard mileage deduction. It is easier to take the standard mileage deduction. Either way you have to keep track your business use. To take the standard mileage deduction you must track the business (not personal) miles that you drove in a car or truck that you owned. You can use a mileage log to track your business miles.
Commuting miles (travel between your home and your studio or office are not considered business miles and are not tax deductible.
The amount of the deduction equals to the IRS Standard Mileage Rate in effect for the year times the number of miles driven. You can look up the IRS Standard Mileage Rate online – it’s subject to change from year to year.
I highly recommend using QuickBooks Self Employed to track your business miles. It tracks the mileage for you as you drive. All you have to do is swipe on the mobile app to indicate whether the mileage is “business” or “personal”.
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Don and Laura Saddlemire from DLWEATHERVANES 8:32am Jan 11, 2017 EST
If we donate a handmade item, is the value deductible as a business expense? And, if so, what is the value - retail?
This question applies to both donations to charity - as well as raffle items donated to festivals we participate in. Often, a donation to a raffle is required in order to participate in an event? (Can the value be legally written off as advertising and/or as part of a show fee)?
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The type of deduction that you get for making a donation to charity is dependent upon how your business is organized for tax purposes. If you are a sole proprietor, then donations to charity are deductible (if you itemize) and if you make a donation to a 501(c)3 charitable organization. You can deduct the fair market value of the donation (normally what you would sell it for in this case).
For items given for a raffle or as part of an event, I would consider that a marketing expense.
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Allison Daw from DayThreeCreations 10:50pm Jan 10, 2017 EST
Should orders that were placed in December of 2016 but paid out in 2017 be included in 2016 income? Should fees, shipping labels, etc accrued on our Etsy bills in December of 2016 but paid to Etsy in January 2017 be deducted from our 2016 income? Should money from Etsy orders that is added to our paypal accounts in 2016 but not withdrawn until 2017 be added to our 2016 income?
Thank you!!
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That depends on whether you are an “accrual” or “cash” basis taxpayer. If you are a Sole Proprietor, then you are a “cash basis” taxpayer, which means that you generally recognize income when received and expenses when they are paid.
Money from Etsy orders that are added to your PayPal account in 2016 are considered as received in 2016. Think of PayPal as a “bank account”.
The folks here at Etsy also want you to know that on their 1099Ks they issue to qualifying Sellers (which would list DirectCheckout "payouts" for the year), they are including all settled payments. A payment is settled when the money is placed the seller's SPA (shop payment account). Note, however, that auto-disbursements happen on Mondays. In other words, any funds placed in the Seller's shop account on Friday 12/30/16 are reported on the 2016 1099K, even though they aren't disbursed to the seller's private bank account until Monday 1/2/17.
Should orders that were placed in December of 2016 but paid out in 2017 be included in 2016 income? Should fees, shipping labels, etc accrued on our Etsy bills in December of 2016 but paid to Etsy in January 2017 be deducted from our 2016 income? Should money from Etsy orders that is added to our paypal accounts in 2016 but not withdrawn until 2017 be added to our 2016 income?
Thank you!!
-----
That depends on whether you are an “accrual” or “cash” basis taxpayer. If you are a Sole Proprietor, then you are a “cash basis” taxpayer, which means that you generally recognize income when received and expenses when they are paid.
Money from Etsy orders that are added to your PayPal account in 2016 are considered as received in 2016. Think of PayPal as a “bank account”.
The folks here at Etsy also want you to know that on their 1099Ks they issue to qualifying Sellers (which would list DirectCheckout "payouts" for the year), they are including all settled payments. A payment is settled when the money is placed the seller's SPA (shop payment account). Note, however, that auto-disbursements happen on Mondays. In other words, any funds placed in the Seller's shop account on Friday 12/30/16 are reported on the 2016 1099K, even though they aren't disbursed to the seller's private bank account until Monday 1/2/17.
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Jessica Poljacik from jessicapoljacik 8:17am Jan 11, 2017 EST
Hello Veronica,
I have just started using Quickbooks self employed and have my bank account and my Etsy account linked to it. While sorting through my transactions I noticed that for every Etsy transaction there are duplicates. When I make a sale it will be recorded through the Etsy account, and will show the total sale amount as income in Quickbooks, then will show the fee that Etsy takes as an expense. Then when the money is dispersed to my bank account it will again show the dispersed amount as income, and then a third line item will show up that has the same amount but as a negative. What is the correct way to record this? I have been excluding the second two line items and just using the original line item that shows the sale amount as income and then the Etsy fee as an expense. Is excluding them correct or should I be leaving all three?
