Tax Time: 3 Ways to Simplify the Process

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“In this world nothing can be said to be certain, except death and taxes.” ~ Ben Franklin

Although April is usually considered the official month for tax season, some online sellers are more familiar with another date – October 15. For those that don’t know, this is the deadline date for those who have filed extensions. Whether your with the former or latter crowd, as this year begins to draw to a close, it’s a good time to think about how you can make the process simpler for next year. Here’s some ways that can help.

Create a dedicated area for tax stuff.

Whether you prefer an organized file system or like to just toss receipts and other paperwork into a desk drawer to deal with later, the first step toward simplifying the process is to create a dedicated area to keep your tax stuff in. Terry, a longtime eBay seller finds that the best way for her to keep up with receipts and other papers she may need is to take them straight out of her purse and put them into the top drawer of her file cabinet. Although she says there is still some organizing to do whenever tax season rolls around, everything is in one place which makes the process a whole lot easier.

Use a designated bank account for your online business.

Creating a separate bank account for your online business may seem like some extra work for bookkeeping, in reality, it actually makes the process easier. Instead of having to sort through personal and business purchases, you can simply view your bank statements to know exactly what you spent for business and what type of income you had. Keep in mind that although it’s not mandatory for you to have separate accounts as a sole proprietor, if you choose to become a corporation or LLC, you do need separate accounts, so if you are just getting started and think that you may incorporate in the future, it’s best to go ahead and open a business account right off the bat.

Make bookkeeping part of the routine.

While it’s easy to procrastinate and make taxes a low priority, you can save a whole lot of time and stress by making your bookkeeping a part of your daily or weekly routine. Even though April (or October) may be months away, dealing with it a little at a time can keep tax preparation from becoming a big ordeal as time ticks away. To make the process even more simple, consider using Quicken, Quickbooks or another type of bookkeeping software that will import bank records and sales totals right into files on your computer.

How do you simplify the tax process? Leave a comment below.

Year-end Tax Planning for 2015 by Cliff Ennico

cliff ennicoFor most people, the end of December is called “the holidays.”  For lawyers, accountants and other financial types, however, it’s called “year-end.”

While most of us celebrate with turkey, egg nog, ugly sweaters and football (often all at once), these folks are working late hours trying to save their clients as much money in taxes as possible before the ball drops in Times Square.

Thanks to the continuing political gridlock in Washington, 2015 wasn’t a big year for major changes in the tax law.  Given the Presidential election next November, odds are 2016 won’t be a big year for tax law changes either.  After the election, though, look for some dramatic changes, especially if the Democrats keep the White House and regain control of the Senate.

For now, the basic year-end advice still applies:  defer the recognition of taxable income into 2016, and accelerate deductible expenses into 2015.  Wait until January to send out invoices for work performed in December, and prepay in December expenses you know you will incur in January.  Here are some other tips:

Avoid the Obamacare Penalties.  Under Obamacare, individuals who choose not to get health insurance through government exchanges, on their own or via their employers have to pay an additional tax.

If you did not have health insurance coverage in 2015, you’ll have to pay the higher of:

  • 2 percent of your yearly income above the tax-filing threshold (generally about $10,150) up to a maximum cost of the national average premium to purchase a “Bronze Plan” from the federal healthcare exchange; or
  • $695 per person ($347.50 per child under 18). The maximum penalty per family using this method is $2,085.

These costs have more than tripled from last year, when the penalty was $95 per person or 1 percent of household income.

New Filing Deadlines for 2016 Returns.  Partnerships, LLCs taxed as partnerships, and S corporations, which used to file their federal tax returns on April 15 of each year, now have to file them on March 15.  Regular or “C” corporations, which used to file their federal tax returns on March 15 (if they use a calendar year), now have to file them on April 15.   The filing deadlines for 2015 tax returns are unchanged.

Contribute to Your Retirement Plan.  You can still deduct contributions to an IRA, 401(k) or other retirement plan, even if the contribution isn’t made until just before you file your 2015 tax return sometime in 2016.  Heck, you can even set up a new retirement plan after December 31 and still deduct your contribution in 2015 as long as you make the contribution before you file your 2015 return.

