Happy Monday, everyone!
Well, I'm stickin' to my word and beginning Handmade Business Monday today. Considering I just finished Tansy Dolls' taxes (hooray! I hope this reads dripping with sarcasm, like I intended.)
Anywhoooooo, I thought I'd impart some of what I've learned over my many years of being a freelancer and running my own businesses. I hope this helps ya, please join in the conversation if you have something you'd like to add. I certainly don't know everything and I'd appreciate some tips!
1. Find a local CPA that treats you well.
As a small business owner, I sure do appreciate when people consciously choose to buy locally and I feel no different when deciding which businesses I choose to support. My advice? Avoid the bigger companies at tax time - they will charge you the same (possibly more) and you will not be treated with as much one on one attention from someone who really wants to earn your trust and have you return to them next tax season.
That said, ask around if you have any friends that are freelancers, artists, or small business owners. Most likely they've found someone they enjoy working with. Nothing is better than a confident referral to cut your time down finding the right person for the job. And, if that person doesn't do a top-notch job for you, then next year ask around again and find someone else. Eventually, you will find a CPA that is totally awesome and you'll be confident everything is where it's supposed to be.
2. Save all of your Receipts.
I know, I know, you've heard this before. But, seriously, save everything. Most likely, if it's your first time itemizing your deductions you'll be surprised at what you can write off. Ideally, you should keep a running total of your spending month by month. Of course, if you're like me, you'll probably be stuck sorting and tallying up a huge bag of receipts at the end of the year. Yup, don't expect to hand your CPA a bag of receipts, oh no, you will be
creating a spreadsheet with the totals of your spending in neat little
categories (make sure to save the actual receipts in a file at home though, in case the dreaded day comes when you are audited.)
Here's a handy-dandy look into what sort of categories you can expect to have: Art Supplies, Office Supplies, Website hosting/Domain, Advertising, Postage/Shipping, Phone, Internet, Client Gifts, Client Meals, Business Meeting Meals, Business Miles Driven (this is a great one, with big savings, so keep track of those miles), Travel (includes all meals, transportation, hotel, and even entertainment), the depreciation of your computer, and on and on...
So talk to that amazing local CPA you found and I bet they'll know exactly how you need to categorize your deductions to get the most out of your earnings.
3. Know your Inventory.
So, say you bought $4,000 worth of material supplies this year (more specifically, the art materials you use to craft your super cute crafts that you sell , not your office supplies, etc...) Then you actually used $2,000 worth of them, and only sold $1,000 worth. That leaves you with $2,000 worth of unused supplies for future sales in addition to those $1,000 worth of already-finished cute crafts just waiting to be sold. In other words, $3,000 worth of unsold supplies that need to be carried over into next year's taxes.
It could look a lil' somethin' like this:
Art materials purchased: $4,000
Materials used in the crafts we sold: $1,000
Materials used in the crafts that haven't sold yet: $1,000
Materials we haven't used yet: $2,000
Confused? You CPA won't be, and they'll help you figure it out. So, just trust me, keep an inventory of art supplies, an approximation of what was actually used, and the hard numbers of what sold.
4. What to expect to Pay.
You can expect to be charged anywhere from $300-$500 (and with the right accountant, it's worth every penny.) Some CPA's will give you a 'first time' rate. Don' t forget to mention that friend that referred you! Most likely they'll get a discount too.
5. Get everything in to your fabulous CPA early.
Your accountant will have a long list of clients all expecting to have their taxes filed before the 15th, so you'll be getting in line! If you wait until the end of March to get them your info, you can be sure that you'll be one of the many to have to file an extension because you'll be handing your taxes in late. Now, being late with your taxes isn't the heart-stopping-worst-thing-you-could-ever-do like a lot of people seem to think. But, it will cost you money - late penalties and extra interest if you owe. The object is to save you money, after all. So, yeah, git'er done!
Well, I think that's enough for today, I can feel the gears in my brain shutting down. I hope this helps, guys! Have a great week!