With 2013 sales in excess of $1 billion, it’s safe to say that business is booming on Etsy. Sellers operate their own online stores on the site, where they offer handmade, vintage, and crafty goods and supplies.The growing popularity of DIY and visual inspiration sites like Pinterest have created incredible opportunities for crafty and creative types to profit from their handiwork. Once you've established a favorable reputation for yourself and your goods, generating sales comes easily. CPA Ann Irons, who offers bookkeeping services in Bellingham, MA, advises you to take a proactive approach to managing your store’s finances.

Tax Considerations for Etsy Sellers

As an Etsy seller and PayPal user, you must report your revenues on Form 1099-K. This comes as a nasty surprise for someone who hasn’t kept up with their finances over the previous months. Outsourcing your bookkeeping duties gives you more time to focus on the creative side of your business without fear of missing deadlines or important documentation. Irons adds that this requirement applies only to sellers whose total Etsy sales equal $20,000 or greater, AND who have sold 200 or more items. If you operate multiple stores or accounts, you will add these numbers together to find your total sales.

For example, suppose you have five accounts, and each one generates $6,000 in revenue from 60 items sold. Even though no single account meets these requirements, their combined values do, so you must file a tax return. You may be eligible to claim certain deductions related to your business, such as the home office deduction, retirement contributions, and mileage.

Bookkeeping Services Improve Efficiency

In addition to sales, you must also take note of returns, shipping revenue, how much sales tax you collect, and any payments determined to be fraudulent. Recording, organizing, and analyzing these figures can be overwhelming, especially if you aren’t experienced in financial matters. With help from your Bellingham, MA, CPA, you can manage your finances more efficiently, using information from your financial statements to make important decisions about your expenses, pricing model, and profitability. Several types of expenses must be tracked, including:

• Fees from Etsy and PayPal
• Shipping costs
• Cost of supplies
• Vendor registration costs, if participating in craft fairs or similar events
• Business travel expenses

When these numbers are in order, it’s easier to identify potential problems and opportunities.

You do the crafts, we’ll do the math. To learn more about bookkeeping and accounting services, or to request a consultation with Ann Irons, CPA, LLC, contact us at 508-966-0700. Our office is located in Bellingham, MA, near Boston, but we provide our services for individuals and businesses from across the country.