If you are over age 70-1/2 and are forced to take taxable distributions from your IRA, consider donating up to $100,000 of your IRA funds to charity.  The transfer will count toward your “required minimum distribution” for the year, and will not be included in your income as other distributions will.

Hold On To Your Stock, Unless You Lost Money.  Short-term and long-term capital gains rates took a big jump last year because of the 3.8% “net investment income tax” that was part of Obamacare.  To avoid the tax, hold onto any stock that appreciated in value during 2015.

If you lost money in the stock market, consider “loss harvesting” –selling your “losing” stocks before December 31 to realize losses. You can then use those losses to offset any taxable gains you have realized during the year. Losses offset gains dollar for dollar. And if your losses are more than your gains, you can use up to $3,000 of excess loss to wipe out other income.

If you have more than $3,000 in excess loss, it can be carried over to the next year. You can use it then to offset any 2015 gains, plus up to $3,000 of other income. You can carry over losses year after year for as long as you live.

Prepare for the 2016 Election.  Predicting the outcome of any election is a fool’s errand.  But here’s one fairly safe forecast:  whoever wins the White House next year, lowering taxes for upper-income Americans (that means you) won’t be anyone’s priority.  Start planning now for post-election increases in tax rates, and the gradual elimination or phasing out of some popular deductions for people in higher-income brackets.

Here’s my personal rule of thumb:  the more a tax deduction or credit is perceived as furthering a “positive” social or environmental goal, the more likely it will survive any post-election tax reform intact.  So make tons of charitable contributions, and look into energy tax credits for solar panels and other “alternative energy” or “sustainable energy” home improvements.  Consider buying an electric car.  And moving to a state with no income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming).

Don’t Obsess.  Chances are there isn’t much you can do between now and December 31 to make a dramatic change in your 2015 tax liability.  Enjoy your holidays.  Worry about taxes next year.

Cliff Ennico (cennico@legalcareer.com) is a syndicated columnist, author and host of the PBS television series ‘Money Hunt’.  This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state.  To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.  COPYRIGHT 2015 CLIFFORD R. ENNICO.  DISTRIBUTED BY CREATORS SYNDICATE, INC.

The Business Plan: Where to go – what to do

Brainstorming business plan on a paper by drawing schemas, infographics, diagrams. Free HD video
If you’re like a lot of online sellers you may have some idea of where you want your business to go, but you probably don’t have your ideas written down. These ideas, or rather, the goals you set for your business are the cornerstone of your online business (or any type of business) and when they are written down, they are typically referred to as a business plan.

Although creating a written business plan for your online business may seem like a daunting task, in reality, it really is just simply a matter of taking those ideas that you have had floating around in your head and getting them put down on paper. This is sometimes hard to do if you are just getting started with your online business, but even if you don’t know all the numbers or exactly where the business is headed, it still is a good idea to at least do an estimate, or what you might call, an estimated guess.

So, what are the types of things you want to include in your business plan? Well, the first step is to create a goal for how much money you plan to make from your online sales. From this number, you will then want to estimate your expenses. These should include your fees, taxes to be paid, the cost of shipping materials, the actual cost of your items and so on. The amount of money you have left after these expenses have been paid, is then considered your profit and is how much you get to actually put in your pocket.

The next step for your business plan is to then decide how you will execute the plan. This is done by creating smaller goals that will help you to meet the bigger goals you have set.

Keep in mind, your business plan is thought to be fluid, meaning that it will constantly change over time. Business plans are sometimes referred to as living documents, since the goals and even the plan itself often changes over time. Initially, you may want to review your plan every couple of months and then eventually, at least once a quarter. If you find that you are getting too far away from your goals, you can then take steps to make a correction.

While business plans can be as simple or as complicated as you wish, if you plan to use your business plan to procure funding for your online business, there are guidelines you should follow. You can learn more about building a business plan by visiting here.

Do you use a business plan for your online company? Leave a comment below.

