Wednesday, January 20, 2010

Q&A with Valorie - Tax Basics For Your Shop!

Valorie, our resident tax specialist here on the blog, has offered some more great answers to very common questions sellers may have about filing with the IRS........just breathe and read further.

     Q.   I just started selling in June and didn't make $400.  Do I need to file?

  1. Ok, this one I researched because I really wanted to see the answer.  I have seen other websites and advice, forums etc mentioning a $600 filing requirement.  There is no minimum requirement if you own a business.  I think they confuse the magic number there with the 1099 issuing requirements (that’s a whole other ball of wax.  Just because you don’t receive a 1099, it does not mean you don’t have to declare the money.)

    According to IRS Publication 334, Chapter 5, “You must report on your tax return all income you receive from your business unless it is excluded by law. In most cases, your business income will be in the form of cash, checks, and credit card charges. But business income can be in other forms, such as property or services.” 

    I researched the databases I had access to and found no answer so I am assuming that you must indeed report all of it, even if it is just a little bit.  However, by claiming the income, you also get to claim any expenses you had.  If your expenses were more, then your business loss would be deductible from your income so it isn’t a bad thing!  Just remember that your business needs to make a profit at least three out of the last five years or the IRS can rule it a hobby (this limits your expense deductions dramatically.)
Q. What else do I need to run my shop legally? I don't need and EIN- no employees, yes?

A.  If you don’t have employees, you don’t need an EIN.  You can get one easily online if you choose to.   Some prefer to put an EIN on documents versus your social security number.  Realistically, unless you have an LLC, Corporation or Partnership, your business return is filed with your personal one so it doesn’t matter if your SSN is used.

Q.  If/when I file? Do I file under self-employed? Or is there another way I should be doing this?  What next?!   

A.     Your sole proprietorship tax return (Schedule C or C-EZ) is due the same time your personal tax return is due:  April 15.   Your business return is part of your personal return and it all goes together to the IRS.  Most Etsy jewelry makers will have to file the C because the C-EZ is not for use by those who have inventories, business losses, expenses over $5000, or business use of home deductions.

Q.  Do I need to register? Get a license or is that only state?

A. You do not need to register with the government as a business for federal tax purposes unless you are an entity other than a simple sole proprietorship (corporations, etc.).  You can register with your state Department of Revenue to file and pay sales taxes (all of which can be done online).  You can also obtain an occupational license if your city requires one.  Seriously, they are usually under $20 and worth it to just go get one for peace of mind.

*Please keep in mind that this blog is just to advise you that you should think about it before you act.  Your best course of action is always to consult your tax advisor or accountant.  I really hope this helps!

Sunday, January 17, 2010

Waiting for Your Next Sale? Don't!

It is a helpless feeling.....putting all your love into creating and posting your items, only to find slow traffic to your shop, low views and no sales. But don't pout! Turn a negative into a positive!

Now is the time to get creative and revamp your shop!

  • Have photos that don't seem to fit? Blurry? Dark? Now is the time to retake and experiment with new backgrounds and lighting! Even just adjusting them a little more in photo editing software can give it that something extra to encourage more views.
  • Maybe your photos aren't so hot to begin with? This does take a lot of time and practice, but with so many blogs dedicated to offering photo tips (including this one!), you can't go wrong! Try researching more in the forums on how to improve them. The better your photos, the more views you are likely to have. 
  • Keep your shop looking fresh by arranging it every so often and featuring different items.
  • If you have an item that seems to get low views, try switching the photo with another one in your set of five. This can sometimes work magic!
  • Head to the forums for some critiques. Etsians are kind and will really help you! 
  • Why not try expanding on your descriptions? What makes the item special? Have you described the color, texture, size sufficiently? Who could use the item? Is there a story behind why you created it?
  • What about rechecking the spelling of your listings and shop announcement? Typos make your shop look less professional and are so easy to fix!
  • Are your policies clear? Maybe there is something else you would like to add to help your customer understand the checkout process? 
  • Always keep your shop announcement current. There is nothing worse than a sale announcement for last month there!
Avatars and Banners
  •  Try changing your avatar every so often. Choose your best photos of items that really stand out. You never know when a seller in the forums will get tempted to click!
  • What does your banner say about your shop? Are you using crisp photos and clear text? There is a great article on how to create your own banner on Etsy.  But if you don't have the time or the graphic design skills, don't worry. There are shops that sell branding packages with banners, avatars, and business cards rolled into one! Just do a search on Etsy!
Free Exposure
  • Search the forums for blogs looking to feature shops.
  • Have a Blog? Host a giveaway! Tweet about it, tell your friends, post a promo thread in the forums!
  • And I am sure you know all about social networking on Facebook. Myspace, and Twitter!
But most importantly......keep crafting! Keep adding new items to your shop and enjoying what you love to do!!

*What do you do while you wait for your next sale?

Thursday, January 14, 2010

Sold! Now What? - A Quick Walkthrough of an Etsy Sale

Your first sale on Etsy can be downright thrilling! It can also be bewildering...... Now that you have made your very first sale. What next?

Hopefully you have purchased on Etsy before. Knowing the process can be extremely useful to you as a seller so if you haven't yet, get going!

This is just a little post with very basic step by step guidelines on the selling process and is by no means definitive. Every seller has their own unique style when working with customers, shipping items etc. This article will hopefully give you a very basic place to start. Seasoned sellers- I hope you will chime in on your process too!

  • How do I know I even made a sale? 

Oddly enough, there is no "you made a sale!" announcement when you are signed into Etsy. (You will notice, however, when you log in after you made a sale, you will be asked for feedback.) The main indicator that you have made a sale will be an email from Etsy and an email from Paypal. Etsy tells you that you have an order and paypal notifies you of your payment from that order.

After you do your happy dance:

  • Contact Your Buyer
To me, this is the most important step of the process. Many sellers do not, but I think is a great thing to do and it only takes a moment! First, you are letting the buyer know that you have received their order. Second, by addressing them personally, you are showing them that their support of your shop (and of handmade) is appreciated!

When signed into Etsy,  head to "Your Etsy" and scroll down to "Sold(Orders)" on the left. Find the purchase and click on "View Receipt". Bask in your glory for the moment, then click on the buyer's profile and click contact if you would like to convo them on Etsy. Keep it brief. Thank them for their purchase and let them know when/how it will ship. If you want to email them directly, you can get that info from your Etsy receipt in your email inbox.

  •  Print a receipt
Next, go to the printer friendly version of the receipt and print one to include when you ship the item. You may also print a receipt through paypal as well. (If you wish to print a receipt through paypal, you will need to sign into your paypal account first and click details there.)
  • Ship it!
Pack your item carefully for shipping, double check the shipping address to see if paypal and Etsy match, and get yourself to the P.O.! (If the shipping addresses don't match, it is always a good idea to contact the buyer for clarification).
  • Feedback
Immediately after your sale you can leave feedback for the buyer. Some sellers leave feedback right away with a thank you etc.. Others will wait until they are assured the customer receives the item and is satisfied. It is entirely up to you when you leave feedback.

So that's it in a tiny nutshell! Happy sales!!