-----
Jessica - it’s hard to answer this without looking at it. However, you probably need to take a look at whether you should be recording the amounts showing in the bank account as a transfer. I recommend a chat with the tech support folks at QuickBooks Self Employed.
Hello Veronica,
I have just started using Quickbooks self employed and have my bank account and my Etsy account linked to it. While sorting through my transactions I noticed that for every Etsy transaction there are duplicates. When I make a sale it will be recorded through the Etsy account, and will show the total sale amount as income in Quickbooks, then will show the fee that Etsy takes as an expense. Then when the money is dispersed to my bank account it will again show the dispersed amount as income, and then a third line item will show up that has the same amount but as a negative. What is the correct way to record this? I have been excluding the second two line items and just using the original line item that shows the sale amount as income and then the Etsy fee as an expense. Is excluding them correct or should I be leaving all three?
-----
Jessica - it’s hard to answer this without looking at it. However, you probably need to take a look at whether you should be recording the amounts showing in the bank account as a transfer. I recommend a chat with the tech support folks at QuickBooks Self Employed.
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Ashley Moore from DrinkUpBudderCup 11:34pm Jan 10, 2017 EST
When it comes to mileage -
Must we log every single trip (I ship daily). When we log each trip is the log supposed to include our odometer reading at start and finish for each trip for purposes of being audited?
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Ashley, I highly recommend using QuickBooks Self Employed to track your business mileage or to get an app like MileIQ for your mobile phone. It will make thing so much easier.
If you want to track mileage manually, you can use a mileage log to track your business miles. The mileage log should include:
a. The date of the trip
b. The business reason for the trip, including the destination, who you met with, and for what purpose
c. The business miles driven
d. Odometer readings (starting and ending for each trip)
When it comes to mileage -
Must we log every single trip (I ship daily). When we log each trip is the log supposed to include our odometer reading at start and finish for each trip for purposes of being audited?
-----
Ashley, I highly recommend using QuickBooks Self Employed to track your business mileage or to get an app like MileIQ for your mobile phone. It will make thing so much easier.
If you want to track mileage manually, you can use a mileage log to track your business miles. The mileage log should include:
a. The date of the trip
b. The business reason for the trip, including the destination, who you met with, and for what purpose
c. The business miles driven
d. Odometer readings (starting and ending for each trip)
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Lisa Gentner from TheSpiritedGarden 9:49pm Jan 9, 2017 EST
Hi Veronica,
Just starting to do all the paperwork to start a home business.
Husband is very concerned that my home business will affect our personal taxes.
If i start the business as an LLC, which i have been advised to do, will our personal taxes be affected and if so, how?
Thanks so much!
Lisa
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Hi Lisa. Yes, your business will affect your personal taxes regardless of the business structure that you choose. The earnings or losses of the business will be reported in your personal tax returns. For example, for an LLC taxes as a sole proprietor, you would report the taxable income of the business in Schedule C. I recommend a consultation with a tax accountant so they can advise you on your individual tax situation.
Hi Veronica,
Just starting to do all the paperwork to start a home business.
Husband is very concerned that my home business will affect our personal taxes.
If i start the business as an LLC, which i have been advised to do, will our personal taxes be affected and if so, how?
Thanks so much!
Lisa
-----
Hi Lisa. Yes, your business will affect your personal taxes regardless of the business structure that you choose. The earnings or losses of the business will be reported in your personal tax returns. For example, for an LLC taxes as a sole proprietor, you would report the taxable income of the business in Schedule C. I recommend a consultation with a tax accountant so they can advise you on your individual tax situation.
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Vicky and Earl from VisionFineArt 2:42am Jan 11, 2017 EST
I downloaded the CVS files for 2016 and getting QuickBooks in a week..
I did read that QuickBooks starts with the year you got it- 2017.
#1-how do I get my 2016 income into QuickBooks?.
#2- which CVS file do I upload into QuickBooks as I downloaded all of them.
#3- then how do I get QuickBooks to track only 2017 income and expenses.
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QuickBooks can be started for any date - not the year you got it. You should be able to enter or import income into QuickBooks for 2016.
I am going to assume that you are saying that you downloaded CVS files from Etsy (but I’m not sure in this case). As far as importing any transactions into QuickBooks - it depends on the version of QuickBooks and the file format. You can use a tool called “Transaction Pro Importer” to import transactions into QuickBooks.
