The Step by Step Guide to Filing Your Taxes for E-commerce Business Owners
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- čas přidán 3. 01. 2023
- Check out this step by step guide to filing your taxes for e-commerce business owners. If you're an Etsy shop owner, Shopify seller, or online business owner, this explanation of the Schedule C will help you understand how to do your taxes this April.
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⬇️ Get your bookkeeping templates from Paper + Spark:
paperandspark.com/shop/
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⬇️ Additional Resources mentioned in this video:
Read this post: An Overview of the Schedule C paperandspark.com/schedule-c-...
Download the Schedule C: www.irs.gov/pub/irs-pdf/f1040...
Download the Schedule C instructions: www.irs.gov/pub/irs-pdf/i1040...
Learn all about the easiest bookkeeping system for e-commerce sellers: • The No Brainer Bookkee...
When to Worry about Taxes as a Handmade Seller: paperandspark.com/tax-workshop/
Download a free step-by-step checklist of the financial & legal stuff you need to do to get set up properly: paperandspark.com/gltchecklis...
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⬇️ Let’s connect:
Facebook: / paperandspark
Instagram: / paperandspark
TikTok: / paperandspark
Pinterest: / paperandspark
Twitter: / paperandspark
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👋 Hi! I'm Janet LeBlanc
I’m a Louisiana girl now living in South Carolina, a Certified Public Accountant, a serial-entrepreneur, and a mom of two. My passion is helping other creative women bring their entrepreneurial dreams to life with confidence. As an accountant and data nerd, I love creating tools + resources to help you achieve financial success in your biz and personal life.
Why should you listen to anything I have to say? Because I’ve been in your shoes! I started a handcrafted jewelry shop on Etsy back in 2011 as a side hustle from my accounting job. During my time in the handmade community, I heard a lot of the same frustrations and questions over and over. Concerns like, when am I supposed to register my shop? Do I have to charge sales tax to my customers? When do I claim this on my tax return? What sort of bookkeeping system am I supposed to use?!
In 2014, I finally united my love of handmade and accounting and founded Paper + Spark. In 2015, the first iteration of the Etsy Seller Spreadsheet debuted. This product completely changed the course of my entrepreneurial journey. Creating spreadsheets isn’t the sexiest or most glamorous product to design (although I like to think they’re pretty, for spreadsheets), but getting the chance to help creatives feel more confident about their money has been SO fulfilling and I am grateful to serve you today!
🌐 Visit Paper +: Spark to learn more:
paperandspark.com/
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#ecommercebusiness #creativebusinessowner #handmadebusiness #taxes #businesstaxes
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Thank you for clarifying
You are the BEST! We love you!!
Thank you so much! 💕
This was so helpful! Thank you!
I'm so glad!
Janet, thank you this is great!
Glad it was helpful!
THANK YOU!
Of course!
The video was awesome and explains so much , thankyou !
Glad it was helpful!
Thank you for this! You made it easy!❤
Glad it helped!
I love your content and the Etsy seller spreadsheet is going to be a life saver for me! Would you consider doing a video on filing a 1065 as a partnership?
You are the BEST!!! been using your spreadsheets since 2021 and they are a live saver!!! I will say the COG section confuses me and stresses me out e very tax season 🤦♀️ cant get my brain wrapped around it haha but i try my best.
Thank you! I have some resources about inventory & the Schedule C on my site if you need more help with that!
Do you have a video on state sales tax? You are awesome and explain everything!
Thank you so much! The most up to date resource I have on sales tax is a blog post right here - paperandspark.com/salestax/
Brilliant ❤ I’m from Ireland and bought your sheets and easily modified to suit me. I love it. Great job! I might record video on my channel about this topping to lead my USA viewers to you. I hope that’s fine. I just need to find time with a small baby quite challenging but doable. I’ll tag you . ♥️♥️♥️
Absolutely! Let me know if you need anything from me to make it easier! I have an affiliate program if you're interested :) Thank you!
Can you also include in the videos the answer to the following question , if for example your business is in the state of Michigan and other states start buying from your online store which is located in the state of Michigan, when or if you have to pay taxes to other states because buyers are buying on your online store from other states ! Or when does nexus also come into play from outside of state purchases ! These questions will really help me and others like me who are really confused and frustrated and just ready to give up on e-commerce! I spoke to a company and they want to charge me $400 dollars for sales tax license per state per location, imagine how many counties are in the USA! Your my only hope , my last hope .
