It is THAT time of year again. We wait until at least April Fool’s Day every year to do our taxes. It just seems fitting. It also allows for all minor changes to the tax code to catch up to the software we use (TurboTax).
Since we work for ourselves and have no W2s, we set aside 25-30% of our income for this happy(?) occasion, to contribute our due to the nation's slush funds. Congress controls the purse and makes sure they get their paychecks regardless of their inaction on national matters. But we do our part.
If you still receive W2s from a “real” job, you might want to file earlier to get any refund that you are due, before they run out of money.
Bookkeeping and Other Left-Brained Chores
For me, accounting of income and paying bills rate right up there with dealing with an embedded sliver that has become infected or shopping for orthopedic inserts for your work boots. They can be the most mundane of chores, yet if left ignored can become overwhelmingly painful. I have come to the realization that these tasks are best addressed as they happen or shortly thereafter. Creating this daily habit will keep everything organized and easier to find at the end of the year when the taxman cometh.
Every morning over coffee, after checking email and shipping the previous day’s output, I pay outstanding bills, order any necessary materials and supplies. I write up any new orders on my workshop clipboard. Then, I simply spend about 10 minutes catching up on my spreadsheets. Basically, I add completed orders to my monthly sales register and expenditures to its spreadsheet.
Once you get the hang of it, creating these spreadsheets takes only a few minutes, even if you are a novice. You can modify them to conform with expenses particular to your business and home budgets, with whatever metrics that are important to you. Set up properly, they will automatically tally the monetary values and if you are experienced with your spreadsheet making, can be programmed to do all kinds of fancy things with links and stuff. I am not proficient with bookkeeping software, so mine are simple and designed to get the job done. No frills.
I tend to stay away from online resources such as QuickBooks as I am suspicious of giving my financial info to companies that are regular targets for hackers. But that is just me. Do whatever is comfortable for you, but it needs to be done if you work for yourself.
I have created these custom forms in Google Sheets (part of my Google Drive) so that I can make blank duplicates for each month and year. If you are familiar with Excel or some other bookkeeping program, by all means use it. They are all similar in use. YouTube is a great source to find tutorials on making these
My Most Used Forms
Order Worksheet: Done with Google Docs, this is a static chart that I print out on whatever blank paper that I can find to take with me to the workshop. The backs of previously used printouts work great. These are only saved for reference until the orders on them are shipped and received.
Monthly Sales Spreadsheet: My simple ledger spreadsheet records daily sales (Order Date, Customer Name, Item purchased, Gross Price and Date Shipped). Since each state’s and country’s sales tax is collected and remitted by Etsy, I do not have to concern myself with those figures. (Thank you Etsy!) These sheets are also handy when tracking down a repeat client’s purchase date, then going to that date in Etsy’s invaluable order history to determine exactly what they previously bought.
Monthly Expenses Spreadsheet: Each column of expenses relates to items that will be deductible next tax season, such as Materials, Tools, Shipping, Fees, etc. Once created and before I enter any monthly data, I make duplicate files and rename them for each upcoming month.
I always “bookmark” the current month to my browser's bookmark bar so it is easily accessible. When I enter a payout in its proper column, I insert a comment to that block as to whom payment was made and what it was for. At the end of each month, I enter the Etsy fees, Etsy advertising budget and Etsy shipping charges that are found on Etsy’s “monthly statement”. Don’t forget PayPal fees (if any). That closes that month and I am ready to transfer those totals to my “Yearly Expenses and Sales Balance” sheet (next).
Yearly Expenses and Sales Balance Spreadsheet: Also custom made using Google Sheets but with the totals transferred from the monthly reports (above) to keep track of current and past years income and expenses. This is the form I use at tax time with all of the year’s info and to gauge growth from previous years.
* I have yet to make a home budget spreadsheet but need to, as many home expenditures are partially deductible for home office business expenses. Maybe next week…
Notes on Banking & Taxes
At the time of this writing, Etsy does not require a “business” bank account. I use my personal checking account to receive the weekly payouts on a weekly basis. As long as you are making regular sales on Etsy, they will deduct sales fees, advertising fees and shipping charges from your shop’s balance before cutting your payout check for automatic deposit. They will also require payment of fees, if your Etsy balance does not cover them. I have double-checked them a number of times when figures didn’t seem to jibe with mine, but ultimately found their accounting to be accurate. Mistakes were mine.
Your social security number is sufficient as an EIN number for their reporting income to the government. As far as I can tell, this information is held securely by Etsy. I’ve not had any problems.
I make sure to report ALL income at tax time. All digital transactions (which mine are) are easily tracked by the IRS and an audit is one hassle I do not need. Learning my lessons from family members (that I shall not name), I would rather overpay my tax burden than try some loophole trickery that some internet “whiz” recommends. Besides, politicians need pocket money too. Pay your taxes!
A word on accountants ~ If you can afford and trust a CPA… Good Onya! Our last accountant 1983 was a frazzled, pasty white dude in a coffee stained dress shirt and boxer shorts as his uniform. His manner and suggestions did NOT instill confidence.
I have filing using TurboTax’s Home and Business software (about $90.00) since 2011 when H&R Block charged me $500.00 to do it. With all my business info on spreadsheets and Etsy history, it is straightforward to complete our joint filing within four hours. It guides you through the process and helps you find legitimate deductions for having a home office and workshop.
As with sharp spinning blades, mind your digits!
If you are enjoying what you see… I like it hot and black. 😉
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What a great tutorial! It’s so kind of you to post that for those who are just starting out with their craft. Don’t you wish someone would have done that when you started out. Good job, Scott! I’m so proud of you.😘💕 Mom