Preparing to file your yearly income taxes for an online seller begins on January 1st.
It is very important that you keep accurate records to bring to your tax preparer. Money going out for your business as in costs, are as important to your taxes as the income you made.
Save all receipts throughout the year, whether it’s for items you’ve purchased for resale, supply items, or receipts associated with your workspace.
If you rent a space that you work out of, or a storage unit that you store your inventory in, those costs are tax deductible. If you have a dedicated area in your home that you work from, then a portion of your household costs can be tax deductible. Mortgage or rent, electric bill, internet fees, and heating costs are a few. If you pay someone to plow or shovel your driveway in the winter, and the cost of maintaining your car to drive to the post office, and to source, is also tax deductible.
I like to keep a running tab of my supply and household costs through the year. That way I’m not scrambling at tax time to put it all together. Having to replace your desk chair, or needing to purchase a new printer is also a deduction, provided it is used only for your business, and not for personal use.
When you go to your tax preparer, you should have a totaled list made of your net profit from your spreadsheet, a total list of your household costs, any transportation costs, and your supply costs. Your preparer will know the percentages that can be used. He will also ask the dollar amount of the inventory that you are carrying over into the new year.