I downloaded the CVS files for 2016 and getting QuickBooks in a week..
I did read that QuickBooks starts with the year you got it- 2017.
#1-how do I get my 2016 income into QuickBooks?.
#2- which CVS file do I upload into QuickBooks as I downloaded all of them.
#3- then how do I get QuickBooks to track only 2017 income and expenses.
-----
QuickBooks can be started for any date - not the year you got it. You should be able to enter or import income into QuickBooks for 2016.
I am going to assume that you are saying that you downloaded CVS files from Etsy (but I’m not sure in this case). As far as importing any transactions into QuickBooks - it depends on the version of QuickBooks and the file format. You can use a tool called “Transaction Pro Importer” to import transactions into QuickBooks.
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Alexandra Armbrust from FashionHusky 7:45pm Jan 10, 2017 EST
If it true you only have to file if you made over $500 in total sales?
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Hi Alexandra, according to the IRS, you have to file US federal income tax return (Form 1040) if your net profit was $400 or more from all of your business and self-employment income for the calendar year (January through December). “Net profit” means that the income received was greater than the expenses incurred.
Check out this page from the IRS website https://www.irs.gov/instructions/i1040sse/ch01.html
If it true you only have to file if you made over $500 in total sales?
-----
Hi Alexandra, according to the IRS, you have to file US federal income tax return (Form 1040) if your net profit was $400 or more from all of your business and self-employment income for the calendar year (January through December). “Net profit” means that the income received was greater than the expenses incurred.
Check out this page from the IRS website https://www.irs.gov/instructions/i1040sse/ch01.html
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Mimi from CreekLifeTreasures 7:05pm Jan 10, 2017 EST
Hey Veronica, I am having problems integrating Quick Books (Self-Employed version that Etsy offered us) to pull in my Paypal information. I accept Direct Check-out as well as Paypal. I have linked my paypal acct with Quick Books, but it is not working properly.
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Hi Mimi. I don’t know exactly what’s not working properly from your question. It would be best to contact the folks at tech support at QuickBooks Self Employed so they can take a look at it. You can contact them at tickets@selfemployed.uservoice.com
Hey Veronica, I am having problems integrating Quick Books (Self-Employed version that Etsy offered us) to pull in my Paypal information. I accept Direct Check-out as well as Paypal. I have linked my paypal acct with Quick Books, but it is not working properly.
-----
Hi Mimi. I don’t know exactly what’s not working properly from your question. It would be best to contact the folks at tech support at QuickBooks Self Employed so they can take a look at it. You can contact them at tickets@selfemployed.uservoice.com
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Don and Laura Saddlemire from DLWEATHERVANES 8:18am Jan 11, 2017 EST
If I write and mail a check for a business expense in December 2016, but if it is not cashed by the recipient until 2017, can I still deduct the expense in 2016?
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Generally yes, you can.
If I write and mail a check for a business expense in December 2016, but if it is not cashed by the recipient until 2017, can I still deduct the expense in 2016?
-----
Generally yes, you can.
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Don and Laura Saddlemire from DLWEATHERVANES 8:20am Jan 11, 2017 EST
We are in NC and are issuing a 1099 to an independent contractor in Virginia, for work done in 2016. In addition to filing the 1099 with the federal government, do I need to file a copy with either the State of NC or the State of Virginia?
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Since every state is different, I’m not familiar with the laws in NC or Virginia. However, you can check out this information from the Virginia Department of Taxation http://www.tax.virginia.gov/content/withholding-tax2
We are in NC and are issuing a 1099 to an independent contractor in Virginia, for work done in 2016. In addition to filing the 1099 with the federal government, do I need to file a copy with either the State of NC or the State of Virginia?
-----
Since every state is different, I’m not familiar with the laws in NC or Virginia. However, you can check out this information from the Virginia Department of Taxation http://www.tax.virginia.gov/content/withholding-tax2
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Don and Laura Saddlemire from DLWEATHERVANES 8:25am Jan 11, 2017 EST
My husband and file as a qualified joint venture for our business. If we receive 1099's that have one person's social security number, what is the correct way to handle that income so that it is split between the two of us?
For example, if we receive a $10,000 1099 from Square that has been reported under my social, that income (in a qualified joint venture), should be reported $5,000 for me, and $5,000 for my husband.
I do not, however, want to trigger a problem that might be caused by the fact that the 1099 was issued solely to me - and therefore a potential question might arise as to why I haven't reported the entire $10,000 on my personal Schedule C.