Where the Amazon Fulfillment Centers Are Located (And Why You Need to Know)

markfaggianoMark Faggiano is the founder and CEO of TaxJar, a service built to make sales tax compliance simple for eCommerce sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax headaches from your life!

 

Amazon doesn’t make it easy to keep track of the locations of the Amazon fulfillment centers. Between new warehouses opening up all the time, warehouses occasionally closing, and the opening of data centers and the fairly new “sortation centers,” keeping up with where your Amazon FBA inventory is housed can be downright confusing.

 

But as an FBA seller, you do need to know where your Amazon inventory is stored due to one thing: sales tax nexus.

 

That’s right, housing your inventory in a state likely gives you sales tax nexus in that state, meaning that you need to collect sales tax from buyers in that state. Here’s a map with info about each state and what constitutes sales tax nexus.

 

How Do You Find Out Where You Have Nexus?

 

So you sell on FBA and you know you have inventory has been shipped to other states. But where do you have nexus?

 

First of all, you have nexus in your home state. You live there and run your business there.

 

Second, you can use a couple of methods to find out where you have nexus due to FBA. You can run this report in Amazon Seller Central, or use a paid service like Wherestock.com.

 

Once you’ve figured out where you have sales tax nexus, your next step is to register for a sales tax permit in each state. Then, set up sales tax collection with Amazon. (You can find a step-by-step guide to setting up your Amazon sales tax settings here.)

 

Do you have questions about sales tax nexus? Start the conversation in the comments!

Are You Ready for July Sales Tax?

TaxjarMark Faggiano is the founder and CEO of TaxJar, a service built to make sales tax compliance simple for eCommerce sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!

 

 

Not only is July a time to celebrate the country’s independence and maybe hit the beach, it’s also a time when many state’s departments of revenue require that you check in about a little thing called sales tax.

 

We know nobody likes to think about filing tax forms and sending in payments, so we put together this quick guide on how you can make sales tax painless this month… and all the months going forward!

 

Check Your Sales Tax Due Dates

 

One of the frustrating things about sales tax is that every state is different. While one state may want to hear from you on the 20th of the month another might have a due date on the last day of the month. So we’ve put together a handy list of July Sales Tax Due Dates for online sellers. Just go and find your state (or states) and you’re all set!

 

Report How Much Sales Tax You’ve Collected

 

The taxable period ended on July 1st, but now you have to figure out how much you collected over that period. You can do this by pulling reports from all the different channels you sell on, plugging them into spreadsheets, triple checking your math, and wasting a whole lot of time, or you could just sign up for TaxJar and let us do all that work for you. Not only does TaxJar connect with the shopping carts on which you sell, we also organize each state’s info in a return-ready format. That means no puzzling over zip codes to try and figure out how much you collected in each city, county and district on those difficult states like Washington, Florida… and most of the other ones.

 

File and Pay Sales Tax

 

From here, take your TaxJar reports over to your state’s department and revenue and you can quickly and easily fill out your return and remit your payment.

 

Don’t forget a couple of key things here.

 

First, some states require you to file a “zero return” even if you didn’t collect any sales tax in that state. Here’s a list of states that require zero returns.

 

Second, some states offer discounts for filing early or on time. Are you one of the lucky ones? See a list of sales tax discounts here.

And that’s it. You’ve put July’s sales tax behind you. Do you have questions about sales tax? Start the conversation in the comments, or join over 3k online sellers and sales tax experts in TaxJar’s Sales Tax Community!

Common Sales Tax Pitfalls eCommerce Sellers Face

Mark Faggiano is the founder and CEO of TaxJar, a service built to make sales tax compliance simple for taxjarlogoeCommerce sellers. Mark’s passion is solving complex problems for small businesses. He previously co-founded and led FileLater to become the web’s leading tax extension service for both businesses and individual taxpayers before being acquired in 2010.

Sales tax can be one of the biggest headaches eCommerce sellers face. There are so many pitfalls on the path to sales tax compliance that it can be downright treacherous, but if you already have a handle on the most common mistakes, you are going to be just fine.

