AVOID These Etsy Tax Filing Mistakes 💰 (TOP CPA Answers Your Questions)

About this video

Dylan Jahraus interviews CPA Saleem Omar, who says he started his accounting firm 26–27 years ago, has a team of 15, and runs a practice specializing in e-commerce businesses; the questions come from students in Jahraus’s Etsy course and coaching program. Key answers: any profit over $400 must be reported (under that the IRS treats it as a hobby), and income is aggregated across platforms such as Etsy and Shopify, not counted per platform. On research trips with family, he advises making a spouse a real team member (with a role, business card, and title) and allocating costs by day — in his example, a 5-day, $1,000 trip with 4 business days yields an $800 deduction. For bookkeeping, he recommends a daily or weekly discipline and hiring an affordable VA once transaction volume becomes overwhelming. International sellers can form a US LLC in a business-friendly state such as Wyoming or Texas, though getting a taxpayer ID takes 4–6 weeks. Two Etsy shops do not need separate entities for tax purposes unless liability is a concern. He compares sole proprietorship (easy, no legal protection), LLC, and S corporation: an S corp lets owners pay a reasonable salary and take the rest as a distribution, saving the 15.3% self-employment tax — he suggests considering it around $30,000–$40,000 in net profit, with an example where a $20,000 distribution saves about $3,000. He also covers retirement saving via SIMPLE/SEP plans and Roth IRAs (including hiring your children for $5,000–$6,000 a year and funding their Roth IRAs), keeping documentation for 7 years, and avoiding red flags like huge ‘miscellaneous’ expense categories.

Key takeaways

• Profit over $400 must be reported to the IRS, and income is aggregated across all platforms (Etsy, Shopify, etc.), not per platform
• Family research trips can be partly deductible if a spouse has a genuine business role and costs are allocated by business days — e.g., 4 of 5 days on a $1,000 trip = an $800 deduction
• An S corporation can save the 15.3% self-employment tax on distributions; Omar suggests considering it at roughly $30,000–$40,000 net profit (example: a $20,000 distribution saves about $3,000)
• Hiring your children for $5,000–$6,000 a year lets that pay fund their Roth IRAs while giving the business a deduction
• Keep documentation for 7 years, categorize expenses specifically (business education/coaching is its own category), and avoid large ‘miscellaneous’ buckets, which Omar calls an audit red flag

Episode details: published June 20, 2024 · 15:46 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Dylan Jahraus’s own claims, shared for education — they are not typical or guaranteed.

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