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Hi Laura. Generally speaking, if you are married, both your income and your husband’s income will be reported in the same tax return (unless you file separately). It would be best for you to consult a tax accountant just to make sure that everything is handled correctly.
My husband and file as a qualified joint venture for our business. If we receive 1099's that have one person's social security number, what is the correct way to handle that income so that it is split between the two of us?
For example, if we receive a $10,000 1099 from Square that has been reported under my social, that income (in a qualified joint venture), should be reported $5,000 for me, and $5,000 for my husband.
I do not, however, want to trigger a problem that might be caused by the fact that the 1099 was issued solely to me - and therefore a potential question might arise as to why I haven't reported the entire $10,000 on my personal Schedule C.
-----
Hi Laura. Generally speaking, if you are married, both your income and your husband’s income will be reported in the same tax return (unless you file separately). It would be best for you to consult a tax accountant just to make sure that everything is handled correctly.
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Amanda Nouguier from PearlsAndPrim 8:35am Jan 11, 2017 EST
We have an accountant doing our taxes for last year because thanks to him they are a disaster.
But I signed up for QuicksBooks and I and I'm wondering… Someone told me it was illegal to file married and jointly since my only income is from my Etsy business.
So if I sign up married but not filing jointly, my husband is head of household so I don't click that option and he claims me as a dependent, so would I put zero dependents when I fill out mine on QB or do I still claim myself as a dependent on mine also?
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Amanda, I highly recommend a consultation with a qualified tax accountant. I cannot answer your questions as I am not familiar with your unique tax situation.
We have an accountant doing our taxes for last year because thanks to him they are a disaster.
But I signed up for QuicksBooks and I and I'm wondering… Someone told me it was illegal to file married and jointly since my only income is from my Etsy business.
So if I sign up married but not filing jointly, my husband is head of household so I don't click that option and he claims me as a dependent, so would I put zero dependents when I fill out mine on QB or do I still claim myself as a dependent on mine also?
-----
Amanda, I highly recommend a consultation with a qualified tax accountant. I cannot answer your questions as I am not familiar with your unique tax situation.
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Granny Joy from GrannyJoy 9:03am Jan 11, 2017 EST
I need to GROW my business as my husband has recently been diagnosed with cancer. I am hoping to get a "helper" out there to promote my products. How do I "pay" an employee? How much do they need to make for me to turn in their income? What firms do I need? Help!!!
Also, I'll be in a doctor appt during the 2-4 session. Will it be available to listen to later?
-----
HI Granny. I’m sorry about your husband.
You can pay people who perform services in 2 ways - 1) as employees, or 2) as independent contractors.
If paying your employees, check out IRS Publication 15 Circular E at https://www.irs.gov/publications/p15/index.html. Employees’ earnings are reported on Form W-2. You have to report all of their earnings. I highly recommend using a payroll service and not doing payroll manually.
Amounts paid to independent contractors should be reported if they equal or exceed $600. They are reported on Form 1099.
To determine whether an individual should be treated as an employee or independent contractor - check out this article from the IRS https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...
I need to GROW my business as my husband has recently been diagnosed with cancer. I am hoping to get a "helper" out there to promote my products. How do I "pay" an employee? How much do they need to make for me to turn in their income? What firms do I need? Help!!!
Also, I'll be in a doctor appt during the 2-4 session. Will it be available to listen to later?
-----
HI Granny. I’m sorry about your husband.
You can pay people who perform services in 2 ways - 1) as employees, or 2) as independent contractors.
If paying your employees, check out IRS Publication 15 Circular E at https://www.irs.gov/publications/p15/index.html. Employees’ earnings are reported on Form W-2. You have to report all of their earnings. I highly recommend using a payroll service and not doing payroll manually.
Amounts paid to independent contractors should be reported if they equal or exceed $600. They are reported on Form 1099.
To determine whether an individual should be treated as an employee or independent contractor - check out this article from the IRS https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...
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Monika Cecil Kieffer from SassyHangUps 9:36am Jan 11, 2017 EST
Can a percentage of rent/mortgage and light bill be deducted when working out out of your home? If so how is that figured.
-----
Hi Monika. In some cases you can take a Home Office Deduction.
If you use part of your home for business, you may be able to deduct expenses for a “home office.”