So what are the four most common sales tax mistakes and how do we fix them?

Nexus – What’s That?
It is common knowledge for most online sellers that they should collect sales tax from buyers in their home states. By operating your business in that state, you have sales tax nexus. But It can come as a shock though to find out just how easy it is to create sales tax nexus in other states. Some activities that create nexus include:

● Having items stored in a state
● Having an employee in a state
● Using a distribution center in a state
● Having delivery vehicles in a state
● Attending a craft show, exhibition, or trade show in a state

If you do have nexus in a state and you didn’t realize, you can register for a sales tax permit with that state. However, if you have been operating for awhile without a permit, you should probably check with a sales tax expert to see what you should do about all the unpaid sales tax.

No Permit? Uh, Oh.
If you have been operating for awhile and you know you have nexus, but you don’t have a permit, you could be in trouble. Most states consider it illegal to collect sales tax without a permit. Be sure to check with your state’s department of revenue to make sure that you have a permit and that it doesn’t need to be renewed. If you have nexus in multiple states, you need a permit from each state.

Collecting the Wrong Amounts
Many sellers have trouble calculating sales tax rates. Let’s say for example that you live and operate your business in Minnesota. Because Minnesota is a destination based state you will calculate sales tax based on where your customer lives. The Minnesota base sales tax rate is 6.875%, but you must add any applicable local rates.
So for example, although the base rate is 6.875%, if your customer lives in St. Paul, you would pay a total of 7.625%. If they live in the Anoka area, you would pay 7.125%. This can be trickier than you think, especially when you sell online and have to set up your shopping cart to collect. You can learn more here about which sales tax rate you should charge to buyers.

So Many Platforms
This mistake happens frequently. Let’s say you are selling on Etsy and you set up to collect in the states where you have nexus. You think you have it all taken care of, but what about all the items you sell through your personal website? The next step is making sure that you have all the platforms you sell on set up for sales tax collection. So if that’s eBay, Etsy, and your website, make sure that you have all of those platforms set up to collect sales tax from buyers in every state where you have sales tax nexus.

That about sums up some of the most frequent sales tax errors. (Though, with sales tax being so complicated, there are thousands of other pitfalls!) If you have questions about sales tax pitfalls, start the conversation in the comments.

Need help with sales tax? Check out our Sales Tax 101 for Online Sellers Guide!

4 Things You Should Know Before Hiring an Accounting Professional for Your Online Business

Accounting
When you first started your online business, you probably didn’t need an accountant except perhaps around tax time. As your business has started to grow, however, the idea of having someone else handling all those pesky accounting details has probably started to look pretty appealing. Before you hire an accountant though there are some things to consider:

What do you need an accountant to do?
Depending on what type of accounting professional you hire, they can help with everything from your day-to-day bookkeeping and figuring out the taxes you will owe to preparing future financial projections for your online business. Before hiring an accountant, determine what kind of services you will need, then talk to several accountants to see what type of services they may offer.

What type of rates do they charge?
Most accountants have a fee structure along with an hourly rate. As you might expect, the more they do – the more they charge. In many cases, you will discover that the head accountant or owner of the accounting firm may charge twice what his or her underlings do. Make sure to ask questions and understand how much you will be charged and by what rate you will be charged. This will keep you from getting a jolting surprise when you open the bill and see just how much you owe.

Do you want a CPA or an accountant?
A CPA (certified public accountant) is a type of an accounting professional who has met licensing requirements for the state that they operate in. CPAs have a college degree and must pass a professional exam to become licensed. An accountant, on the other hand, generally handles bookkeeping, but is not certified by the state. In most cases, using an accountant will cost less than using a CPA and can be a good choice when you have a fairly straightforward budget and an uncomplicated tax format.

Does the accounting professional understand how an online business works?
Although the accounting practices for your online business should be similar to any other type of business, there is one big difference and that is the fact that your online business most likely collects sales tax that may need to be paid to several different states. Unfortunately, if your accounting professional has never dealt with navigating the online tax matrix, there could be a learning curve they will have to overcome or they may choose to charge you more for all the additional paperwork they have to fill out. Make sure to ask if they have experience with bookkeeping for online businesses and whether this service is included as part of their regular fee.

