These forms will ask for your business expenses.Įxpense tracking on the Schedule C form can be quite complicated, with at least 20 lines of detailed expenses to fill out. When you’re filing your taxes as an Etsy business owner, you'll be required to fill out either a Schedule C or a Schedule C-EZ. How organized expense tracking helps at tax time

At the very least, if you're using a paper method of tracking expenses and storing receipts, scan or photograph the documents so you have a backup digital file. The risk is that you could lose paper records or they could get damaged or stolen. Otherwise, you could use a paper ledger to write down expenses and use devices like a calculator and an accordion organizer to store paper receipts, organized by month and year. This is where an electronic record-keeping service like QuickBooks can help, since you always have a digital copy of your records available, and the calculations are always quick and accurate.* The amount of time you should keep these documents varies between three years to indefinitely depending on the type of tax return you file, but the longer you keep them, the better protected you’ll be if you’re audited. Receipts for all entertainment, gift, transportation, and travel expenses.The IRS recommends keeping the following types of expense documents for your business: You’ll also be able to build up business credit that can help with future financing, as well as earn points and rewards for business expenditures. Opening a separate bank account for your business allows you to make purchases with a business-designated credit card and keep your business purchases separate from your personal ones. When it comes to finances, mixing business with pleasure can get complicated. This means keeping your receipts and purchases organized.

To prove to the IRS you did, indeed, make those purchases for your business, you’ll need a paper trail to back up your claims. That information will help you home in on essential expenses that will help your business be profitable and grow. As you track your business expenses, you may notice that you’re overspending in categories that aren't really benefiting your business. Just like tracking your personal expenses is essential to strong personal financial growth, tracking business expenses gives you a better understanding of the state of your business. Not keeping track of these expenses might mean you’ll owe more.

Entertainment, gifts, meals, and travel (entirely related to your business)Īs you can see, many of your expenses may give you a tax advantage when you file.

The United States Internal Revenue Service (IRS) considers business expenses to be deductible if they are both “ordinary and necessary.” This basically means they’re common and appropriate. Subtracting business expenses from sales gives you the lowest taxable income and lowers the amount of taxes you'll have to pay. As an Etsy seller, you’re required to pay taxes on income. Having an accurate view of your business expenses helps you make deductions that can lower your taxes, leaving you with more money to reinvest in your shop and yourself. Why you should track your business expenses Keeping a close eye on all of your expenses can help you make smarter decisions about your business and allow you to claim money-saving deductions. Running an Etsy shop means spending money on supplies, Etsy fees, and maybe even marketing and other overhead costs. You’re dreaming up a new product, which means purchasing supplies (and shipping boxes for when orders start coming in).

Cogs accounting for etsy