Preparing for Tax Time as a Small Business

Every year I look forward to doing my taxes. I'm the only person I know who squeals when the W-2s are delivered at work, and who spends hours gladly poring over tax documents and reading every tax article I can get my hands on.

For the record, I'm a writer. Not a tax professional*. And yet, even when it seems like I can't multiply even simple sums in my head, for some reason finances just get me worked up like a school girl on a snow day.

As I've been working on my taxes this year, I've found a lot of really great informational resources that I want to share. This was my first year filing a Schedule C - which is necessary for income from self-employment (Etsy and some freelancing). Like me, this may be your first year tackling your self-employment taxes yourself, or unlike me, you may just hate doing them because they're hard to understand. Hopefully some of these resources will come in handy and make tax time a bit more of a pleasure than it generally is for most people.

Why I love doing my taxes
First off, let me just tell you why I get such a kick out of doing my taxes. Although I'm a pretty liberal person, I don't like giving the government my money. I want as much of it back from them as I can possibly get.

When I was a kid, I hated authority. I rebelled a lot as a teenager - not with drugs or alcohol, but by pushing boundaries and ticking off my high school administration. So when I do my taxes now, that's how I feel a little bit - kind of like I'm sticking it to the man. (Hopefully you can relate to this - because I know how alienating it can be when I tell people I enjoy doing taxes.)

Let it also be noted that I am single, childless, and do not own my own home - so my taxes tend to be relatively easy to do. Your situation may be different, and I fully understand how the complexities of life could make someone loathe tax time.

Small Business Taxes
I won't go so far as to profess my love for the IRS - because who are we kidding - but IRS.gov has some really great resources for small business owners.

The Small Business and Self-Employed Tax Center has answers to some of your biggest questions, including:

How do I know what business expenses are deductible?

What forms will I need to file my own taxes as a sole proprietorship?

How can I make tax time easier next year?

Can I deduct part of my rent or mortgage since I use part of my home for business?

Will I be able to file my taxes online or do I still need to do it on paper for my business?

But how much *is* self-employment tax, anyway?

What about things like theft or retirement? Where can I learn more about managing the risks of a small business?

Honestly, the IRS provides all the help you could ever want to do your taxes. They're thorough - if lacking in style - and generally provide easy-to-understand instructions for tax forms.



But wait, there's more...
What if "generally easy to understand" isn't good enough? Well, the internet has something for everyone.

Should you fill out a Schedule C, or the shorter, easier Schedule C-EZ?

I just wish someone would walk me through filling out the Schedule C!


Paying for your tax preparation
Can't I just get something to do all the heavy lifting for me?

Yes, absolutely.

TurboTax, H&R Block and CompleteTax are all services that will walk you through your tax preparation, step by step, and then file them for you via the internet.

TurboTax and H&R Block both have software you can buy to do your taxes at home, then print out or e-file your taxes. However, I like the online tax preparation a little better because it gives you the chance to test out the programs before paying to file your taxes, whereas with the software, you pay up front.

Cost Analysis:
Online:
Turbo Tax for Small Business + Personal - $74.95
Plus state return - $34.95
= Total of $109.90

H&R Block for Small Business + Personal (Signature)- $79.95
Plus state return - $29.95
= Total of $109.90

Software:
Turbo Tax for Small Business + Personal - $99.95
State return included, but not for e-file
Mac compatible
= Total of $99.95

H&R Block for Small Business + Personal - $79.95
State return included, but not for e-file
Not compatible with Macs
= Total of $79.95

What if I want a real, live person to help me do my taxes?

Good question. Well, I happened to meet an H&R Block tax preparer earlier this year (note: this is not an endorsement). In the course of our conversation, she told me that it would cost about $150 to have her do my business/personal tax preparation - and that I should call to make an appointment early in the year.

From what I've heard, going to an accountant or a CPA is going to run at least this much money, if not more - though they should be able to give you valuable advice and make up for the cost of their services. Also, be aware that the cost of an accountant or CPA or any other tax preparer is actually a deductible expense on your Schedule C, so they should benefit you two-fold when you hire one.

So best of luck this tax season, and remember - claiming all *legitimate* expenses is just a way for you to keep as much of your own money as possible. Don't let the man get you down!

And feel free to leave any questions you may have in the comments - I will try to provide resources to answer them, to the best of my ability.

*I am not a tax professional in any way, and these resources are only meant as references for you to learn more about doing your own taxes. If you have questions or concerns, please consult an accountant or tax preparer.

Winter slumber

Oh, I've been terrible lately! No blog posts, haven't been spending much time on Etsy. Bad shop owner!