Forgot how to Handle Sales Tax?

Guest Post from Mark Faggiano of Taxjar.com

Forgot how to Handle Sales Tax? Here’s How…

markfaggianoMark Faggiano is the founder and CEO of TaxJar, a service built to make post-transaction sales tax compliance easier for multi-channel ecommerce sellers.

January is the promising start of a brand new year. It’s time to sit back and count your profits after the holidays, make some resolutions and maybe enjoy a few cups of hot cocoa.

But for many online sellers, January is also the only time of year you have to deal with sales tax.

But never fear. If you have annual sales tax due dates in January (and nearly every online seller does), then TaxJar has your back.  Here’s what you need to know, even if it’s been a whole year since you’ve dealt with sales tax:

1.) Find Your Sales Tax Due Dates – Check out this list of January sales tax due dates to determine when your sales tax filing is due. Most sales tax filings are due on January 20th, 2015, but there are always a few states that just have to be different.  Double check due dates in every state where you’re registered to collect sales tax to ensure you pay on time.

2.) Determine How Much Sales Tax You Collected – If you’re only filing annually, this means you have to determine how much sales tax you’ve collected throughout the entire year. You must also determine how much sales tax you’ve collected through every channel on which you sell. You can do this the time-consuming way, by running reports from all your channels, or the easy way by letting TaxJar do it for you.

3.) Get Your Sales Tax Reports Return-Ready – In a perfect world, states would only want to know how much sales tax you collected from buyers in the entire state and be done with it. But, of course, as with anything sales tax-related, it’s often more complicated than that. Many states want you to break down sales tax you’ve collected by county, city or other taxing district. This can mean poring over every transaction and trying to figure out exactly what districts your buyers lived in.  TaxJar has your back here, too. We’ll give you return-ready reports so you don’t have to spend your time on this tedious task.

4.) File Your Sales Tax Returns – Once you’ve gathered up all of your information, it’s time to file. You can file online or even let TaxJar AutoFile for you (in 26 states and counting!)  Be sure to file on time – states will penalize you if you’re late, but many will also allow you to claim a sales tax discount if you file early.  And don’t forget that many states require you to file a “zero return” when you’re registered there, even if you didn’t collect any sales tax over the taxable period.

And that’s it! You’re done with sales tax. Well, at least until the next time sales tax rolls around.

Sales tax is complex. That’s why we created TaxJar – to handle the burden of sales tax while you get back to running your business.  TaxJar pulls in sales tax collected from all the channels where you sell, compiles your data into return-ready reports, and will even AutoFile your sales tax returns for you in 26 states (and counting!).

Sign up for a 30-Day TaxJar free trial today and put a lid on sales tax. To let us take care of your January sales tax filings, be sure to sign up by January 5th!

 

Taxjar Launches Autofile, Eliminates Manual Sales Tax Filing For Online and Storefront Retailers

Tax JarNew Service the First to Fully Automate Filing of Returns and Payments Online

 

SAN DIEGO, CA (September 17, 2014) — TaxJar (www.taxjar.com), the online service that makes sales tax filing effortless for SMBs/retailers, today announced the launch of AutoFile, a new service that automates direct filing of state sales tax returns and payments for online and storefront retailers. For the first time, sellers who previously would spend hours each month manually preparing sales tax returns can now have their sales tax calculated, accurately reported and filed directly to a state through TaxJar. With the addition of AutoFile, TaxJar automates sales tax compliance from post-transaction to filing, eliminating the responsibility for retailers to actively manage the process.

“AutoFile creates a sales tax service for sellers that has never been available before – we’re taking away a major burden that saves hours of admin time each month. It was easily the most requested feature from sellers. We have been working closely with customers to make sure AutoFile is a no-maintenance tool that helps their business,” said Mark Faggiano, CEO of TaxJar.

