Tax question

[dcornett]

I've just done my taxes, and things didn't turn out like I expected...so I thought I'd see if anyone here with more experience or business sense could enlighten me a little or point me in the right direction of where I can get more information. I was surprised that my soap sales hurt my return this year. I suppose I thought that since my income was better due to "sales" that my return would be better, but it obviously doesn't work that way. :cry:

So does anyone have any advice for next year? :wink:
( beside saving every reciept and counting anything, including the phone that can count as expenses...which I already do)

 

[Deda]

What do you mean "hurt your return"?

You pay income tax on income, so if you paid income tax you made money.

I do an in depth assessment, more than just closing the month, each fall. If my projected taxes for the next year are going to have me paying alot I make an investment into my business before year end. New equipment, molds, computer - that kind of thing.

Supplies count towards inventory, so I try not to order more than I'll use by the end of the year. I try to keep my inventory in the $400 range. Easier to count, and less to carry over.

Are you using an accountant?

 

[carebear]

you are including your expenses, right?

ditto what Deda said!

 

[dcornett]

I am counting my expenses carebear, but there were things that I hadn't thought of counting, that the consultant added, which helped me.

Thanks Deda, that makes sense and something I'm sure to keep in mind next year.

 

[Deda]

OK, I just finished my taxes, no biggy - I use quickbooks through the year and just transfer everything over. An accountant helped me set it all up and I hit her up if I have any questions before I get started.

I thought I'd come back and mention that it's ok to show a loss, but not every year. The IRS won't look fondly on your home based business if you don't show a profit every couple years. They'll class it as a hobby. Snatching away all the nifty tax breaks.

http://www.irs.gov/newsroom/article/0,, ... 90,00.html

Thankfully, I've shown a profit for the last several years, next year I won't, hopefully. (think invest in building!)

 

[dcornett]

Thanks for the link. I'm still learning, and I have to admit the business end is not my favorite part of soap making... But if your going to sell your products it is a necessary part.

 

[Deda]

Thanks for the link. I'm still learning, and I have to admit the business end is not my favorite part of soap making... But if your going to sell your products it is a necessary part.

ABSOLUTELY! Once I decided I was going to turn my soapmaking hobby into a business I set a path; got a job at a small cosmetics company, basically trading my bookkeeping/office skills in exchange for a paid internship to learn the behind the scenes workings of a successful small business, took every class I could find on marketing, found competent, proven and willing mentors in various disciplines, and last but not least, treated my tiny little micro-business like I was a Fortune 500 company.

So far, so good. I may be overly cautious, but it works for me. I'm more of a tortoise than a hare.