To my surprise, I have had a few sales trickle in without even promoting, so that has been lovely. And despite my absence online, I've got a few new products in development.

The fabulous Lillyella tagged me on her blog to participate in a little meme - which may be just the motivation I needed.

The Rules:
Link to the person who tagged you

Post the rules on your blog

Write six random things about yourself

Tag six people at the end of your post and link to them

Let each person know they've been tagged

Onto the facts:

1. I was such a precocious kid, I bullied my mom into admitting there was no Santa Claus when I was 5. I can't even imagine what I would do if I had a kid that was that clever! You'd have to have a web of lies.

2. I love cooking - the process and the end result. I may roast a chicken this weekend just to do it, even though I'm cooking for one (most of the time).

3. I'm terrified of bats - even though I think they're quite cute.

4. Sometimes I worry that I'm flaky because I have so many different interests and hobbies and have a hard time sticking to just one.

5. I hate the cold weather, but there's something so cozy about being nearly snowed in on a weekend afternoon.

6. Sometimes I can be overly analytical and get so caught up in thinking about something that I can't make a choice. And it bugs me!

So that's it! And for these six people - tag, you're it!

katydiddys
Double Dipped Sweets
Emma's Gems
The Clack House
The Vintage Chain

Darning Diva

First Craft Show

Thanks to everyone who wished me well! My first craft show was a blast, and I did very well.

It was in a Catholic elementary school gym, and there were about 30 vendors. The show was to benefit the eighth grade's class trip to Chicago - and the eighth graders were there to help. I met a bunch of really fabulous kids, and some of them just couldn't stop coming by to coo over my designs. So that was a real ego boost!

There was a preview night on Friday, and Saturday it started snowing. Which I guess is a big deal in Southern Ohio! They got about half inch to an inch, and our traffic drastically slowed. I found the whole thing hilarious, because meanwhile, back in Michigan, I knew we were getting about a foot of snow this weekend. (Seriously, I've pulled out the fur-lined wellies just to get to work. The roads looks like a margarita explosion.)

I was very pleased with how I did at the show, and I can't help but wonder how I'd do with even more traffic. I definitely think I'll be doing another craft show.

But for right now, I'm taking a little breather, getting my home back in order, preparing for Christmas, and working on some new ideas for the Etsy shop. Check back soon for some blog entries about what I learned at the craft show, and more nuggets of marketing wisdom. I've got a couple of articles in the works.

Here I go!

The time has finally come. I've been preparing for weeks, and tomorrow I'll drive out to Cincinnati to attend the Something Beautiful Craft Fair for Mother Theresa Catholic Elementary School.

It's the first year, but my friend Tara's sister, Mandy, has been working her butt off getting press - like this and this, where she even mentions my business by name! She also got an interview on the local NPR affiliate. Crazy.

Anyway, I gave Tara a necklace to pass on to Mandy over Thanksgiving, and she's been wearing it all week at school where she teaches, giving staff and students a little sneak peek at my wares. =o)

I'm feeling pretty excited about it - and even if the show is a total flop, I'm going to spend a weekend with some really fantastic people and have a little vacation.

Wish me luck!

Price Vs. Value

I'm working like crazy getting ready for the craft show this weekend, so I don't have any new pictures or sales to offer up in my shop. So, rather than neglect my blog, I thought I'd share some things I learned in college.

My dad is pretty controlling. I went to college for Creative Writing; he made me get a Business minor. While I hated it at the time, I learned a lot in my Accounting, Marketing, Management and General Business courses.

There's a lot of discussion on Etsy forums about whether or not to lower prices to increase sales. Some people think lower prices encouraging people to buy more, since their dollar goes farther. Other people think pricing lower devalues handmade goods and sets the market average lower for everyone.

Good sales aren't just a question of price, but also a question of value. Let me clarify.

Price is the amount of money you ask for your item.
Value is what consumers think your item is worth.

Value is the reason some people can look at an item - a hand-sewn wallet, for example - and one person can feel it's overpriced, while another person thinks they're getting a steal.

It's also the reason you can buy a case of bottled water at Target for ten bucks, but one bottle of water might sell for $3 at a concert. Because they're not readily available at the concert, and people get thirsty, they value the water more.

If you think your customers are reluctant to buy from you, don't just look at your prices, but also the value of your merchandise. Sometimes you can increase the value of your work without lowering your prices, or even by increasing your prices.

Here's an example from one of my textbooks in school:

Tag Heuer watches are finely made watches. They're made of quality materials, and built to be reliable Swiss watches. Today, they're also a well known luxury brand, existing under the LVMH (Moet Hennesy Louis Vuitton) company.

