With the New Year here, it’s time to start thinking about taxes (we know, we get it, we’re dreading it, too!). It isn’t anyone’s favorite topic (at least we hope not), but if you own a business then you can’t avoid it. We’re here to help you take some of the stress over tax-planning, whether you’re filing once a year or every quarter.
One of the best resources for tax information is Etsy itself – they’ve got their sellers’ backs in this department. Of course, we are NOT tax professionals here at Patterned HQ, so please be aware that what we’re offering here is insight but not professional advice. Please consult a tax lawyer or accountant in your local area if you have any specific questions or needs!
Ok, let’s see. Here are some tax tips to make things easier on business owners everywhere:
- File your taxes quarterly. As a business owner, you can’t guarantee or predict what your income and expenses will be like for the year. Sure, you probably have some basic idea but you just never know when you’re going to hit a serious slump or a giant windfall. On top of that, since you don’t have a traditional employer taking taxes out of your paycheck, the IRS doesn’t get your money until April 15, and they’re not overly fond of that. To ease the burden of annual taxes, start paying estimated taxes every quarter. It’s surprisingly easy to set up an account online with the IRS, and if you pay your taxes throughout the year then it makes it more likely that you will owe less (or get a refund) when the annual tax returns come due. According to this useful article from Etsy + Outright, you only have to pay quarterly taxes if you will owe $1,000 or more in taxes this year.
- Keep track of your income and expenses. If you have over $20,000 in sales and 200 or more transactions, you’ll get a 1099-K from PayPal (and/or Etsy) which will report your income. This form also gets sent directly to the IRS, so make sure that your data lines up with theirs when you submit your taxes. Read more about the 1099-K here, and learn more about tracking your business income and expenses here.
- Remember that the IRS isn’t the only entity with its hand out come tax-time. Depending on where you live, you may have to pay business tax, local tax, state tax, sales tax and who knows what else! Get the low-down on the various types of taxes here, and be sure to check with your state’s department of revenue to find out what your local and state tax obligations are; these taxes are due at various times throughout the year so you’ll need to manage those payments regularly, not just in April.
Do you have any tax tips for fellow business owners? Of course we won’t hold you legally responsible for anything you post, but feel free to share your tax lessons in the tips below!