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I’ve been talking a lot lately around here about getting ready for taxes. We’ve discussed how to get your numbers caught up for 2016, doing your year end inventory count, and organizing your documents. Once you’ve got your numbers ready to go, you might be asking yourself – should I do my own taxes, or should I hire a professional?

Maybe you’re not sure how to find a tax professional that fits your creative business. Or maybe you’re a little bit intimidated about handing your paperwork over to someone else. Today’s post will let you know exactly what it’s like and what’s to be gained by working with a professional.

working with a tax pro

Over the past few weeks I’ve touched base with some of the best tax preparers in our niche. These ladies work especially with Etsy shop owners and creative artisans just like you.  I asked them all sorts of questions so you can get an idea of what it’s like to work with a professional on your taxes (think *peace of mind* y’all!).

First let me introduce my panel of lovely tax experts, all of which provide tax prep services (and more) for creative entrepreneurs.

What sort of paperwork do you request from a client in order to prep their tax forms?

Everyone on the tax panel sends their clients a checklist or tax organizer with a list of the important tax forms you might receive in the mail around tax time, like W2s, 1099s, etc. They also ask for info on your investments, health insurance, mortgage, and other personal info that’s relevant for your taxes.

When it comes to your business, it’s important to note that before you outsource your tax work, you still want to have all your sales and expenses totaled for the year, along with all your important financial documents and receipts organized. Doing the legwork now to compile the numbers your tax preparer needs to do your forms will save you money, time, and sanity.

Each expert I spoke with requests similar documentation regarding your business. Melissa says that “if you have the numbers in a spreadsheet, or reports from accounting software, then you can send it all to me directly”. You can expect to provide a summary of your business income & expenses, info on big ticket purchases, home office expenses, business use of your car, and anything else that might be relevant.

Bottom line – most tax professionals will expect you know how much your business has made in net income or loss over the course of the year when you get started. Before handing everything over, you’ll want to have your ducks in a row when it comes to your business finances. If you’re struggling to catch up for 2016, I recommend the Bookkeeping Bootcamp or the P+S Etsy Seller Spreadsheet to get your numbers together.

bookkeeping spreadsheet

What can a smart creative-preneur do before working with you to make the tax prep process easier on you both?

Helena recommends getting an early start on tax prep. “Start reaching out to accountants in January and February – many fill up by mid-March and you may have to file an extension if you want to work with them,” she says. “Get in early, and accountants are more likely to have availability and time to talk to you one-on-one about your situation.”

According to Melissa, the most important thing is that you’re willing to put in the work to pull together the info & amounts you need. “You will need to be able to add up all your income and expenses for the year either in a spreadsheet or accounting software,” she says. She also requests beginning and ending year inventory amounts. Having everything organized is essential!

Amy recommends gathering all your receipts and bank statements together first. “Then,” she says, “instead of trying to learn a bookkeeping software and doing a year’s worth of bookkeeping under stress, I always suggest using a spreadsheet to organize income and expenses.”

Christina also recommends having everything entered and ready in spreadsheets. “Totals of different expenses save me time and you money,” she says. {Obviously I’m partial to spreadsheets around here myself!}

working with a tax preparer

What are some of the biggest tax mistakes you see creative business owners making?

It sounds like the biggest mistakes all revolve around forgetting something, so it’s key to 1) keep up with your finances throughout the year, and 2) be knowledgable about what tax rules apply to you as a business owner.

Christina says the biggest mistakes she sees are not keeping track of inventory (which is very important for crafters and makers), and mixing personal and business funds.

The biggest mistake Melissa sees are creative entrepreneurs not claiming their business on their tax return at all, usually because they had a loss for the year. Even if you didn’t have a profit this year, you still need to file for your business. “Claiming a loss will not be an automatic audit flag like some think,” she says.

Helena says the most common issue she sees is business owners not claiming all their expenses. She says to “write down everything you buy so you can report it in your bookkeeping system later and claim all those expenses to which you are entitled!”

Amy strongly recommends setting aside money throughout the year especially for taxes. “Even if the business started out as a fun hobby and then quickly becomes a real money-making business, make it a point to save about 30% of your profit (income left after expenses) for taxes,” she says. “Set up a separate savings account and move this amount to the separate account so it’s out of sight, out of mind and ready to pay in quarterly or annually with your tax return.”

What’s your favorite way for a creative entrepreneur to keep track of all their financial documents & receipts?

Amy & Melissa both recommend Evernote – “I’m a big fan of sending & scanning my receipts into a notebook in Evernote,” says Melissa. “You can use the free version and the phone app to capture everything. The Evernote web clipper allows you to save any receipts in your email. You do not need to keep physical copies of your receipts if you’ve scanned them…I’m so programmed now that if I’m at the store and have a paper receipt, I pull out my phone as soon as I get to the car and snap a picture of the receipt. ”

Amy adds that she saves her paper receipts in envelopes labeled by the month, which she keeps in her purse. Christina suggests a similar method, organizing receipts in an accordion folder divided by month. “Then you can scan or take a photo to digitally preserve them once a month. It is a lot easier to take care of them periodically then to let them pile up,” she says.

working with a tax preparer

Give us your best “pro tip” for the tax prep process.