According to the IRS, there are two basic requirements to qualify for the home office deduction:
a. Regular and exclusive use
You must regularly use part of your home exclusively for business purposes. This means that this is a place set aside in your home or apartment that is used strictly for conducting business, such as an office, a studio, etc. It cannot be used for personal purposes.
b. Principal place of your business
You must show that you use your home as your principal place of business. If you have a home based business then generally your home or apartment is your principal place of business.
Given these requirements, it may difficult to qualify for the home office deduction since many business owners who office out of their home don’t necessarily maintain an area exclusively for business purposes. If you qualify for the home office deduction then I suggest that you refer to IRS Publication 587 at http://www.irs.gov/publications/p587/ar02.html#en_US_publink1000226294
Can a percentage of rent/mortgage and light bill be deducted when working out out of your home? If so how is that figured.
-----
Hi Monika. In some cases you can take a Home Office Deduction.
If you use part of your home for business, you may be able to deduct expenses for a “home office.”
According to the IRS, there are two basic requirements to qualify for the home office deduction:
a. Regular and exclusive use
You must regularly use part of your home exclusively for business purposes. This means that this is a place set aside in your home or apartment that is used strictly for conducting business, such as an office, a studio, etc. It cannot be used for personal purposes.
b. Principal place of your business
You must show that you use your home as your principal place of business. If you have a home based business then generally your home or apartment is your principal place of business.
Given these requirements, it may difficult to qualify for the home office deduction since many business owners who office out of their home don’t necessarily maintain an area exclusively for business purposes. If you qualify for the home office deduction then I suggest that you refer to IRS Publication 587 at http://www.irs.gov/publications/p587/ar02.html#en_US_publink1000226294
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Roma Arellano from romaarellano 9:51am Jan 11, 2017 EST
For this year we have the income from the Etsy shop on top of a corporate salary, all of which pushes us up into a higher tax bracket. (In 2017 we'll no longer have the corporate income, so things will be back to normal.) We are going to place most of what we earned from the shop into a self-employment retirement account for 2016 only, and I'm still researching the different types--SEP or a SIMPLE IRA. Our small business is an LLC. Can you either make a recommendation or talk about the pros and cons of each, especially for a business like Etsy? Thanks.
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Hi Roma. A SEP (Self-Employed) IRA is for individuals who are self-employed (like sole proprietors). A Simple IRA is for employees of companies. I recommend that you check out this article from Inc. http://www.inc.com/john-hewitt/sep-ira-vs-simple-ira-simple-ways-to-determine-which-is-right-for-you...
For this year we have the income from the Etsy shop on top of a corporate salary, all of which pushes us up into a higher tax bracket. (In 2017 we'll no longer have the corporate income, so things will be back to normal.) We are going to place most of what we earned from the shop into a self-employment retirement account for 2016 only, and I'm still researching the different types--SEP or a SIMPLE IRA. Our small business is an LLC. Can you either make a recommendation or talk about the pros and cons of each, especially for a business like Etsy? Thanks.
-----
Hi Roma. A SEP (Self-Employed) IRA is for individuals who are self-employed (like sole proprietors). A Simple IRA is for employees of companies. I recommend that you check out this article from Inc. http://www.inc.com/john-hewitt/sep-ira-vs-simple-ira-simple-ways-to-determine-which-is-right-for-you...
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Emily Gauthier from LetsHearItForSpirit 10:07am Jan 11, 2017 EST
Can QuickBooks link to your Etsy Acct to pull sales and postage fees etc right from the system? Can it link to my business bank account? Thanks!
-----
Hi Emily. No, you cannot link your Etsy account to QuickBooks Online or QuickBooks Desktop versions. You can connect QuickBooks Self Employed to Etsy.
You can connect QuickBooks (all versions) to your bank and credit card accounts.
Can QuickBooks link to your Etsy Acct to pull sales and postage fees etc right from the system? Can it link to my business bank account? Thanks!
-----
Hi Emily. No, you cannot link your Etsy account to QuickBooks Online or QuickBooks Desktop versions. You can connect QuickBooks Self Employed to Etsy.
You can connect QuickBooks (all versions) to your bank and credit card accounts.
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Big Dot Of Happiness from BigDotOfHappiness 10:25am Jan 11, 2017 EST
I know this one has been discussed for many years now, however, are we required to collect sales tax in states where we have no physical presence? What if we utilize Amazon FBA and there is a Amazon warehouse located in a particular state...are we then also required to collect sales tax on Etsy sales as well?
-----
Hi Big Dot - I am not familiar enough with the Amazon rules so I won’t comment on that. It is best to consult your state to ensure that you are in compliance with their rules. Every state is different.
