Saturday, January 10, 2009

Organizing for Taxes

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.


BeadedTail said...

You sound very organized and an accountant in the making! I love that you say that you were happy to discover you had made a profit and hoping for more this year. As a CPA, our clients want to see a loss in order to reduce the tax paid so your comment is very refreshing and shows that you have a fabulous attitude!

storybeader said...

love to see how people organize their important papers. 2008 was my first year in business, and I wasn't sure what to keep, so I kept everything. I plan on giving it all to my CPA - I don't know if she'll be mad or sad with me!

Jenn said...

2008 was my first year with my business, and I'm sad to say that I didn't do a great job with my bookkeeping. I have everything (I think!), but it is not organized at all.
Thank you for posting the spreadsheet - I'm definitely going to use it this year, especially since I have stores on both etsy and ebay this year!

NICO Designs said...

What organization! I have QuickBooks and I prefer Excel! I know it is shocking to all the accountants but it is so much easier for ME.

Good for you about the profit--keep it up; and I like the buy now button. maybe one day I will add one to my blog.

Jen said...

Thanks for this very helpful post! I'm definitely doing the learning curve thing with taxes (this being my first year filing for the business) and doing them myself, too. sounds like you have a great system -- I can definitely learn from it!

uniquecommodities said...

yes you are very good. I am STILL Lost though...LOL! Poor me.. I will have to talk with the guy who does my taxes to figure out what I need to do. Maybe I should not have gotten that LLC so soon! I am thinking of getting quicken home and business