This is one of the choices for topics to discuss in the bi-monthly Etsy bloggers Blog Carnival. The other topic (new goals for the year) seemed too similar to a post I wrote at the beginning of the year, so I guess I'm resigned to talking about taxes in this one.
GROAN, not my favorite topic. Last year was the first year of my business on Etsy and I barely had a clue what I needed to do until I got to the end of the year and had to try and gather everything to do my taxes properly. I've been doing my taxes myself ever since my divorce in 2002 and finding that satifying in a strange sort of way. So, I was detemined to do my taxes myself even after I started my Etsy business. After all the real work is knowing what to keep track of and doing that throughout the year. The first year was a bit painful because although I had kept everything, I didn't really have it organized. By the way I have used TaxAct software to do my taxes since 2002. One feature I like is that it retains the history/information from the previous year so I don't have to put same information in again.
For 2008, I had the following system in place all year which should make taxes much easier:
1) I keep track of all my products (bill of materials for each item, materials purchases, miscellaneous expenditures, and mileage using the Excel spreadsheet I created. It's a modified version of the one that is linked on the right hand side of my blog.
2) My reciepts go into envelopes labeled with months so I can find them later if needed.
3) When I make a sale, I record it in my Excel spreadsheet, checking to be sure I've recorded the cost of the materials to make it, postage costs, taxes if any, etc. I print the Etsy receipt and the Paypal receipt, staple them together and put them in my "Etsy sales" folder.
Next year, I may make a folder for each quarter of the year because I had so many sales, it's a huge file. :)
4) At the end of each quarter, I added up my total sales, my taxable sales, computed my taxes and send them in to the state of Idaho.
Last year, when all was done I was happy to discover I had made a small profit. I'm hoping for even better news this year.