I know this one has been discussed for many years now, however, are we required to collect sales tax in states where we have no physical presence? What if we utilize Amazon FBA and there is a Amazon warehouse located in a particular state...are we then also required to collect sales tax on Etsy sales as well?
-----
Hi Big Dot - I am not familiar enough with the Amazon rules so I won’t comment on that. It is best to consult your state to ensure that you are in compliance with their rules. Every state is different.
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Rosa from RosaCLopez 12:09pm Jan 11, 2017 EST edited
Great Questions! I missed the voting time, but can't wait to read the answers.
I was wondering if anyone knew if you have to charge sales tax on digital download items on your Etsy Shop? Since they aren't tangible, I was wondering if you still need to charge sales tax in the state of CA.
I understand I missed the deadline, so this question might not be answered, but thought it was worth a shot!
-----
Hi Rosa. Please contact the State of California directly to ask them. In the State of Texas, where I live, digital download items are subject to sales tax.
Great Questions! I missed the voting time, but can't wait to read the answers.
I was wondering if anyone knew if you have to charge sales tax on digital download items on your Etsy Shop? Since they aren't tangible, I was wondering if you still need to charge sales tax in the state of CA.
I understand I missed the deadline, so this question might not be answered, but thought it was worth a shot!
-----
Hi Rosa. Please contact the State of California directly to ask them. In the State of Texas, where I live, digital download items are subject to sales tax.
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Rae Rodriguez from JesterSwink 12:56pm Jan 11, 2017 EST edited
I'm trying to capture online vs retail sales. What is the best way to differentiate online sales from Square and retail sales w/Square? Right now both just come in as Square customer. Not sure if this is a QB or Square thing? Any advice?
Cash sales / Retail - I'm not sure how to capture this in QB? Do you create the sale in square so it comes over in QB?
thx
-----
Hi Rae. Take a look at the integration between Square and QuickBooks. You likely need to find this in your Square app. See if you can choose from more than one sales account. It is a “Square thing”.
Regarding cash sales - you would have to see if you can enter them in Square. Otherwise, you would have to enter them in QuickBooks.
I'm trying to capture online vs retail sales. What is the best way to differentiate online sales from Square and retail sales w/Square? Right now both just come in as Square customer. Not sure if this is a QB or Square thing? Any advice?
Cash sales / Retail - I'm not sure how to capture this in QB? Do you create the sale in square so it comes over in QB?
thx
-----
Hi Rae. Take a look at the integration between Square and QuickBooks. You likely need to find this in your Square app. See if you can choose from more than one sales account. It is a “Square thing”.
Regarding cash sales - you would have to see if you can enter them in Square. Otherwise, you would have to enter them in QuickBooks.
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Nickie Frye from SpunkVintage 2:39pm Jan 12, 2017 EST
Thanks Veronica! One other question regarding this: "You pay taxes on the taxable earnings of the sole proprietorship and not on the amounts that you as the owner take out of the business."
The amount we take as an owner's draw is considered income, right? So, wouldn't we end up paying tax on that in the form of income tax? Does it make sense to cut ourselves an official check, then? Maybe twice a month?
-----
The amount that you take out an an Owner’s Draw from a Sole Proprietorship is not considered income to you. Only the earnings on Schedule C (Taxable business income minus allowable business deductions) are considered taxable income to you.
You may take an owner's draw at any time as long as there money available.
Thanks Veronica! One other question regarding this: "You pay taxes on the taxable earnings of the sole proprietorship and not on the amounts that you as the owner take out of the business."
The amount we take as an owner's draw is considered income, right? So, wouldn't we end up paying tax on that in the form of income tax? Does it make sense to cut ourselves an official check, then? Maybe twice a month?
-----
The amount that you take out an an Owner’s Draw from a Sole Proprietorship is not considered income to you. Only the earnings on Schedule C (Taxable business income minus allowable business deductions) are considered taxable income to you.
You may take an owner's draw at any time as long as there money available.
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Rebecca Davis from AegeanDrawn 1:02pm Jan 11, 2017 EST
To add to this, I had an unclaimed item shipped back to me and a return, both from a products ordered/paid in Dec 2016 but they came out of Jan 2017. I assume those are considered expenses for 2017?
-----
If the expense was paid or incurred in 2017, then it is considered a 2017 expense.
To add to this, I had an unclaimed item shipped back to me and a return, both from a products ordered/paid in Dec 2016 but they came out of Jan 2017. I assume those are considered expenses for 2017?
