We actually filed our taxes back in February because we like to make sure our accountant has time to check our numbers, find any deductions we missed and find out the amount we owe early so we have time to pay.
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For the past two years, we've used GoDaddy Bookkeeping (GDBK). (We actually met the developers when they were called Outright before the company was bought and name changed). If you're familiar with other online financial services, it's easy to use. We simply gave GoDaddy Bookkeeping access to read all your accounts: bank accounts, credit card, Paypal, Amazon, eBay, Etsy. Now we have all our financial data in one place.
How does it work?
I can now organize the data for my own information and for my accountant when he does our taxes. It has a neat way to see your sales and expenses in graph and table form. I can see if our sales are up or down, and identify trends throughout the year, or between different years. We can really dig down pretty deep.
The really genius part of GDBK is teaching it how to categorize our expenses. I tell GDBK that something is an expense, so now it always labels it as an expense. I cannot stress enough how cool this is.
Why are deductions so important for an eBay business?
Like any business, we have costs of doing business. The IRS allows all businesses to deduct many of these costs since it's not seen as profit. This is so important for an online seller because deducting business expenses will help you pay the appropriate taxes at the end of the year. All businesses depend on deductions.
What can I expense?
Let's be clear, I am not a tax professional...so consult with an accountant for your own needs. But according to the IRS, you can deduct:
- the cost of inventory that sold that year
- mileage on your vehicle used to drive around to thrift stores, etc.
- meals you buy when you're out shopping
- home office costs (utilities calculated based on the size of your office)
- storage costs (like if you rent a space)
- shipping costs (USPS, UPS, insurance etc)
- shipping materials
- eBay fees
- Paypal fees
- Amazon fees
Since we've pulled in all our data throughout the year and taught GoDaddy Bookkeeping to know our expenses, it's easy to print out a Schedule C Worksheet for our accountant. He loves it when we don't just give him a shoebox full of receipts and this saves us money because he charges by the hour.
GDBK also helps estimate how much we owe on self-employment taxes each quarter. The IRS suggest you pay quarterly but does not require it. There is a small penalty if you don't pay by the end of the year.
GDBK also helps us keep track of sales tax which I believe will become more important as Congress keeps pushing for an internet sales tax. Currently, you only have to collect sales tax if you sell to someone in your own state.
What GDBK does not do?
COGS stands for Cost of Goods Sold. You'll see this acronym pop up in many forums for online selling. Unfortunately GoDaddy Bookkeeping does not have a way to keep track of what inventory you bought that also sold in that tax year. We have to keep a separate spreadsheet for that. Many sellers don't keep track. It's confusing since buying items at yard sales are always in cash without receipts anyway. We simply do our best in case we're audited. Ultimately, the cost of inventory isn't that huge an expense for us as one-of-kind sellers. Many items we buy are under $5. I really hope GoDaddy Bookkeeping adds a way to track COGS. I started a thread on their help forums and would be helpful if other members added their ideas.
Is it safe?
GDBK cannot do anything with our accounts except pull info. If anyone hacked into my GDBK account, they couldn't access my bank accounts. It's as safe to use as any banking online. Always minimal risks involved, but it's worth it for us for the convenience.
GoDaddy Bookkeeping really saved us when our eBay business took off. Instead of spending many hours doing accounting, GDBK does it for us. I also love that I can see all our accounts in one place making it easy to see if we're in the red or black. We have three bank accounts, a credit card, Paypal, and eBay account. It's great that I don't have to log into all these accounts separately. Getting our numbers ready for our accountant takes an afternoon.
I know some of you use GDBK. What do you like or don't like about it? Anyone use a different online bookkeeping service that is aimed at online sellers?