That blog post I just commented with is a great place to start :)
Thank you for the content! I have two questions 1.) Do we also fill out for SE for self employment tax and 2.) when we pay ourselves how do we file that income for income taxes
Yes if you had a positive net profit on your Schedule C you will also fill out a Schedule SE for self-employment tax.
If you're a sole prop filling out a Schedule C, what you pay yourself is not actually an expense to your biz. You pay tax on your entire business net profit, regardless of how much or how little you paid yourself of that net profit, and it's not reported anywhere. This article has more info:
paperandspark.com/how-to-pay-yourself1/
Hello Thank you so much for sharing this much needed information!!!! I was wondering when filing jointly will our info on 1040 all be in the same form? Or will he have a 1040 and I have a separate 1040.
If you are going to file married jointly, then you only have one 1040 with both your stuff added together on it.
You think you can also do a video on the states nexus it's extremely confusing, 100,000 and 200 transactions
this is a good place to start: paperandspark.com/salestax/
Does anyone know what the NAICS code for a ecomm is ?
You think you can do a video on states and digital goods taxes, like ebooks or subscriptions , it's very confusing after the supreme Court ruling south Dakota vs Wayfair? It will help a lot of us who are extremely confused .
Thanks for the idea! Digital products are subject to sales tax in about half the US states with sales taxes. So you really have to see where you have nexus and then determine if your state charges sales tax on digital products.
To be clear though, this video is about income taxes - which will apply to your digital goods regardless of what's going on with sales tax.
Thank you this is so helpful! I have a question about Purchases, and Materials and Supplies of section 3. I might be overthinking it. So I sell bookmarks + stickers that are made at a print shop and manufacturer. But I design them. So would the cost of what I paid to get those made be in Purchases? My manufacturers buy the ink and paper, not me. I just use an iPad and Apple Pencil to draw everything, which would go under expenses or materials and supplies? Thanks you!
The cost you pay your manufacturer to print the items (and ship them to you) could be your inventory purchases in this case. I'd consider your iPad a tool or equipment.
When would you recommend hiring a CPA? I’m very new just started my llc this month. No revenue as of yet just trying to legally set everything up.
A CPA will usually help with your tax preparation at tax time. They may also help you with any local, state or federal paperwork you need to do. So it really just depends what you need help with and whether you feel comfortable DIYing it or not!
Why leave blank e thru j on tax form
Question, Do these steps still apply if this is the only income I am making? I plan to run my etsy full time for now while I job hunt. I just fill out the Schedule C and give it to the irs?
Also how do we know if we have to file quarterly vs annually.
Yes, it doesn't matter if it is your side hustle or your only income - you'd attach the Schedule C with your Form 1040, assuming you're a sole prop.
Question what if I didn't keep track of end of year inventory for last year? I have an inventory tracking system that displays total goods cost. 2023 i didn't keep track of sales but on 2024 I am every sale with profits and revenue. 2023 i started on october so does it matter
So you're saying instead of calculating beginning inventory, purchases, and ending inventory your system is tracking your cost of goods sold directly?
Do you have one for amz sellers? Ty.
This video applies to Amazon sellers, if that's what you mean? I do have a bookkeeping template for Amazon sellers here: shop.paperandspark.com/collections/seller-spreadsheets/products/handmade-amazon-seller-spreadsheet
Quick question: I am a dropshipper and do have physical inventory. do i have to mention inventory at the beginning of the year?
Usually as a POD shipper you don't have inventory at the beginning or end of the year. This would only be if you actually had a stock of inventory on hand.
I want to ask
Shopify business tax is 30% rate
But Hong kong business tax is only 8% in first 2M$
Do I have to pay shopify tax 30% if my business is located in hong kong?
This is federal right but, what about state taxes. If I just sell digital products online do I just pay taxes on profit federal only or do I have to send in a state tax for each state minus states that don't have state taxes?
This is federal income tax, but it works very similarly for state income tax. You also may have state SALES tax - which is a totally different animal.
For your business, you'd have federal & state income tax (unless your state doesn't have income tax) on your net profit.
For sales taxes, you only deal with that in the state(s) in which your biz has nexus. I have more info on that here: paperandspark.com/salestax It's also a different due date.
Do I have to register ‘sole proprietor’ business somewhere before starting an e-commerce business? How does it work if you sell digital products only?
No, here in the US you default to being considered a sole proprietor when you start selling, assuming there's only one of you operating it (otherwise you'd be considered a partnership). You don't need to "do" anything to "be" a sole prop. But once you do start selling, there are some things you need to do to get your financial ducks in a row - like get your sales tax permit (possibly - not all states charge sales tax on digital products), get your DBA or assumed name license, etc. I have a full list here: paperandspark.com/gltchecklistyoutube/
Hi Janet, I already register for sales tax in my California state last year, but I just start sell on Etsy this year, no sales from last year, should I fill sec C form 1040 for submit this year tax?
