Business income and business expenses - a primer for Etsy shop owners and craftypreneurs

On my last post I talked about the importance of separating business income and expenses from personal income and expenses. Let's look at the definition of business income and business expense.

Business income refers to money you have earned in your business. Business expenses refers to money you have spent on your business. The IRS also defines business expenses as “the cost of carrying on a trade or business.”  The IRS also indicates that business expenses must be “ordinary and necessary.”  The IRS points out that “an ordinary expense is one that is common and accepted in your trade or business.  A necessary expense is one that is helpful and appropriate for your trade or business.”  For more information see IRS Publication 334 – IRS Tax Guide For Small Business.

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