-----
If the expense was paid or incurred in 2017, then it is considered a 2017 expense.
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by
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01-13-2017
12:00 AM
Hi folks!
Thanks for joining us today and for your thoughtful questions.
We’re going to sign off now, but this thread will remain open so you can continue to view the questions and answers. Feel free to continue sharing your tax and QuickBooks knowledge with one another.
Also, be sure to tidy up your shop’s finances for tax season with QuickBooks Self-Employed. We’ve partnered with Intuit to give you access to top-tier accounting software at just $5 a month. Your sales and expenses will be categorized and organized instantly, and you’ll get insightful stats and graphs right away too. Pair it with TurboTax and your taxes are pretty much done. Try it for 30 days here! https://selfemployed.intuit.com/etsy?utm_source=etsy&utm_medium=web&utm_content=forumQAUS&cid=par_et...
Thanks!
Thanks for joining us today and for your thoughtful questions.
We’re going to sign off now, but this thread will remain open so you can continue to view the questions and answers. Feel free to continue sharing your tax and QuickBooks knowledge with one another.
Also, be sure to tidy up your shop’s finances for tax season with QuickBooks Self-Employed. We’ve partnered with Intuit to give you access to top-tier accounting software at just $5 a month. Your sales and expenses will be categorized and organized instantly, and you’ll get insightful stats and graphs right away too. Pair it with TurboTax and your taxes are pretty much done. Try it for 30 days here! https://selfemployed.intuit.com/etsy?utm_source=etsy&utm_medium=web&utm_content=forumQAUS&cid=par_et...
Thanks!
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Thanks everyone for all your questions! I enjoyed answering them.
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139 Replies
PinkCottageStud
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
Hi
Two questions:
1- may I ask you to briefly outline any NEW Schedule C deductions for tax year 2016?
2- may I ask you to outline the travel / mileage allowance guidelines for small business owners (i.e. Trips to the post office/ bank/ supply purchases etc)
Thank you
Two questions:
1- may I ask you to briefly outline any NEW Schedule C deductions for tax year 2016?
2- may I ask you to outline the travel / mileage allowance guidelines for small business owners (i.e. Trips to the post office/ bank/ supply purchases etc)
Thank you
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
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01-12-2017
10:23 PM
Hi Krista!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513627
Thanks!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513627
Thanks!
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HipLittleSquare
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
Hi!
I use the same credit card to pay for all shop-related supplies and don't use it for anything else. Most supplies are ordered online. Do I still have to save receipts or are my credit card statements sufficient?
Thanks,
Denise
I use the same credit card to pay for all shop-related supplies and don't use it for anything else. Most supplies are ordered online. Do I still have to save receipts or are my credit card statements sufficient?
Thanks,
Denise
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
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01-12-2017
10:13 PM
Hi Denise!
Veronica responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368512907
Thanks!
Veronica responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368512907
Thanks!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-10-2017
02:59 AM
Hi there!
As a new business owner, this will be my first year filing taxes for my Etsy business. My questions are:
1. What would you consider the most important things for new business owners to know when filing for the first time, based on the most common mistakes you are aware of for that group of people?
2. What habits would you encourage new business owners to practice throughout the year that will better prepare them for filing their taxes?
Thank you so much!
Melissa H.
Owner, Every Day Joy Fine Art
As a new business owner, this will be my first year filing taxes for my Etsy business. My questions are:
1. What would you consider the most important things for new business owners to know when filing for the first time, based on the most common mistakes you are aware of for that group of people?
2. What habits would you encourage new business owners to practice throughout the year that will better prepare them for filing their taxes?
Thank you so much!
Melissa H.
Owner, Every Day Joy Fine Art
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
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01-12-2017
10:10 PM
Hi Melissa!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/4?post_id=352636260
Thanks!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/4?post_id=352636260
Thanks!
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TheSpiritedGard
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
Hi Veronica,
Just starting to do all the paperwork to start a home business.
Husband is very concerned that my home business will affect our personal taxes.
If i start the business as an LLC, which i have been advised to do, will our personal taxes be affected and if so, how?
Thanks so much!
Lisa
Just starting to do all the paperwork to start a home business.
Husband is very concerned that my home business will affect our personal taxes.
If i start the business as an LLC, which i have been advised to do, will our personal taxes be affected and if so, how?
Thanks so much!
Lisa
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-12-2017
10:33 PM
Hi Lisa!