For sales tax, since you already have your state permit, you still file when due - even if you have nothing to report.
If you don't have any sales for last year, I wouldn't file a Schedule C until this year.
do you have a new Shopify spreedsheet for 2023?
The most up to date version of your spreadsheet is always available inside your account at paperandspark.com if you are an existing customer!
2 quick questions: 1. As an Etsy seller, do I need a Power of Attorney and Declaration Of Representative (Form Gen-58)? I'm an LLC so I have a Registered Agent. 2. Do we need a Resale Cert of Exemption (E-595E) if our State Dept of Rev said we didn't need to file for a tax ID because we sell exclusively on a marketplace? Thanks! I'm so confused with all I've read online at this point.
Just with the lone qualification of being an Etsy seller you don't need a power of attorney... now does your state's LLC registration require something along those lines? Possibly. I would call to confirm with your state's Department of Revenue that you definitely don't need a sales tax permit if you ONLY sell on a marketplace; states seem to give different answers on this question so it's best to get it straight from the horse's mouth! Sometimes your sales tax permit doubles as your resale certificate as well, so it may be worth getting anyway.
@@paperandspark thank you! I did call and they said I didn’t need a state ID. Maybe I’ll just get a cert then!
Hello and thank you for this amazing video, quick question: I sell products online, I have an LLC formed almost 2 years ago, I filed the first year as a sole proprietor, been told by the accountant that I don't need to file quarterly taxes, my question is: when do I file the quarterly taxes and how? knowing that for my monthly sales taxes for my home state, I file 0 because I do not sell anything in my city I do not own a Physical store here, also my business is very slow I barely sell one item per week, due to Amazon and Aliexpress that are destroying small businesses like myself. could you help, please? Appreciate it
The first thing to get clear on is what you mean with "quarterly taxes" - your state sales taxes which could be due quarterly? Or your estimated federal income tax bill, which may be prepaid on a quarterly basis?
Also another question 😂 as a sole proprietor do I need to register my online retail business with the state or the IRS?
For that, I highly recommend checking out my free training here - paperandspark.com/tax-workshop
I will walk through what you need to do to/not do!
Hello! Please give me some advice. I am trying to file my taxes on turbo, and I do not see a 1040 form. They're asking about 1099... do I fill out that part? What is a 1099 vs 1040 form? I'm just so confused.
I have an LLC but it's an independent LLC, and I did not make more than 500 as I started in November of 2023. Can you help me on any advice?
A 1099 is something you may have received for the work you do in your LLC, not something you fill out on TurboTax. You will use TurboTax to file your Form 1040 (personal taxes) and potentially a Schedule C for your LLC.
@@paperandspark Ok, got it. Thank you!
You stated shipping was included for the sales section. How does this work? I thought you only paid taxes on profit. If the seller is shipping products and pays shipping fees, the buyer is reimbursing them and there is no profit. Also, how does this work if you are using a third party drop shipper that ships the product?
Profit is your revenue or sales minus your expenses.
Shipping the customer pays to you should be included as part of your revenue. What you actually pay USPS, UPS, etc. for postage is reported as a shipping expense. Those two numbers may cancel out, or they may not. Either way, yes you pay taxes on your profit. But you still included those two pieces of the shipping puzzle in sales & expenses separately.
why am i being told that have to file my taxes monthly? Should it just be once a year?
Hi there, there are different types of taxes. In this video, I'm talking about your federal income taxes, which are due once a year (April 15th if you're filing a Schedule C). You may pre pay your income taxes as quarterly estimates 4x a year.
If you're filing "taxes" monthly, that's uuuusally your state sales taxes, which may very well be due monthly for you.
What if I have multiple shops, and combined they pass that $600 threshold?
Well first, breaking news - today they literally announced a delay of the $600 threshold to tax year 2024. That means you won't receive a 1099K, but it doesn't impact whether you need to file a Schedule C or not. If you're running a business, you still want to be prepared to file this Schedule C at tax time if you're a sole proprietor.
Welp, I already did my personal taxes. So there's that lol
Uh oh, did you forget to add your Schedule C to it?
@@paperandspark hi Janet 👋🏾, well i thought you file the sole proprietor business separately. But it’s all good now, i just amended my taxes last night and added the schedule c. You were a big help. Thank you