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  #1 (permalink)  
Old 02-06-2012, 06:44 PM
WAHM Regular
 
Join Date: Oct 2011
Posts: 15
Default Tax Questions

Howdy! I'm sure the answer to the question I'm about to ask is somewhere in the archives of this forum... but I've done an exhaustive search, and have yet to find it! I did find other posts about accountant vs. H&R Block, sales tax, etc... but here's what I want to know:

Specifically, which items are classified as legitimate business expenses?

Mileage? Office supplies? Printing services (hostess packets, etc...)? Jewelry for my display? (whether purchased at advisor discount, or hostess bonus price)? Tax and shipping on my supply orders? What if I purchase collectors pieces to be used as booking incentives? If I give those away, does that count as a supply/deduction? I play a booking game with a deck of cards, where my hostess earns a discount on one of her bonus pieces; if I pay 10 of the 15 dollars, can I deduct that as a business expense? What about expo fees?

I know that I'm being very particular with my question, and if there's an easy-to-read resource available anywhere online, please point me in the right direction!

This year I didn't get a 1099, because I started selling in November. I didn't deduct any business-related expenses. However, I have big goals for next year and want to be prepared. In January, I started using Quickbooks to track expenses & sales. I'm not trying to get over on Uncle Sam, it's just that I plan to make a lot of money with lia sophia this year (gotta love the power of positive thinking ) and I want to start 2012 off right in terms of business organization, so that I'm not scrambling to get documents and numbers together at tax time.

Sorry for the long post, and sorry if these specific questions have already been answered. I really appreciate any input you ladies have!

Thanks,

Kim P.
Dallas, TX
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  #2 (permalink)  
Old 02-07-2012, 05:39 PM
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Join Date: Oct 2005
Location: United States
Posts: 1,138
Default

Your best bet for getting correct info on this question is to go to the IRS and research your questions. Personally I use TurboTax Home and Business for my taxes and have for my entire lia sophia career.

Unless someone is a tax professional anything we say would just be our personal interpretation so you really can't count on our answers as accurate.
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Harriett Brawner, Independent Advisor/Star Unit Coach
lia sophia jewelry
  #3 (permalink)  
Old 02-07-2012, 06:40 PM
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Join Date: Nov 2006
Location: United States
Posts: 1,189
Default

HI Kim

As Harriet mentioned any advice from someone other than a tax consultant would be a guide. Best thing, if you are unconfortable with what is or is not deductable would be to get your taxes done by a professional the first year or two so you have some guidance on what you can and can not deduct.

You may want to go out to the IRS site and download a copy of a schedule C. You will use this form when you file your taxes. This will give you a good idea of what "catagories" of deductions you will want to keep track of throughout the year.

Most of what you listed above is a write off for your business. You will need to keep your receipts for your records. No receipt - No write off.

PS.. even though you did not realize a profit from lia sophia this year you may want to check with a tax professional about filing a schedule C against your earnings (pretty sure if you were under $600 in earnings lia sophia did not mail a 1099 but you can find a copy under Your Business - My Documents.).. you may still be able to use the loss (earnings - your cost of doing business) against your personal tax liability. Worth at least talking to a tax professional. Not sure if you would be able to carry over your business costs from this year to your 2012 taxes otherwise.

I will follow with a guide I had received from someone years ago on this forum.
__________________
Dana
lia sophia - Jewelry for Life!

Last edited by smokinhotjewelry; 02-07-2012 at 06:56 PM.
  #4 (permalink)  
Old 02-07-2012, 06:46 PM
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Join Date: Nov 2006
Location: United States
Posts: 1,189
Default

Advertising
o Business cards (these are considered Advertising).
o Booth rental for craft shows, bridal shows, etc.
o Ads placed in any kind of circular.

Bank Charges
o Account fees (service fees, NSF fees from a customer/hostess bounced check if not reimbursed, checks, etc.)
o Credit card interest

Charitable Donations
o Any donations made from your business to a charitable organization, i.e., church, American Red Cross, domestic violence shelters – must be a 501(c)3 organization. It’s always a good idea to ASK the group if they are.

Entertainment/Meals
o Business meals/coffee breaks (this includes if you are eating at a fast-food joint on the way to a show because you didn't have time to eat at home. This also includes if you take someone to lunch or Starbucks to discuss the biz...per CPA). You will be able to deduct 50% of your meal.

