Tax information from HO
I forgot that this was in my files. Maybe it will help some of you about to do your taxes. *This was forwarded to me: I did not compose it. Please seek professional advice if you are not sure if a deduction is allowed by the IRS.
Portions based on conference call training with Vicky Collins, CPA
Sponsored by the Direct Selling Women's Alliance
As the owner of a home-based business you are entitled to a lot of money-saving tax deductions. Vicky said that most direct sellers overpay their taxes by thousands of dollars each year! There are usually two reasons for overpaying your taxes:
Fear (of the IRS)
Lack of knowledge (not knowing what is deductible)
Vicky stated that as the owner of a home-based business, you are entitled to these benefits - it's one of the major advantages of this business! She stated that the most important thing is to keep good documentation for your expenses. Take it from my own experience, if you keep track of your expenses on a daily or weekly basis, you will be very thankful to yourself when tax season rolls around. You can make up your own simple spreadsheet or purchase an expense log at any office-supply store. A great online tool to help you with all aspects of your taxes and record keeping is Quicken Home & Business (soon to be released as Quicken Premier).
Here are some of the allowable deductions. Take full advantage of them and don't cheat yourself - they are legally ours to take!
SUPPLIES
§ Super Starter Kit - (your initial start up cost)
§ Super Starter Booster Kit
§ New Product Samples
§ Any products you purchase for yourself
§ Door Prizes
§ Hostess gifts
§ Envelopes, folders, pens, etc.
§ Bowls, bins or towels used for demos
§ Copies
§ Business cards
§ Stampers
§ Catalogs, order forms, etc.
TELEPHONE
§ Telephone expenses (separate line for computer, or portion
of your local/long-distance charges used for your business)
§ Long-distance calls to customers, home office
§ Cell phones (based on % used for business)
§ Internet Fees
POSTAGE
§ Hostess packets, thank-yous, flyers, etc.
§ Bills related to PC
§ Newsletter mailings to customers, consultants, etc.
§ Customer Care
TRAVEL EXPENSE
§ Hotel costs
§ Monthly meetings (mileage, food expenses, etc)
§ Out-of-town shows (airfare, etc.)
§ Meals (50% is tax deductible unless you prepay for gift cards in advance, then 100%!)
§ Taxi's or airport transfers (just ask for a receipt!)
§ Tips for bellmen, etc.
DUES AND SUBSCRIPTIONS
§ Cooking magazines, recipe clubs, etc. (online or magazines)
§ Business related dues (chamber of commerce memberships, etc.)
§ Meeting and Conference registration fees
ENTERTAINMENT EXPENSE
(Entertainment and meal expenses are deducted at 50%)
§ Recruiting interviews (buy a potential lunch, coffee, etc.)
§ Planning meetings with spouse other consultants, etc. Be
sure to document your agenda (If you meet for lunch with another consultant to
share ideas, etc.)
§ Entertainment expenses. Vicky gave the example that if your
husband golfs, you can give him some catalogs to pass out at his golf
game, and he can legally deduct his golf fees!
HOME OFFICE EXPENSE
§ Office equipment such as computer equipment, fax machines,
calculators, scanners, etc. Percentage based on how much time it is
used for business vs. personal
§ Internet expenses - based on percentage of how much it is
used for business
§ Computer Software used for your business
It is extremely beneficial to have your own "home office". A home
office does NOT need to be a separate room - it can be a corner of a kitchen, bedroom, etc. To qualify as a home office the area must be used "regularly and exclusively" for your business. When you have a home office you can deduct the following:
§ A percentage of your real estate taxes, mortgage, and utility bills. (based on square footage used for business use) To determine the percentage, calculate the square footage of your home and your home office. Divide the footage of your home office by that of your home. This is the percentage you can deduct. For example, if your home is 2000 square feet and your home office is 100 square feet, you can deduct 5% of your expenses. (that's more than you can do now!)
§ Mileage to and from your shows.
§ Mileage to another job you may have, with restrictions. In
order to take this deduction, you must do some type of Pampered Chef work
at home before you leave for your other job. The tax law reads that you can
deduct mileage "from your first job to your second job". If you are working
on Pampered Chef as your first job in the morning, then you leave for your
other job the mileage is deductible. This could be as simple as sending out
a few emails or entering orders on your computer.
§ All computer-related expenses, considering that your computer is only used for your business. This includes Internet connection fees.
MILEAGE AND TOLLS
§ To cluster meetings, conferences, grocery store, post office, bank, etc. For shows, check with your accountant: this may be deducted if you stop on the way for food or if you have a home office). See note under Home Office Expenses
§ Current rate is .375 per mile!!!
ADVERTISING AND VENDOR FAIRS
§ Logo clothing, hats, pins, etc.
§ Newspaper ads, church bulletins or newsletter ads
§ Free gifts to vendor fairs, etc.
§ Vendor Fair booth fees
§ PC LOGO apparel. (deduct this as advertising, not work clothes!)
(all of these are considered advertising.)
GROCERIES
§ Any food you use to practice Pampered Chef recipes (According to Vicky, you can deduct grocery expenses more than once for a particular
recipe if you are working on "perfecting" it- like feeding it to your family all the time!)
§ Any food you take to shows, meetings, etc.
INTEREST AND FEES
§ Tax Preparation Fees (business portion on Schedule C at 100%,
personal portion on Schedule A - Itemized deductions)
§ Bank fees
§ Credit card interest that relates to any business expenses
PAYROLL EXPENSES
§ According to Vicky, this is an incredible way to reduce your taxes!
If you have children between the ages of 6 and 18 you can pay them
for helping you with your business. There is some work involved, but the
benefits are great. You will need to get a Federal ID number (your
tax advisor can help you with that). Then you should pay your children a
normal salary for age-appropriate work (i.,e., a 6-year old could be paid $5
for stamping catalogs for ½ hour but not $50 for an hour of host coaching
calls!)
§ You can pay each child up to $4,750 per year. It is TAX
FREE to the child, and FULLY DEDUCTIBLE for you, You should write a paycheck to your child and document the time spent and tasks completed
RETIREMENT CONTRIBUTIONS
§ As the owner of your own business you can set up special retirement plans for yourself. There are SEP's (Self-Employed 401K's), Simple IRA's, etc. Contact your financial or tax advisor for details. This is a great way to save money for your retirement TAX FREE!
Chris Manion
National Director and Trainer for
THE PAMPERED CHEF |
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