I have been asked by a lot of theme developers are getting popular on the web by selling their themes on Mobihand and other storefronts. And let’s face it. I know a lot of you are thinking – wait wait – that money is under the table right? I mean I wont have to pay the dreaded income tax to Uncle Sam and his first cousin the Internal Revenue Service?

I hate to disappoint you but that’s just not the case. There is a pretty good chance that you will be receiving a 1099 MISC for the total of all your theme sales for the year. If that total is under $600, you probably won’t get one. But if it’s $600 or more, around the middle to end of January expect a piece of 1099 goodness coming your way.  And there is a huge paper trail that is being laid that the IRS can follow straight to you.

So, in a series of articles,  let’s talk about how to stay on top of all this accounting stuff when it comes to keeping track of theme sales and expenses incurred. Then, how to be prepared for the tax man that cometh.  I am only going to do a couple of topics a part just because I want you to think about the information and ACT.

1.First and foremost, I recommend some sort of accounting software. Personally I would use QuickBooks. It has so many great features, but I found the downloading of my bank statement directly to my QuickBooks to be one of them. It saves me time because I am not interested in each individual theme sale.  Another plus is with the press of a few clicks, I can know my revenue for any given point.  I know plenty of folks that use an Excel Spreadsheet and honestly that’s fine but don’t get lazy. Sometimes those with the best of intentions get bored with logging theme sales and then a weeks worth of work turns into a month or quarter’s worth of work. Regardless of what you choose, stay current. You are a theme developer and not an accountant. Do what you do best.

2. Make sure you know your expenses. Wait, I am theme developer. Plazmic is free. What expenses do I have?  Good question! Well, if you are making any type of money with themes, you are using either paypal or a merchant account service.  Your biggest expense will be the fee you pay. For example, most themes that are $6.99. If you accept paypal, there is a good shot you are paying .50 to .60. That fee is deductible usually under  a merchant account fee or credit card fee expense.  Here is another expense. Lets say you put your themes in a store like Mobihand. You sell it for 5.00. You sell a theme and your cut is 60%. That means you are taking home $3.00.  What is that $2.00 that you don’t see? Well, you can classify it as a Store Admin Fee. So at the end of the month, you can grab your gross figure and your net figure and then consider the difference to be your admin fee.  That is a pretty big expense as well.  So when you are writing down expenses don’t just think in the money you netted. Write it down like this.

Month of September 2009

Gross theme sales — $2,000

Store Admin Fees — $ 800

Net theme sales — $1,200

What other expenses are deductible? Anything that is an “ordinary and necessary expense” to building themes.   If you question whether it is an expense for you ask yourself, is it ordinary and necessary to building themes or building my business. Business cards, print materials, laptop or desktop computer are all expenses to think about. What about wireless internet package you pay for monthly for your BlackBerry? Well, if you strictly do OTA links, you want to test on a live device right? And you can’t keep asking people for beta testing, even though they love it. You MUST have a data plan. Expense it!

I don’t want this post to be too long and we do have other topics to cover. Part 2 will discuss should I incorporate my business? Should I have separate bank accounts for my business? What tax form do I fill out? Stay tuned for that.

If you have any other accounting or tax questions follow me on twitter and ask away.  @themes4bb. Part 2 coming soon.