Mileage
o Mileage to and from hostess' houses (which can be multiple times if you are dropping packets off instead of mailing).
o Mileage to and from the office supply store for supplies, paper, whatever.
o Mileage to and from the bank to deposit checks, etc.

Mileage is one of the biggest deduction - be sure to keep a log - you can get a log book at any of the office stores.

Miscellaneous
o If you pay a CPA to do your taxes, it is deductible the next year.

Office/Business Supplies
o Your Starter kit.
o Any other jewelry samples you buy (as supplies).
o Supplies ordered from the company, i.e., catalogs, customer tickets, Collectible sets, etc. (print supply order list).
o Anything you purchase for your display, i.e. mirrors, display boards, add’l carrying cases, etc.
o Any gifts or prizes you purchase for customers and/or team members.
o Paper/cardstock you use for printing.
o Printer cartridges.
o Copying charges.
o Supplies purchased from Wal-mart, Office Depot, etc.

Parking/Tolls
o Anytime you have to pay a parking fee (i.e., for an event).
o Tolls to/from shows/deliveries.

Postage
o Postage from USPS, UPS, FedEx, etc.

Software/Computer
o A software program specifically for business use. (i.e., Quicken)
o A portion of your computer (check with your CPA for how much and for what time period).
o Jump drive or any other computer accessories purchased for business use.

Travel/Conferences
o Ticket/Registration Fee, hotel cost, airline ticket, shuttle/taxi/train cost & related expenses for monthly meetings, Fall Workshop, Success Camp, June conference, etc.

Utilities/Your Home Office
o Internet service (keep your monthly bills).
o Cell phone (Can take a portion of cost, again, keep your monthly bills).
o Insurance (if you get an umbrella policy for your jewelry in the house).
o You may also be able to write off a percentage of your home as a business expense if you have a dedicated home office (check w/CPA).


OTHER NOTES
o Awards from the company that come separate from the 1099 go under Miscellaneous Income on pg. 1 of the 1040 form.
o Keep your receipts for 7 years.
o Keep your tax returns for LIFE!
o If you have two businesses, you need two Schedule Cs.
o Only things that go to Schedule A are mortgage interest and real estate taxes when figuring your business use of the home.

Unless you are well-versed in home-based business taxes and what can/cannot be used as an expense/income, I recommend letting a CPA handle it at least the first year. My CPA charges less than $200 to do our taxes and for the peace of mind that comes with it, it’s worth every penny.

o The best thing you can do for your CPA is provide him/her neat, organized and COMPLETE records! That will also cost you less money. I make a really simple workbook in Excel that has a spreadsheet for each category. I then just enter each receipt with date/vendor/amount/reason and total it up. Those totals then are linked to a master spreadsheet that I print off and take to the CPA - he LOVES not having to plow through all my records.


This list is by no means all-inclusive!!
HTH
__________________
Dana
lia sophia - Jewelry for Life!
  #5 (permalink)  
Old 02-07-2012, 06:51 PM
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Join Date: Nov 2006
Location: United States
Posts: 1,189
Default

Just one last quick thought.

I like to keep my business receipts "clean" so if I go to Target or Walmart and have a cartful of purchases I will always pay for any business related supplies on a separate purchase using a separate checking account I have setup for my business. Just keeps things clean in my records.
__________________
Dana
lia sophia - Jewelry for Life!
  #6 (permalink)  
Old 02-07-2012, 08:52 PM
WAHM Regular
 
Join Date: Oct 2011
Posts: 15
Default

Thanks so much! This is EXACTLY what I was looking for. Clearly, I'll consult a tax professional and confirm... but I just wanted a place to start. Didn't know that form was called a Schedule C. Most of what I've read on the IRS website is in legal jargon. But this post at least gives me a little bit of something to go on when I finally do find time to consult a professional. See, this is why I love this forum!
  #7 (permalink)  
Old 02-08-2012, 07:19 AM
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Join Date: Oct 2005
Location: United States
Posts: 1,138
Default

One thing I do know to be true is that you must show a profit in 3 of 5 years or you risk being classified as a hobby.
__________________
Harriett Brawner, Independent Advisor/Star Unit Coach
lia sophia jewelry
 
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