(Poop on the figuring out part. Not the paying. I'm totally cool with paying them.)
I was filling out my expense spreadsheets tonight and as I do so, I always update my annual tax spreadsheet. Then next February or March, everything is right there and organized and ready to be categorized and added up! ...Except that never happens. I sit there in mid-March, staring blankly at the 1040 Schedule-C, probably drooling a little, clicking back and forth between the form and the instructions, trying to translate IRS-speak into non-business-person-dummy-speak, and figure out how the hell I categorized my expenses. My accountant said *generally* as long as you include eeeevvvvvvverrryyyything, the categories themselves aren't that big of a deal.
Still, it seems silly to go through all the trouble and not do it right.
So I zone out looking at the numbers and the various colors (because I color-code all the categories to make them easier to visualize and then add, since I have absolutely no clue how to tell Appleworks, "total this shit up" and I still do it by hand; no not with an abacus but one step up from that). And then it gets to be 2 in the morning and my husband has told me he wants to send the taxes in THE NEXT DAY so I just start plugging in numbers and adding them up so I can get to bed.
And every time I say, Next year will be different. When I have time, I will research exactly what all these categories mean so I can file properly and know exactly where the numbers came from when I look at them the following year.
But do I? Noooooo!!
Tonight became that day! Yay! I decided as I updated my taxes spreadsheet that it would probably be a good idea to go over all the categories NOW, when I have time and when I'm not in a sleep-deprived-stupor.
I think I've got them all straight. I'm not sure if this helps anyone else, but since there are like 4 categories for "supplies" I thought I'd summarize what I found tonight.
On Form 1040 Schedule C (Profit & Loss From Bidness):
Part 2 Expenses
Line 18: Office Expense. So like, office supplies and crap. Tape, staples, pens, whatever. This also includes Postage! Did you know that? Cause it doesn't say on the form. You have to look in the instructions to find it!
Line 22: Supplies (not included in Part 3): Well WTF other kind of supplies are there? Now I have to jump ahead all the way to section 3 and figure out what doesn't fit in there (or in Line 18 as office supplies)? What IS this? According to the instructions, it's "supplies" that you would consume in a year. "Books, professional instruments, equipment" are examples given. But that's confusing because most books or equipment last longer than a year, so you go into depreciation?? I have no idea. Maybe that's why they include the text "not included in part 3" because they don't even know. And they couldn't come out and say, "Uhhh... whatever.. doesn't fit... anywhere else. Put it here. Yeah that sounds good."
Part 3 Cost Of Goods Sold
Line 36: Purchases less cost of items withdrawn for personal use. Geez. So obviously items for personal use don't belong on your taxes, duh, so if you leave out the part of this category written by Captain Obvious, you have... Purchases. Ok, still, what? Through a bunch of internets-super-sleuthing, I found out that this means: Things you buy to sell. I *believe* this refers to something such as a print bag. You aren't doing anything special to it, just slipping your print into it to sell. Same with a frame, or a mat. You're buying the item to technically resell it. If I'm wrong on this please let me know- I'll correct this post so no one makes the same mistake as I'm going to be making ;)
Line 38: Materials and Supplies. Hello, could you be any more vague? Through even more exhaustive research than line 36 I found out this is stuff like materials you use to make a finished product. So if you make your own frames then the wood and stain and whatever hardware you use would be included here. And I suppose the ink and paper you use to produce prints that you're selling would be included here, too. And paint. And canvas. Orrrrr maybe canvas fits into the above category!?
Whatever. As long as you're consistent I guess.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Tuesday, June 15, 2010
Tuesday, March 2, 2010
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:
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!!
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!!
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