Zach Olson is the Founder & CEO of TaxAlli.com. At Tax Alli, we pair you with real life accountants and use cloud software to make small business accounting awesome. So you can do what you love while we handle the rest.
During this busy fourth quarter it’s likely the last thing you want to think about is tax time. But Uncle Sam will be knocking at your door for income taxes before you know it, and you don’t want him to catch you unprepared. Ecommerce sellers, especially, have some 4th quarter issues to take into consideration when it comes to tax time. Follow this advice today so tax time doesn’t come back and bite you when spring rolls around!
We spoke with CPA Anna Hill who gave us some general advice that will get all eCommerce sellers prepared for when tax time rolls around next spring.
Here’s what Anna told us:
- Evaluate inventory available for sale – Evaluate the current sales price of each inventory item and where appropriate, adjust to current market (sales) prices. This is a great time to consider selling off inventory that no longer commands the sales price it once carried and as all ecommerce sellers know, what had a higher value one day may dramatically decrease in market value as time goes on. There is no reason to hold obsolete inventory on a balance sheet indefinitely. Get those “stale” items sold!
- Get organized – Be sure you have all operating expense records organized. Gather mileage records – some sellers keep mileage records throughout the year and others choose to document the mileage all at one time at year end. That “all at once” approach is not what I recommend but it is the reality for many sellers so start working on that now – April 15 will be here before we know it! Also gather all records that support other expenses such as shipping supplies, office supplies, postage, and equipment. Begin to organize – you can do this “old school” in manila folders (which I know many sellers do) or scan receipts and records with a scanner and save in Evernote, Dropbox, or other cloud storage. Some sellers even use software such as Inventory Lab to track inventory. Get those operating expenses organized, tallied, and entered now, before year-end, so that you can get a general estimate of your net income.
- Set aside some money – Once you have a general idea of your net income, check the 2014 tax tables to see what your tax liability will be and if you haven’t already, start setting money aside now. Q4 payouts are generally larger than other quarters due to the seasonality of the eCommerce business, so NOW is the time to set aside money for Uncle Sam. Even if you file an extension, you still have to pay estimated taxes. I also recommend hiring a professional CPA to prepare your taxes for you. If you plan to hire a CPA, do not wait to find one until April; start evaluating options now.
Do you have any great tips for your fellow eCommerce sellers when it comes to preparing for tax time? Let us know in the comments!
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