1. Finance 101 for Your Craft Business Jennifer Dunn, Outright

2. Agenda Quick Overview of Annual Taxes Tax changes for crafters… and what to do about it! Minimizing your Taxes Expenses & Costs of Goods Sold Deductions: Common deductions taken by crafters Tips for using Outright’s free version For the purposes of this presentation, we are assuming you are a sole proprietor or LLC

3. Disclaimer (Our lawyers made us do it) This publication is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation. The information and all accompanying material are for your use and convenience only. We have taken reasonable precautions in the preparation of this material and believe that the information presented in this material is accurate as of the date it was written. However, we will assume no responsibility for any errors or omissions. We specifically disclaim any liability resulting from the use or application of the information contained in this material. To ensure compliance with requirements imposed by the IRS, we inform you that any US federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and it cannot be used for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Always seek advice based on your particular circumstances from an independent advisor.

4. Annual Income Taxes Income Tax Filing is due April 15 th (if you file for a tax extension, your tax filing is due 10/15/12)

5. When do you pay your income tax? Estimated Taxes = 1/4 th of your annual income tax Due Dates (2012): Jan 17 Apr 17 June 15 Sept 17 “Quarterly Estimated taxes” are just your annual income taxes paid quarterly.

6. What’s changing for crafters? 1099-K! The 1099-K is a form that your CC processor sends to you and to the IRS to report your revenue

7. Who gets a 1099-K? 1099-K’s sent between 1/25-1/31 You got one this year if your 2011 sales met or exceeded: $20,000 or more in sales AND 200 or more items sold Notes: All sales through one processor count towards limits

8. All of these were included in the total! Shipping revenue Sales tax collected Fraudulent payments received Sales that were returned

9. What do I do with my 1099-K? Reconcile… make sure it’s right Expenses… lower your taxes Deductions… lower your taxes Double Check… your gross receipts REDD It!

10. Reconcile REDD

11. Expenses REDD

12. Deductions Make sure that you are taking all of the non-cash deductions you can Let’s talk about common deductions for crafters REDD

13. Cost of Goods Sold Things that go into making the items you sell (More info: http://www.etsy.com/blog/en/2010/tax-tips-the- cost-of-goods-sold/) REDD

14. Write off a percentage of your mortgage payment or rent and utilities Home Office Deduction Follow the IRS rules, like “exclusively and regularly” Take a picture of your home office REDD

15. Contribute to Retirement Retirement plans aren’t just for “big company” employees –Individual 401(K) –SEP IRA Both allow you to defer your profits (and taxes) until retirement REDD

16. Mileage Tracking Mileage: –Download Mile Bug for your smart phone –Track your odometer at the start and end of business trips… and start and end of the year Choose one: –Deduct $0.55+1/2 cents per mile driven for business OR (not and) –Actual vehicle expenses (gas, maintenance, repairs), based on percentage of annual mileage used for business REDD

17. Double Check Double check that amount on Schedule C Line 1d matches or exceeds your 1099-K reported sales (Box 1) REDD

18. Tips for using Outright’s free version

19. Outright.com/Etsy

20. Link Your Etsy Account Secure, Read-only connection Outright imports and organizes your transactions

21. $51,453.42 $59,418.25 $51,453.42 XYZ Sellers $8,434.21 Etsy Account $51,453.42 XYZ Sellers

22. $51,453.42 XYZ Sellers Steven Aldrich Mike Henderson Steven Aldrich 01/01/2012 01/03/2012

23. Steven Aldrich Mike Henderson Steven Aldrich Mike Henderson Steven Aldrich $51,453.42 XYZ Sellers 01/01/2012 01/03/2012

24. $51,453.42 XYZ Sellers Etsy PayPal Etsy USPS Shipping Etsy Fees PayPal Fees Etsy Fees $5.65 PayPal PayPal Fees PayPal PayPal Fees

25. $51,453.42 XYZ Sellers $51,453.42 XYZ Sellers Etsy Fees Etsy PayPal USPS Etsy Etsy Fees PayPal Fees $5.65

26. $51,453.42 XYZ Sellers

27. $51,453.42 XYZ Sellers $51,453.42 XYZ Sellers Etsy Fees $1,522.49 Cost of Goods Sold $3,512.47

28. $51,453.42 XYZ Sellers $51,453.42 XYZ Sellers

29. $51,453.42 XYZ Sellers $508.38

30. Outright Mobile….Available for iPhone!

31. Final Note: Sales Tax 101 Must have “nexus” in a state to charge sales tax (for now) Your state may require a sales tax or seller’s permit if you sell physical goods Learn your state’s sales tax system - Different tax rates - Some are complicated and require you to pay based on the buyer’s tax rate More Info: http://outright.com/blog/the-simple-but-sweet-guide-to- charging-sales-tax/http://outright.com/blog/the-simple-but-sweet-guide-to- charging-sales-tax/ Sales tax part of Outright Plus after September 2012

32. Thank You! Questions? Contact us at: jennifer@socialstreetmedia.com lauram@outright.com support@outright.com