Dotting Your I's and Crossing Your T's

If you're just starting to sell your craft online then there are a few forms you're going to want to fill out in order to get started.

Already got your shop set-up? No problem, it never hurts to go back and make sure you've dotted all your I's and crossed your T's.

Selling your craft online give you a broader customer base than just putting a sign up in front of your lawn, for sure. However, just like putting up the sign on a new store front, you've got to register and file papers like everyone else.

Whether your writing articles for a magazine in Austria or sending post cards to Japan, the IRS doesn't really care, just as long as you've filed the proper paperwork.

The IRS assumes that if an activity is carried on for profit and makes a profit 3 out of 5 years, that it is indeed a business vs a hobby.

So, basically. These are the forms you need to have filled out to keep yourself legit with the IRS.

Fictitious Name
This differs by state so the following link will lead you to business.gov where you can choose your state. You only need to do this if you're going to do business as a name other than your own. 411 - a bank won't let you open a business bank account without this registration to prove the name change.

EIN
An EIN is your business's identification number. As a sole proprietor you have the option of using your social security number, but with the high rate of identity thief, it's highly recommended that you get yourself an EIN for you business. Your EIN will establish who you are, type of business (single, partnership, or corp), and set you apart from other businesses. As a sole proprietor, having an EIN is not only more professional, but smart.

Sales  and Use Tax.
If you're selling a product that requires the collection of sales tax, you'll need to register for a sales tax number. Many craft fairs require this if you plan to take your craft to the streets. The quickest way to find this is to do a search for Your State Sales Tax. For example in Pennsylvania, you'd go to the PA DEPT OF REVENUE to apply for a sales and use tax licenses.

Self Employment Tax
Think of this as your social security. When you quit your day job and sell your craft online full time, you're no longer paying in social security and medicare taxes. This is where Self employment taxes come into play. Pay them and your safe for social security, don't pay them and when you're over 65 you'll wish you had. Simply put.

On a side note, looking into a retirement plan whether you sell your craft full time or work for a company is still a smart idea.

You may also want to stop by the IRS Small Business and Self Employment Site and read Publication 1518 and Publication 4591 for tax calendar and responsibilities.

Then you'll want to check with your state and city to make sure there are not any additional licenses and taxes that you need to handle. Even though you may not be selling directly out of your home or studio, you still want to tag all your bases. Your local chamber of commence should be able to give you the information you need.

It's easy to turn your passion and talents into a tangible craft to sell, but first protect yourself by making sure you've got all those I's dotted and T's crossed.