E-Commerce Management

How to Prepare Taxes for Your E-commerce Business

Fiverr Team
February 13, 2023
E-Commerce Taxes

With the holidays behind us and a new year underway, now is the time to start preparing to file your annual tax returns. Whether this is your first year in business or your 20th, e-commerce tax preparation can sometimes feel like a never-ending to-do list. The good news is following a systematic checklist can help you take care of all the important tasks so you’ll be ready to file your taxes well before they’re due. Start by following these three simple steps.

1. Make Note of Your Tax Deadlines

Failing to file your taxes on time can lead to serious penalties, so it's important to make note of the key dates and add them to your calendar. Some of the deadlines that may apply to you include:

  • Partnership and S-corp tax filing – March 15, 2023
  • Personal and corporate tax filing – April 18, 2023
  • Quarterly estimated tax payments – April 18, June 15, and Sept. 15, 2023, and Jan. 16, 2024
  • Extension deadline – October 16, 2023

2. Organize Your Bookkeeping and Records

Working with a tax preparation specialist can help ensure you don’t make mistakes on your tax returns. However, even the most skilled professional needs a clear set of books and records.

Whether you’ve hired an accountant to take care of your bookkeeping or you’re handling it on your own, now is the time to make sure all the necessary information has been added and the accounts have been reconciled.

Review Your e-Commerce Tax Deductions

Hopefully, you’ve kept all of your receipts and records, as this will allow you to take advantage of various key e-commerce tax deductions. A business tax specialist can help you identify the deductions that apply to your business so you don’t end up paying more in taxes than you owe. Some of the deductions you may be able to use to reduce your tax liability include:

  • Home office
  • Education
  • Internet and phone
  • Web hosting and online store themes
  • Online service fees
  • Equipment
  • Shipping costs
  • Vehicle use
  • Cost of contract labor
  • Professional services

Understand Your Sales Tax Obligations

The U.S. Supreme Court's ruling on the 2018 case of South Dakota v. Wayfair confirmed that e-commerce retailers are required to pay sales tax. However, each state has its own laws regarding which businesses are required to collect and pay sales taxes.

In general, if a business has a physical connection to a state, also called a “nexus,” then it is required to collect sales tax in that state. This could include having an office or a warehouse in the state, selling at a craft fair or a pop-up shop, storing inventory there, or having employees who work there. This can make the whole process complex and confusing, which is why it’s a great idea for e-commerce business owners to consult with a tax professional rather than trying to figure it out on their own.

3. Work with a Qualified Tax Professional

If you don't already work with a trusted e-commerce tax professional, now is the time to start the process of finding one who is a good fit for your business. Begin your search by narrowing down your options to include professionals who have an educational background in accounting and are properly licensed.

Next, ask how long they've worked with e-commerce businesses and whether they're familiar with your industry. Inquire about the services they offer and make sure they align with your business needs. For example, some firms only file tax returns, while others provide bookkeeping and accounting services all year long. Check out their reviews and references, and, finally, ask for a quote to ensure the pricing is fair and reasonable.

Start Your Tax Preparation Today!

While you may feel like you have plenty of time, the truth is that tax season is already upon us. Taking the time to start preparing now can help you avoid scrambling at the last minute or missing important filing deadlines.

There are many skilled tax professionals on the Fiverr platform who can help make tax time easy and stress-free. Start exploring your options now!

Fiverr Team
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