Tuesday, 5 February 2008

Nobody Wants To Go To Tax Jail!

from Sarah, of SpaceDog Studios

This is a post giving all of BEST an assignment. Yep, an assignment.

Step one: find a box (a shoe box, a photo box, a cereal box, whatever)
Step two: label it RECEIPTS
Step three: put things in it

I'm serious. Just do it, you'll thank me later.

Last night we finished our taxes. I say "we," but really my husband was the one typing numbers into Turbo Tax. Up until last year, my art has been a serious thing for me, but financially not much more than a hobby. Last year, though I made over 2,000 dollars just on Etsy.

This is by no means a fortune, but is enough to affect our tax return since I ended up claiming my income and none of my expenses. I didn't save any receipts or records, or really anything helpful. I know this is Business 101, but I just didn't do it. To be honest I didn't expect to make any income of consequence, and also I just didn't see the importance of keeping these things, until last night.

I really hate "living and learning."

So this year I'm starting off with a labeled box. A small step, I know. But I believe in baby steps. I'll be the first to admit that I know absolutely nothing about taxes or finances . . . frankly numbers scare me, and I don't want to go to jail.

Really, I'm afraid of tax jail.

This year however, I'm determined to take myself and my work more seriously. And that means doing the paperwork. Or at the very least, making a box for the paper work.

In case anyone else is inspired to get their act together, this book on Amazon, and this list of links on Etsy are also helpful.


moonlightbindery said...

Very timely post! I read "Craft, Inc." and found it very helpful - especially the section on pricing!

Blue Valentine Press said...

Great advice Sarah! I'm pretty organized about these paper work things and really pays off. I also recommend Craft Inc. In fact I blogged about it the other day. Very good book for both beginners and experienced sellers.

Piami said...

Thanks for reminding me! Your box looks both beautiful and practical.

Is the "Craft Inc."-book useful for crafters outside USA too?

Sara said...

Here's some tips my accountant gave me last year, deductions galore!:
1. You can deduct milage for craft shows/ events you drive to. Also parking fees if you had to pay any.
2. If you work out of your house (studio in the dining room, that sort of thing) remember to claim your workspace as a home office (gives you deductions on a portion of the ululates going to that room)
3. Subscriptions to Craft magazines (or any related to your work) = deductible, as are entry fees for craft shows, supplies and materials, cost of business cards and advertising. . . . the list goes on!

*Please note: I am not (myself) an accountant, it's true. I cannot defend you should the IRS come knocking. While I believe my accountant is an honest man and that the advice given to me and passed on to you is sound, it's always a good idea to check with a tax professional or at least the appropriate IRS tax publications.

Anonymous said...

I think parts of that book would be useful for people outside of the US, but I think the parts about trademarks, and taxes might only be good in the states.

Thanks sara for the other tips! I think I might need a bigger box! :-)

bookyeti said...

Excellent reminders! I keep mine in an ugly old shopping bag hanging on the back of my office door. lol.

I'm dreading this tax season - it'll be my first incorporating my handmade items sales from home and on Etsy. Fortunately my parents stressed the importance of saving ALL my expense work-related receipts. WHEW!

I hope it goes well for you, Sarah! :)

moonbindery said...

Good advice, Sarah! I took a course on running a small business, and I'm sooo glad that I did. One thing that works for me is to have 12 folders--one for each month of the year, and then staple receipts for that month to pieces of paper (I use recycled printer paper)and put them in that month's file. Makes it easier to keep track of them.