Christina stresses staying organized throughout the year. “An hour once a month can save you days of work in January,” she says. Consistently updating those books means a lot less stress at tax time.

I love Melissa’s response so I’m just going to quote her directly – “It’s important to remember that the savings are in the details, so don’t try to steamroll through your taxes “just to get them over with”. Especially if this is your first time filing taxes with your business, there will be things that confuse you. It is absolutely worth it to pause and get the information you need rather than skip ahead because you think it doesn’t matter that much. If you’re working with a tax preparer, don’t be afraid to ask questions even if you think it seems stupid. I don’t think there is a stupid question when it comes to taxes, because the government has made the tax code so stupidly confusing.” {Amen to that!}

And don’t procrastinate! “The stress of getting your taxes filed could hang over your head for months, if you let it,” Amy says. “Also, by getting your taxes done early, if you owe, you will have time to gather funds in order to make the tax payment.”

Why should a business owner outsource their tax prep, rather than attempt to DIY?

Outsourcing your tax prep to a professional has several advantages that could easily be a blog post all by themselves! Here are just a few positives I came up with:

  • Confidence that someone has your back – Audits can happen to anyone at anytime. According to Christina, having a competent tax preparer means having someone there “to assist you in the process” if an audit does happen, rather than being all on your own.
  • Having someone to ask questions to – Working with a tax preparer means that you have an actual expert on call (and not a box) to ask questions to. Helena agrees, saying that she offers her clients “comfort in knowing all their questions are answered – not just at tax time but throughout the year”.
  • Saving more by getting all the deductions you’re eligible for – Let’s face it, you don’t know what you don’t know. And a well-versed tax preparer with experience in your niche probably does know. You can get the most tax savings by utilizing a tax professional who, as Amy says, is actively looking out for more deductions that apply to you. That means not leaving money on the table when it comes to your final tax liability or refund.
  • Doing it right, the first time around – A tax professional can save you the headache and the money of having to amend incorrect returns later on. Amy says, “It’s easy to feel like you’re doing everything correctly when using an online program to do your taxes, but I’ve seen some pretty ugly tax issues arise because the taxpayer didn’t understand the rules behind what the program was asking.” Christina also mentions spending her summers fixing DIY-done returns gone wrong. Using a professional the first time around can prevent this from happening to you.
  • Less time spinning your wheels, more time doing what you enjoy – It’s definitely important that you understand your finances and your tax obligations as a business owner, but outsourcing your accounting work can give you more time to focus on what you do best and love most. “For most creative entrepreneurs,” Helena says, “that isn’t the books”.
  • The convienece of working with an online tax professional – Working with an internet-based tax preparer means not even having to leave your house! Melissa mentions the added perk of having a virtual tax preparer because you can have your taxes done by a trained professional, “and stay in your yoga pants if so desired.” Sounds like a win-win to me!

It’s up to you to get your biz financials organized for the year. When you’re done with that, consider all the pros of, well, turning the tax prep over to a real Pro.

THANK YOU to our panel of tax professionals for answering these questions about tax time! I encourage you to reach out to any of these wonderful ladies for your tax prep this year. Their calendars are filling up fast so make sure to contact them soon!

Find Melissa Whaley online here, and on Facebook and Instagram.

Find Amy Northard online here, and on Facebook and Instagram. Amy is taking new clients till the end of February!

Find Christina Coyle online here and in her Facebook group hereChristina has March & April appointments available – book now to secure your spot!

Find Helena Swyter online here, and on Facebook and Twitter.

If you need help compiling your sales, expenses, and inventory for 2017 before you can outsource, check out the Bite-Sized Bookkeeping Bootcamp.

The Bootcamp walks you through the process of updating your books step-by-baby-step (entering sales, refunds, Etsy fees, shipping expenses, inventory, business deductions, and more) all with my help. This course will save you hours of Googling and Facebook crowd-surfing and help you get your books from blank to COMPLETE without the struggle. Learn more here.

etsy bookkeeping bootcamp

This Post Has 3 Comments
  1. I decided to get a professional to help me this first year. I am still working part time at my clinical job from which I derive the majority (okay, nearly all this year) of my income. Do you have a suggestion as to how to apportion the cost of the tax prep between my personal and Etsy business expenses?

    1. Hi Shelia! I would talk to your tax professional – often times they can get you basically the equivalent of an “itemized” receipt where they will tell you the cost of what they charged you for your personal taxes vs the business portion.

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