But they haven't always been known as a luxury brand. Once upon a time, you could buy a Tag Heuer watch for around $100. Their sales suffered. Only when they repositioned their brand as luxury and started pricing the watches at 10-15 times as much did their sales really begin to pick up.

Why? Because a $1000 watch is perceived to be of better quality than a $100 watch, regardless of craftsmanship.



Another good example is diamonds. They are not rare or valuable stones. Rather, because of a marketing campaign following World War II, people now equate diamonds with love. The bigger the diamond, the greater the expression of love. Did you know the line, "A Diamond is Forever," was written by a female copywriter - who never married? Yet the simple slogan imbued value into an otherwise common stone.

So how do you position your brand, your store?

When you go shopping, do you automatically buy the cheapest thing? Or do you shop based on value?

Ramen noodles are cheap to eat. But skinless chicken breasts provide more nutritional value, despite costing much more.

If you slash your prices indiscriminately when your sales are low, you may be doing more harm than good. Price adjustment is something to think seriously about. For better or for worse, people are influenced by price - a lower price may signal to them that your merchandise is low quality, just like a too-high price may put them off.

What can you do? Sell the benefits of your product.

For example, I sell my Narcissist necklaces for $27, plus shipping. That's the price. To sell more, I may stress the values of the necklace:

• It's individually handcrafted, with an eye for detail and a guarantee of quality.
• The chain and findings are all sterling silver, meaning it won't rub off, flake, or irritate sensitive skin.
• The pendant is a unique design, something you won't find anywhere else, meaning you can express your individuality - both with the style of necklace, and the initial you choose.
• It's beautiful in person, and easy to wear. It goes with everything, and doesn't overpower any additional jewelry or accessories.

By selling people on the value of my necklace, the price becomes subjective. A $30 item of little value is overpriced, but a $30 item with a lot of value is a great find.

Next time you're thinking about whether or not to adjust your prices, consider the value of your items. You may find what you really need is just a little bit of marketing.

Black Friday / Black like my soul

In addition to being Black Friday, today is also Buy Nothing day, and I participated in buying nothing all day.

The truth is that I didn't step foot outside today. I got up before the sun and started working on inventory for the craft fair next Friday. I've got to make use of this free time!

But honestly, I think there's something so sinister about Black Friday. I read a news article earlier that a Walmart employee was trampled to death this morning by 2,000 avid shoppers. The people kept pushing by and walking over him, even as rescue workers tried to help him.

Around the time I got my first "real" job out of college, I started to get pretty interested in personal finance. There are some great blogs that cover the topic - two of my favorites are The Simple Dollar and Get Rich Slowly, among many others. Mostly the focus of the blogs is on 1) being contented with what you have, 2) spending your money carefully and deliberately, and 3) putting relationships before your material possessions.

Black Friday seems to fly in the face of all that. Yes, I agree there are good deals to be had, especially if you've needed a new item for some time and now the price is slashed. If you want to get up at 4am because your washing machine is broken and you can get a deal on a new one, you've played the game well. But I just can't imagine getting up that early to run out and spend money on something I don't absolutely need.

Before I start sounding like a hypocrite, I want to say that I think the ideals of personal finance and the handmade movement overlap a great deal.

If I can buy something that was made with someone's own two hands, not only have I invested in quality, but I've also supported that artist, my community, and my ideals. If I give someone a gift that was handmade, it's going to have a lot more personality, spirit, and love put into it than a mass produced doo-dad from a big-box retailer.

So I happily stayed inside today, and didn't spend a dime. Instead I worked on my products until my fingers got numb (I still feel tingly in my right pointer finger), and dreamt about a world where I sell my jewelry full-time and control my own destiny.

Sure, my shopping will start up again soon enough. I've already bought a few gifts from Etsy and I plan to buy many more. But for today, it was nice to stay inside and work and think.


*Photo courtesy of megrje under Creative Commons.

Holiday Etsy Fest

I'm participating in the Holiday Etsy Fest, along with 200 other sellers. Here's my special promotion, now through December 1st:

Buy any necklace or ornament set, and get free shipping! This works out to a savings of 10%, 12% or 18% off regular prices.

Ornaments - 3 for $20


Square "Narcissist" Necklaces - $27


Rectangle pendants - $35

I've changed my shipping already, so if you've been on the fence about buying one of these lovely frosted glass necklaces or ornament sets, now is the time to leap into action!

I hope everyone has a Happy Thanksgiving and a safe and productive shopping weekend!