 

How TaxJar and AutoFile Work

TaxJar is integrated with major commerce and payment engines, such as Amazon, Square, Magento, Shopify, PayPal, Etsy and Ebay to allow the automated daily import of a seller’s data from every channel. TaxJar organizes all of the sales data into one report by state and local jurisdictions. Finally, AutoFile enables TaxJar to file returns and make payments online directly to a state, providing start-to-end automated sales tax compliance for a business. AutoFile requires a one-time enrollment, after which the returns and payment process are scheduled for direct filing.

“AutoFile has changed sales tax filing from a dreaded part of operating my business to a task that barely makes it on my to-do list,” said Robert Bagley, owner of RB3 Solutions. “With increased scrutiny from states and the overall challenge of getting accurate data on my own, TaxJar has taken over the management of my sales tax and helped me focus time on new avenues for my business.”

 

Good for Sellers, Good for States

The NSBA’s 2014 Small Business Taxation Survey found that the threat of tax liability in case of inadvertent error was a concern for 76 percent of small businesses, while the burden of keeping abreast of state tax changes and navigating various rules and deadlines was a concern for 79 percent.

“States depend on small businesses as collection agents for sales tax, but the surveys and our customer insights show that compliance is confusing and costly, despite the best intentions of sellers. We are creating a system that eliminates the complexity and helps businesses and states work together for their mutual interests,” added Faggiano.

AutoFile is currently available in 26 states, including: California, Florida, Michigan, Ohio and Pennsylvania with new states added each month. Enrollment is simple and can be completed directly from a current TaxJar account.  The service costs $19.95 for each filing.

TaxJar features a 30-day free trial for any new user. Pricing starts as low as $9.95 per month for small businesses doing less than 1,000 transactions per month. For more information on TaxJar and AutoFile, please visit: www.taxjar.com/autofile

 

About TaxJar

TaxJar was founded by small business experts with a simple mission: help online sellers eliminate the complexity and time of tracking, reporting and filing sales tax so they can focus on growing their businesses rather than dealing with compliance issues. The customer-driven company has a successful history of developing tax and accounting systems used by tens of thousands of online and storefront businesses to solve common operational problems. To learn more, visit http://www.taxjar.com/autofile

 

Sales Tax In Multiple States? What Did I Get Myself Into?

That is likely how you felt when you found out you would have to file in different states because you sell  Amazon FBA, right? If you weren’t aware, did you know that, when selling through the FBA program, you are now responsible to pay sales tax across multiple states? Each state in which Amazon has a warehouse is considered a “nexus,” which is a state you will have to pay sales tax for. If you want to be completely compliant with this policy, you should be registered in all of these states, and you should also be charging a sales tax on your items that are selling from them. Don’t worry, though. It is much simpler than it seems. In my book Introduction to Sales Tax for FBA Sellers, I go through the process and cover everything. For now, I will simply cover the basics.

 

You have to register your business with each state before you can begin to collect sales tax there. There are some states that require you to file with individual cities instead of just the state. Simply figure out which warehouses your items are located at and go from there. Here is a cheat sheet with all the different states’ websites for registering: http://www.sba.gov/content/incorporating-your-business.

 

The rest is just a bit more complicated. You have to figure out which of your skus are at which location and send Amazon a complete list of skus, informing them that you wish to collect said state tax for these items. If only it were as simple as checking a box, right? Each different type of item is a different type of sales tax and you have to charge a flat tax rate, which leaves you open to the chance of charging either too much or too little, based on where the customer lives.

 

The true burden of being compliant lies with you and only you, though. As of yet, Amazon doesn’t offer any kind of remittance service for sellers to help them with this issue, nor do they follow up on whether or not you have. Sales tax returns are known for requiring enormous amounts of time because many states require sales and sales tax collected to be broken down by local jurisdictions, instead of just simple lump sum figures. All in all, it’s a very lengthy and detailed process. I would highly suggest finding a tax professional to help you with, or at the very least reading a book about the subject. If not mine, anyone’s. Just be sure to do your research, as it can be a very difficult endeavor. I am here to offer whatever help I can. Let me know if you have any questions or need help being pointed in the right direction!