In August of 2018 (my 5th month of selling), I made a little over $400 on Teachers Pay Teachers. The next month, I cleared $1000. After the initial excitement faded, the panic set in. Did I need to claim this money on my taxes? How do I do that? What the heck am I supposed to actually do with this TPT money?
I analyzed my own financial situation, read a few finance books, and hired someone legit to do my taxes.
It’s important to note here that I am not a financial expert or professional! Do not take any of this as legal advice. I encourage you to hire your own CPA or accountant. Also, I can only speak about the United States.
My hope is to build awareness for those that may be ignoring their business finances.
Here are a few mistakes that I made with my TPT money so that you don’t have to make them for yourself.
Disclosure: This post may contain affiliate links that earn me a small commission, at no additional cost to you. I only recommend products that I personally use and love, or think my readers will find useful.
TPT Money Mistake #1: Not Separating Your Business Money from Your Personal Money
This mistake is easy to make. At first, you might only make a few dollars here or a few dollars there selling on Teachers Pay Teachers. When your payouts barely cover a Starbucks coffee or your Netflix subscription, separating your business money from your personal money doesn’t seem like a big deal.
When you find yourself making hundreds of dollars, though, separating finances becomes crucial.
The more money you earn, the harder it becomes to track. You buy some TPT clipart for your business along with the lesson plans you need for next week. You order school supplies along with office supplies for your TPT projects.
It becomes impossible to determine what was a business expense and what was a living expense.
Then, when tax time comes, you have nothing to write-off. Or, you hand your poor accountant stacks of receipts with items circled or crossed off.
Keeping your business and personal finances separate is essential. You need to be able to track your income and your expenses if you want to pay taxes accurately. (And you do want to pay taxes accurately!)
Fixing This Mistake
It’s best to begin your TPT endeavors with finances separate right away. If you’re just starting, you might be skeptical about your success possibilities with Teachers Pay Teachers.
Nut your success can come faster than you expect. Be prepared.
(A back-to-school season can create major growth in your sales, followers, and overall exposure.)
If you’ve already started your business, but still don’t have a bank account dedicated to TPT, it’s not too late. You can separate your finances at any point.
You’ll need to:
- Make sure you have an email account for your TPT business (a free Gmail will do)
- Open up a business banking account
- Set up a TPT-dedicated PayPal account
(In my TPT course, TPT Profitability, I have students create a business email before almost anything else. This way, sellers start their businesses with a clear separation between personal and business financials.)
What Kind of Bank Account Do I Need?
Make sure that your bank account is a business account, not a personal one. Choose a bank that will allow you to have several savings and checking accounts.
(Having many savings and checking accounts is useful for saving. I use the Profit First system for my business finances. Having several accounts is imperative for making sure I can cover expenses and taxes.)
Capital One is one bank that can do this for you. This is the bank I use.
Once you have a separate email and bank account, you can then open up a new PayPal account and link it to your TPT store.
It sounds like a lot, I know, but trust me, it will simplify your (and your accountant’s) life in the long run.
TPT Money Mistake #2: Not Claiming TPT on Taxes
The end of the last mistake may have caused you to develop hives: I have to pay taxes on TPT?! Sorry, honey, but you do.
Whether you’re making $2 or $20,000 a year on Teachers Pay Teachers, TPT money qualifies as income. And in the United States, we have something called an income tax.
In teaching, your district removes your income tax for you. You’ve seen those tax deductions on your pay stub for federal and state taxes. There are also deductions taken out for services like medicare and social security.
If you earn over $350 in a year, you also need to pay a self-employment tax. You’ll need to fill out a Schedule-C form when doing your taxes.
It’s very tempting to not pay taxes on your TPT earnings, especially when you don’t feel like you’re making very much.
Neglect to claim TPT and you could be facing severe penalties, including extra fees and interest charges.
Trust me. Forfeiting a little bit of your Teachers Pay Teachers income to the government is way better than being on the IRS’s bad side.
Fixing this Mistake
This is an easy one to fix: file that Schedule-C when tax time comes around.
If you haven’t been paying taxes on Teachers Pay Teachers for a long time, it’s best to seek professional help. A professional can help you file back taxes and fix any previous mistakes.
Don’t panic! The IRS isn’t as scary as people make it out to be. They don’t want to hurt anyone and are very willing to work with people who have made an honest mistake.
