HELP HELP!!!! OMG IT'S TAX TIME.

I know for a lot of us this can be quite an overwhelming time of year. Especially if we are running our own little small business- selling arts, crafts, etc. I'm hoping this blog post might help some people out *a little* if you haven't done your taxes yet.

I know the first year I attempted to sell art at outdoor shows and galleries, I kept what I thought were very meticulous records: I kept track of all of my expenses, and all of my sales/income. And of course, saved all my receipts.
There. Done!

Uhhhh... no. Not even close. At tax time, I searched online to find out what I had to do to report any anythings about my business and found out I needed to fill out Form 1040 Schedule C. Great! I'll fill out that bad boy and away we go, smooooooth sailing from here! I downloaded the form and opened it up expecting to see this:

Income: $________
-Expenses: $________
=
Profit (what we're going to tax you on):$_______

Imagine my shock and horror when I downloaded 2 pages of big words that I didn't understand, blanks, and instructions that ran you around in circles like, "Subtract line 7 from line 42 on page 2"... so you flip to page 2 to see "Add lines 28 and 29 and then subtract line 30 then multiply by the square root of the number of beers you had last night plus the calories you burned while the wheels in your head were spinning out of control as you try to comprehend this."

EEEEEEEEK!!!

Luckily after my first year of doing my own taxes (which took me like 12 hours), I now know to keep much better and more detailed records than "spent" and "earned."

I keep a spreadsheet every year of all my tax-write-off-expenses. I put my receipts into a little stack on my desk (and save all my emailed receipts from online purchases in a folder on my computer) and when they start to pile up, I open my spreadsheet and record them. I record the date, the store from which I made the purchase, the amount I spent, and then the category (the number of the line on the tax form) that I'll need to know when it's tax time.

Expenses on the tax form are broken down into allllll different kinds of things: Advertising, office supplies, legal fees, labor, inventory-type-stuff, and a crapload of others that I don't even use. I spent hours reading the instructions for Schedule C to understand what all the blanks meant (and I kind of feel like I still don't know...). Sorting between categories each and every time I record an expense has significantly cut down the time it takes me to do my taxes! Another thing I do at the end of the year is color code all the categories so I can easily just glance at the thing and know what's what.

In 2009 I also implemented something else to help me at tax time (and help over all with expenses). I made a chart of how much each thing I sell costs me to make. So, for example, if I'm selling a print- what goes into that? A plastic sleeve, backing board, paper, ink, sometimes a mat. I figure out the cost of each of those things and add them up, then I know how much it costs to make a matted 16x20 print, a matted 11x14 print, etc. (Ink is tough, I cheat; there are websites out there with that info, you just have to find them!) When I'm at an art show, each time I sell something, I write down what item I sold, the price of the item, and in parenthesis next to that I write in what that item costs me to make. This way at the end of each art show I know my real profits, not just what I sold. I can now also easily add up the "cost of goods sold" at the end of the year, and that minus what I spent on inventory = my inventory at the start of the following year.

It's a lot to contend with, maybe I could've/should've hired an accountant to do it all. We have one who does our taxes and each year he checks my forms to make sure at least everything makes sense! And so far it has.

One piece of advice that he gave me was, "Getting the expenses in exactly the right blanks isn't necessarily the most important thing. The most important thing is just that you report everything and get it on that form somehow."

Good luck this tax season, everyone!!