Veronica responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/6?post_id=368514123
Thanks!
Veronica responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/6?post_id=368514123
Thanks!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-10-2017
07:13 AM
I'd love a primer on filing quarterly taxes for small businesses (sole proprietorships/LLCs). What are the quarterly deadlines for filing? What is the process for filing, and how should a small business estimate their quarterly taxes?
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-12-2017
10:17 PM
Hi Dara!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513343
Thanks!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513343
Thanks!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
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01-13-2017
05:55 AM
Thanks Alexandra! Really helpful, taxes are so complex!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-10-2017
07:11 PM
What kind of deductions do people often forget about that they can include?
Do you have any tips for filing as partnerships vs individual?
Do you have any tips for filing as partnerships vs individual?
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-12-2017
10:16 PM
Hi Leah!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513201
Thanks!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513201
Thanks!
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GoodEyeLLC
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
1. CASH TRANSACTIONS: As a vintage dealer, a lot of my inventory purchases are with cash. What is the best way to record this (both in Quickbooks & in terms of having proof of purchase)?
2. PAYPAL REPORTING: I make a lot of sales & purchases with Paypal, but I find their reports to be very confusing since they include the same transaction multiple times.
For instance, these are all for ONE transaction & are individual line items in the report. Some are positive & some are negative #'s:
Payment Authorized
Authorized Funds Held
Funds Released
Preapproved Payment Completed
I end up doing a lot of sorting, cuting, & pasting in Excel to remove duplicative line items before I can even work with the data. Is there a way to streamline this process? What line items should I keep (I think I normally work with the Payment Authorized ones). It's such a pain. Any tips would be appreciated.
3. PAYING YOURSELF: What is the best way to do this? Should we be cutting ourselves an official check each week? Since sales vary from week to week, how do we determine how much we should pay ourselves?
2. PAYPAL REPORTING: I make a lot of sales & purchases with Paypal, but I find their reports to be very confusing since they include the same transaction multiple times.
For instance, these are all for ONE transaction & are individual line items in the report. Some are positive & some are negative #'s:
Payment Authorized
Authorized Funds Held
Funds Released
Preapproved Payment Completed
I end up doing a lot of sorting, cuting, & pasting in Excel to remove duplicative line items before I can even work with the data. Is there a way to streamline this process? What line items should I keep (I think I normally work with the Payment Authorized ones). It's such a pain. Any tips would be appreciated.
3. PAYING YOURSELF: What is the best way to do this? Should we be cutting ourselves an official check each week? Since sales vary from week to week, how do we determine how much we should pay ourselves?
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
Can you pay yourself as a deduction? I just assumed anything left over after deductions would be my "profit/income"
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GoodEyeLLC
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
Profit is different than income. You have to pay payroll tax on your personal draw (income), plus income tax. I let Quickbooks & Turbotax calculate it for me, but I'd like to have a better understanding of it. I think the best way to do it is to literally cut yourself an official paycheck, but I'd love to hear Veronica's input. No matter what, your income wouldn't be a deduction.
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-12-2017
10:19 PM
Hi Nickie,
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=352636826
Thanks!
Veronica responded to your questions here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=352636826
Thanks!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-12-2017
10:20 PM
Hi Ashley!
Veronica also responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513505
Thanks!
Veronica also responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/5?post_id=368513505
Thanks!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
These are great questions! Keep them coming and vote for your favorite questions. I look forward to answering your questions on Thursday!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
Hey Veronica, I am having problems integrating Quick Books (Self-Employed version that Etsy offered us) to pull in my Paypal information. I accept Direct Check-out as well as Paypal. I have linked my paypal acct with Quick Books, but it is not working properly.
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-12-2017
10:43 PM
Hi Mimi,
Veronica responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/6?post_id=352638076
Thanks!
Veronica responded to your question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/6?post_id=352638076
Thanks!
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-11-2017
03:45 AM
If it true you only have to file if you made over $500 in total sales?
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
Former_Member
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01-11-2017
05:08 PM
Similar question! I just set up my shop for two months and there are a few sales. What is the bottom level when you have to start filing taxes??
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Re: Admin Q&A: Tax Edition with QuickBooks (January 12, 2017)
by
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01-12-2017
10:42 PM
Hi Alexandra and Sujie,
Veronica responded to the question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/6?post_id=352637980
Thanks!
Veronica responded to the question here: https://www.etsy.com/teams/7722/discussions/discuss/18221036/page/6?post_id=352637980
Thanks!
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