TPT Money Mistake #3: Not Saving for Taxes
Ok, so you’re separating your business from your personal finances. You know taxes are coming. But are you actually preparing for them, or are you trying not to think about it?
You need to save for taxes every time you receive a Teachers Pay Teachers payout.
Sometimes, the paycheck from your full-time job will contribute enough so that you don’t owe any tax at the end of the year, even with TPT money coming in. In this case, if you’ve saved, you now have an end-of-the-year bonus. Congrats!
If your job doesn’t take out enough to cover taxes–or TPT is your only income–and you haven’t saved anything, you could be hit with a tax bill that you simply cannot afford to pay.
Trust me, the former is less stressful of the two situations.
Fixing this Mistake
In mistake #1 I recommended opening a business bank account with multiple checking and savings accounts. This is why.
Every time you receive a TPT payout, take a portion and move into one savings accounts dedicated to tax savings only. Don’t touch it!
Now, how much should you save? That will depend entirely on your financial circumstances including whether or not you’re married, if you’re employed elsewhere, where you live, etc.
I am not a financial or tax professional! You should consult with a professional to determine exactly how much to save.
I started by saving 30% of every payout. I preferred to overestimate my taxes rather than underestimate them. Every year, I adjust how much I save.
I’ve already mentioned Profit First, but this book will help you estimate a starting point as well.
What About Quarterly Taxes?
At some point in your Teachers Pay Teachers journey, you’ll need to pay estimated quarterly taxes.
Quarterly taxes are an estimate of what you might owe. The more you pay in quarterly estimates, the less likely you are to owe at the end of the year.
For me, I had to start paying quarterly taxes somewhere in the $8,000-13,000 range. I knew this because my CPA told me. (I also received a letter from the IRS after filing taxes that year.)
Besides saving for taxes every payout, I now also send the IRS a check every quarter. My CPA helped me set this up, but it’s not hard, and it should mean that I’ll have a smaller tax bill at the end of the year.
Every time I write a quarterly tax check, I take that amount out of my tax savings accounts.
TPT Money Mistake #4: Not Hiring a Professional
If you’re deadset on doing your own taxes, you can. You can use TurboTax or any other tax software to fill out a Schedule-C and pay taxes on your TPT income.
I DO recommend that you hire a professional.
A professional CPA will help you file your personal and business taxes. They’ll also help you find every write-off possible and make sure that you stay in good standing with the IRS.
It might suck to pay a CPA, but they could save you more than you’ll end up spending.
When it was time for me to start paying quarterly taxes, my CPA made this painless. She explained it all to me, came up with a quarterly amount to send, and even gave me pre-addressed envelopes for those checks.
(And when I forgot to send one, she talked me off a ledge and reminded me that in the grand scheme of things, a late payment wasn’t that big of a deal.)
For me, my taxes have always been complicated, so I’ve never done them myself. (As a teacher I’ve always had crazy side gigs which meant a lot of paperwork).
I make sure to save plenty for taxes and when it comes time to pay my CPA, I use that “tax fund” to cover the costs.
Fixing this Mistake
Fixing this mistake is easy–just hire a tax professional. Ask your friends, neighbors, and relatives for recommendations. If you don’t find any leads, you can go to a chain like H&R Block.
Business schools sometimes offer free tax preparation so their accounting students can get experience. If you’re worried about costs but live near a college, check to see if they offer it. It could be a great opportunity to have your taxes done for free while helping out a student.
To you, Teachers Pay Teacher may feel complicated tax-wise, but to any CPA, it won’t be.
They’ll help you find write-offs you might not even be aware of–like your home office.
TPT Money Mistake #5: Not Allocating Funds to Reinvest in Your Business
When you start getting Teachers Pay Teachers payouts, it’s so tempting to just pocket all of this money (I definitely did this the first few months!). But you should be reinvesting some of that money back into your business so it can earn you even more!
The deeper you go into TPT, the more places you’ll find to spend money. While I’m a big believer in bootstrapping, at some point you’ll need to invest in some tools.
When you find the perfect clip art, virtual assistant, or marketing strategy, you’re going to wish you had the money for it.
You do not want to pull money from your personal bank account to loan out to your business. Your business should be self-sustaining.
