Online businesses were already on the rise in the past decade, but there’s no denying that they’re flourishing now. With the ongoing pandemic throwing shock waves through the worldwide economy and an endless cycle of isolation and quarantine, retail is happening online more than ever. This may be why so many folks have moved their businesses out of the physical world and into the cloud. If you’re an online business owner, you probably use a platform like Shopify or QuickBooks to run your financials.
Shopify and QuickBooks are great for bookkeeping—they keep track of sales in a sales channel, they allow you to keep an eye on cash flow and invoicing, and they can even help estimate deductions you may be able to claim come tax season. The thing is, though, that there’s nothing like real-live CPAs and tax preparers when it comes to actually finding the most deductions that get you the most refunds. It may only be early 2022, but it’s never too early to start thinking about tax planning—especially if you run an e-commerce business. If tax services are on your mind and you’re wondering how best to approach the tax season, read on for some useful information.
Can’t I just use accounting software?
There’s nothing wrong with accounting software, like TurboTax or Intuit, but they’re not really built to handle the details that go into tax preparation for a small business owner such as yourself. Accounting software is great if you have a W-2 and maybe a couple of 1099s to file. If you’re a seller on Etsy, though, you probably are receiving income through a variety of channels and have myriad deductions that need to be addressed.
Maybe you’re a freelancer, and you get income that’s coming in from lots of different states. How does sales tax figure into the whole tax preparation business, when sales tax differs in the various jurisdictions you operate in? This goes into far more detail than a simple one-size-fits-all software can handle.
Do I really need accounting services in my area?
While a good accountant will be familiar with nationwide tax codes, it doesn’t hurt at all to have the physical presence of a CPA who understands the requirements a business owner in your state must meet. A quick Google search for “e commerce tax accountant near me” will get you the information for a number of great accounting firms who can help you come tax time. That said, you’ll want to make sure the accounting firm you hire is a good fit for your small business.
Make sure you work with someone who has experience in the realm of e-commerce businesses, both with independent startups and those who work through a platform (like Etsy or Amazon sellers) so that you know they’ll be asking the right questions.
Can’t I use tax strategies from the previous year?
Sure! But what you did in the previous year they won’t necessarily meet your needs this year, especially if you’ve had much more of a high transaction volume this year than you’ve had in years past, or if you moved most of your operations into your home. A great tax accountant will be able to take all of those shifts in your bottom line into consideration when putting together your tax return.
They’ll also help you navigate the complicated rules that apply to those who operate in various jurisdictions or different states and have seasonal shifts in their finances. Even if your business operates all around the world, having an e-commerce tax accountant right nearby may give you peace of mind, which is more than a little important.
You’re already managing the nitty-gritty of an online retail business. Give yourself one less thing to think about and hire someone to worry about tax law for you.