Do I Need to Claim Free Products as Income?

[pcjulie]

I got my 1099 in the mail today and have a question about the other income (products I earned for free.) If I am using them solely (or mostly) for demonstration purposes and door prizes/give-aways, do I need to claim them as extra income?

Julie Myers
Denver, PA

 

[dianevill]

YesYou do need to claim them, but then you can turn around and write them off as business expenses .

Diane

 

[krzymomof4]

How does that work if you don't have a receipt for tax purposes?

 

[janel kelly]

I got mine today. I didn't realize PC didn't take out taxes. That is a pain. Now we may end up paying instead of getting money back.

 

[fruit76loop]

You do!

How does that work if you don't have a receipt for tax purposes?

You use your 1099! It lists everything out that you have earned. I just got mine in the mail today and it lists things like spring products, fall products, midseason products and gives the total value. So I will take these as a deduction! Also, for any of you who earn a trip...did you know you could write off your part of the trip? The reason why is it is considered networking wtih other consultants!! So I will be able to write off my part of the Disneyworld trip...about $400 or so! And yes, it is amazing how you network with everyone! I was networking at 2 am in the pool with other PC consultants while my husband rolled his eyes (but he knows that networking is part of the trip!) and the babysitter was in the room with our kids!

 

[pampered1224]

Legally you may NOT write off those itemsI would NOT do that if I were you!
These are not items purchased for your business whether you use them for your business or not. IF IT WAS NOT PURCHASED, IT IS NOT AN EXPENSE!!!!! This was a definate from my tax guy. Which have been three different people over the last 6 years. If you do write them off, then do not cry over it if you get audited. To keep it simple, if you do not have a receipt, do not write it off. The IRS will NOT accept "I do not know where the receipt is but I know I bought it." as an excuse.
I only know this because I know 4, yes four, consultants that have been audited and ended up having to re-do and pay out more the IRS when reciepts were not produced.
As for PC taking out taxes: Someone should have mentioned this too you from the get go. And you too should have noticed that no taxes were being taken out when you got a commission statement. Then you could have asked about it and not been surprised. Sorry to be blunt but that is something you should always note no matter who is paying you. This is your financial well being you are talking about, it is something you should have noticed and asked about.

 

[fruit76loop]

What??Even though you don't purchase them, they are part of your income...so you are paying taxes on this...so why would you not be able to write them off? This is the first I have heard of this. Anyone else?

 

[dianevill]

Disagree with JohnI just got off the phone with my friend, a CPA who does tax preparation, and yes, you can write off items you receive as a gift as long as you use them for your business. My own tax preparer said the same thing last year.


Diane

 

[fruit76loop]

Glad I am not crazy...

I just got off the phone with my friend, a CPA who does tax preparation, and yes, you can write off items you receive as a gift as long as you use them for your business. My own tax preparer said the same thing last year.


Diane

Diane,

Thanks, I thought I needed a trip to the looney bin there for a minute. Because I addressed the issue with my CPA last year and she told me it was not only legal, but it was stupid not to write these off- they are business expenses and you have proof of that on your 1099!

Anyone else have any thoughts?

 

[heat123]

clarifying..ok so I received my 1099 do I take all of my start up cost receipts with me to my tax guy with my 1099 form and he will figure out if I owe anything? This is my first 1099 so I just want to make sure!

 

[krzymomof4]

I am very new to this. This is the first job I have had in 6 years, and the very first one that was "not a 9-5" job. Anyway, being as how I am easily confused when it comes to legal and tax issues, do they not report what they take out in "insurance". Just curious. Also, on the list of things we received as other income...do you just pick and choose what you claim for business purposes? Some of these things I know I can't claim like the bracelet and charms, but what about the things I am going to use for business, but haven't yet for drawing prizes at fairs and things?

 

[luvs2sellit]

I would think all of the items we earn can be a tax write off. The bracelet is used as advertising.

 

[jenniferlynne]

What about new products?Can we write off the products that we buy as and advertising expense? I feel a little guilty because I usually buy it because I want it and will use it, but I also use it at my shows. Does all that stuff count as an expense? I hope so because I think I have darn near purchased the whole catalog in the last year.

 

[Shawnna]

You can use any of the products you purchased as a deduction. Of course you wouldn't take off things you bought and gave as gifts to family or friends, but if you legitimately used them in/for your business it is a deduction. Any time you try a new PC recipe you can also deduct the food costs. Clothing, bags, etc that say The Pampered Chef are also deductions. Mileage to the grocery store to pick up recipe items are also deductable, as well as phone calls - and part of your computer. I personally do not use many deductions because my business is more of a hobby, but I do do enough business to get a 1099, so I have to fill out a tax form. You want to show a profit each year, even if it is a small one. To be a business you must be trying to make a profit or it is not a legitimate business. And yes, if we are earning items that show up as income on the 1099 then they are also business expenses...but only at our discounted price...I am not sure if my 1099 shows retail value, wholesale value, or my discounted price...I'll have to check that out.

 

[pampered1224]

Well then I have a bone to pick with HR BlockTwo of the HR guys showed me the verbage in the IRS codes that said no, this was not acceptable. So who is correct? Maybe I should call the IRS directly. If so, I lost out on a lot of deductions. It figures. Of course, I could also assume that the IRS has contradicted itself in their own rules. That would not surprise me in the least. Thanks. Now I have a little detective work to do. If I can save myself some money, it is worth it!

 

[fruit76loop]

I am very new to this. This is the first job I have had in 6 years, and the very first one that was "not a 9-5" job. Anyway, being as how I am easily confused when it comes to legal and tax issues, do they not report what they take out in "insurance". Just curious. Also, on the list of things we received as other income...do you just pick and choose what you claim for business purposes? Some of these things I know I can't claim like the bracelet and charms, but what about the things I am going to use for business, but haven't yet for drawing prizes at fairs and things?

You can claim the "insurance" deduction on your taxes as insurance! It is $24 a year.

The bracelet and watch are advertising! And you can write the products off that you give for drawings in one of two ways. If you are just giving something away for no return then it is considered a gift ad can only be written off at $25 per person per year. But if you offer it as an incentive, such as book a show get entered for a free "whatever", then this is an incentive and there is no tax limit on this.

 

[sandi4tpc]

Confirmed with my tax guy...

You can claim the "insurance" deduction on your taxes as insurance! It is $24 a year.

The bracelet and watch are advertising! And you can write the products off that you give for drawings in one of two ways. If you are just giving something away for no return then it is considered a gift ad can only be written off at $25 per person per year. But if you offer it as an incentive, such as book a show get entered for a free "whatever", then this is an incentive and there is no tax limit on this.

I pointed out all of the "Other Income" and asked about claiming it and he said that you can claim all of it.

Just one more confirmation
Sandi

 

[D_Patel]

Pc is my only job i am a single mom of 2, i cleaned up on my taxes this year ! I had ton of right offs all the products i earned they let me claim all of that with no problems !!