Fixing this Mistake
Like saving for taxes, I recommend you allocate a portion of each TPT payout for business expenses. You can put this money into a checking account every month.
Then, you can make your business purchases using that checking account. This will also help you track your expenses (and write-offs!).
How much should you save? Profit First can help you determine that. Or you can calculate how much to save for taxes, how much to pay yourself, and dedicate the rest to business growth.
Where Should You Reinvest?
Here are some tools that provide some of the best ROI (return on investment) for your investment:
- TPT Profitability: You caught me–this is my course. It’s designed to take you from nothing to a functioning store in a few weeks. If you’re reading everything you can about selling on Teachers Pay Teachers online but haven’t pulled the trigger yet, then a course might be the thing to give you that push.
- TPT Premium: This should be your first investment. The TPT Premium membership pays you more every time someone makes a purchase.
- Clip Art and Fonts: You’ll want to add some unique art to your resources to take them to the next level.
- Tailwind: This was one of my first major investments into my business and I have no regrets. Tailwind automates your Pinterest pins and/or schedules your Instagram posts for you. It’s a huge timesaver for TPT marketing.
- Canva Pro: Canva is an online design software. I talk about it in detail in this post. You can use it for almost anything: creating logos, creating products, creating social media posts, etc.
- Siteground: This is my recommendation for website hosting. (I have used BlueHost and Siteground is way better). Any hosting is a sound investment if you can blog consistently and are willing to learn about SEO (search engine optimization). My blog is my top driver of traffic to my TPT store.
When you invest in creating better products or marketing, you’ll see more sales and more earnings. It’s crucial that you continue to invest in yourself and your business if you want long-term success.
TPT Money Mistake #6: Not Having a Long-term Wealth-building Plan
After I surpassed $1000 in one month on TPT, I realized that my business had more potential than I ever thought possible. I also knew that if I didn’t have a plan, that extra money would end up squandered and I’d have nothing to show for it.
If you let those TPT payouts hit your bank account without a plan, it might be lost to lifestyle creep.
Or, you might buy a new expensive luxury that doesn’t help build your long-term wealth or financial security.
One day, your TPT money will be more than enough to fix those debts or pay those bills. Make sure you know what you’re going to do with the extra money at that point.
Fixing this Mistake
This might be the hardest mistake to fix on this list. It requires doing some research, learning, and thinking.
I realized that if I could teach myself how to start a business, I could teach myself finances and investing, too. I spent a year learning everything I could about building wealth and investing.
Here are some of the most useful books I read:
- My absolute favorite finance book for beginners is I Will Teach You To Be Rich by Ramit Sethi. After I read this book, I bought it for everyone I knew under the age of 50.
- Profit First by Mike Michalowicz gave me the framework I use to plan and track my TPT money. I modified the plan a little bit based on what works best for me and even added a bank account for saving for charity. (My full review is right here.)
- Your Future Checks and Raises by John Roberts is an easy-to-understand guide to dividend stock investing. This is one stock-investment strategy or many, but it appealed to me because it’s lower risk than other methods.
You don’t have to become the Wolf of Wall Street to do this, but you should have a plan for what to do with your income before it hits your bank account.
Do you have debts to pay off? Saving for a wedding, house, or new child? Do you know your retirement savings goal (and are you on track to hit it)?
I dream of the day when I don’t have to work a full-time job and run a business to make ends meet and feel secure. To get there, saving and investing is a crucial step for me.
A Final Word on Managing Your TPT Money
If any of this is confusing or feels overwhelming, please take a breath!
Like with any other business project, you just need to start. Take one step at a time and the rest will become clear.
Remedy mistake #1. It might take a while to move over funds and figure things out. That’s ok. But once you’ve done that, go fix mistake #2, and so on.
I did not manage to get my TPT money organized in a week; it took me several months.
And if you don’t have a Teachers Pay Teachers store and are questioning starting after reading this, don’t be scared! The rewards of starting a TPT store will outweigh any minor inconveniences like taxes.
Looking for more ways to uplevel your Teachers Pay Teachers business? Check out these resources:
- How I Made $1000 in My Sixth Month on Teachers Pay Teachers
- Profit First: The Must-Read Business Book For Teacherpreneurs
- The Most Important Tool You NEED for Your Teachers Pay Teachers Business
- TPT Profitability: Start Your Teachers Pay Teachers Store without the Overwhelm