Tax filing tips for Makers
I’m no tax specialist. I get just as confused/overwhelmed/annoyed as you do when tax time hits each year, and I’m only filing once a year. Lots of you are rockstars in your line of work and as independent businesspeople you’re ‘taxed’ with filing on a quarterly basis. While I’m not there (yet) I did some heavy duty research to find the best tax tips to help ease some CustomMade Maker stress and ensure compliance.
Annual Federal and State Income Tax
Deadline: April 15th
What: Taxes on any income you’ve made in the past year.
How: As a CustomMade Maker you’re responsible for paying taxes on each of your transactions. The term is coined “self-employment income” which requires you to fill out a form Schedule C “Profit of Loss from Business.” In basic math, total income – business expenses = net profit. Self-employment and social security taxes change depending on the person, but several software suites can help you with determining costs and the IRS has basic guidelines.
Think of it this way: Income tax is technically pay-as-you-go. Think back to any paycheck you’ve ever received. There were about three lines of different deductions that came out of your paycheck. Unfortunately, you can’t “pass Go” when you’re self-employed. In fact, there’s a whole other set of rules for the “pay-as-you-go” policies.
Quarterly Estimated Taxes
Deadline: 15th of April, June September & January
What: Taxes for independent businesspeople who are expected to owe more than $1,000 in taxes per year.
How: These taxes kind of work on the honor system. Because you can’t technically predict your net profit or the deductions you will have each quarter these taxes are estimated. There are two ways to file your Quarterly Estimated Taxes. 1) You fill out a 1040-ES form and snailmail it to the IRS or 2) You file electronically through the Electronic Federal Tax Payment System (or EFTPS). I highly recommend option #2 because once you’re registered electronically, you can use that platform every time you file.
Think of it this way: As long as you pay an amount equal to what you paid the year before, the IRS will not penalize you, which is great if you are having trouble determining what you owe. If you’re a first-timer you can expect to owe roughly 15% of your net profit.
All of your hard work is eligible for Sales tax, so be sure to include it in your proposals. Each state has laws about Sales tax, so be sure to brush up on your facts before throwing numbers out there.
As a savvy online seller there are special deductions you can qualify for. For starters, PayPal’s “bank fee” is tax deductible which incentivizes you to use their platform. You can also meet the requirements for Listing & Advertising Fees that include things like search keyword purchases, business cards, brochures, home office supplies, postage, and even vehicle expenses!
So there you have it. CustomMade has you covered. While we can’t pay your taxes, we can hopefully help you organize your small business. With insider tips that help you engage with Buyers and new releases that make your portfolio more searchable, we’re going to be bringing you more Buyers and more jobs than ever before, so it’s important to keep up with your taxing duties!
Check out IRS guidelines for self-employed individuals and small business owners before submitting your taxes to be sure that you’re filing everything necessary!