Pampered Chef Consultants Being Audited?

[Sheila]

Has anyone heard this?

My sister owns a tax office in Alabama & told me today that she had just received word that Pampered Chef, Tupperware and a 3rd company (I've forgotten now who she said) are being targeted by the IRS this tax season. They will be auditing our Schedule C's to determine if Pampered Chef should be a "Hobby" vs. a "Business".

 

[susanr613]

i'll check with my accountant...and i'll also check with my friend at HO. thanks for the heads-up, even it turns out to be just a rumor!

 

[lisa717]

Well if it's hobby then we shouldn't have to report to the IRS...

 

[Jewel]

We had an accountant at our cluster meeting in Nov and she said that if you show a loss for 3 years then the IRS considers it a hobby. Then you have to show a profit for 3 years to be considered a business again. I am going to do some more checking though.

 

[c00p]

So, I'm very ignorant about all of this, why would it be bad if it's a hobby vs. a business??

 

[crystalscookingnow]

I think if it's a hobby, then you can't use the deductions. I might be wrong on that, it's just a guess.

 

[Jewel]

I think that's right. I am looking for my accounting book now.

 

[Kodeysmom]

My aunt does taxes for H&R Block and she said that they were told that the IRS would be auditing 1 out of 3 returns this year. This is everybody not just direct sales or anything in particular.

 

[ChefKrisB]

Thanks for the heads up!! 1 out of 3??? That seems like alot...

 

[Kodeysmom]

She said that way to many people were claiming child tax credits and others things on dependents they do not have or do not have the right to claim on. It does make you nervous -even if you know you are doing nothing wrong.

 

[ChefKrisB]

Well, its one of those things that kind of makes you look twice. I tend to keep sloppy records of my mileage. Guess I'm going to have to knuckle down and really look at it!

 

[legacypc46]

Today is the first day of the new year, so make sure you write down the mileage on your vehicle. (Write it in your PC planner and you'll know where it is a year from now). Even if you fall off the mileage-log wagon, you can at least recreate a reasonable usage picture if you have your starting mileage for the year.

 

[lauradahl]

Today is the first day of the new year, so make sure you write down the mileage on your vehicle. (Write it in your PC planner and you'll know where it is a year from now). Even if you fall off the mileage-log wagon, you can at least recreate a reasonable usage picture if you have your starting mileage for the year.

Great tip! I was very good in the beginning of 2008 and then very sloppy the second half of the year. I have been wondering how I was gonna detail everything.

 

[priscilla]

Excel has some great mileage record sheets. I print one off and keep it in my car, fill it out for every business related travel I do. I even out the beginning and ending mileage onit. Then, I type the data into an excel spreadsheet, and it calculates the total miles for me.I am extra cautious about it, and put my starting and ending mileage as well as reason for travel.If I ever forget, MapQuest is a great way to retrieve the total bnumber of miles, then I have to spend a bit back-calculating my start and end.Robin

 

[wadesgirl]

My first year in business I didn't keep good track of my mileage. This last year I bought a mileage book and kept it in my car with a pen tucked in the current month. It was a great reminder to keep track of my mileage better.Thanks for the heads up about the first of the year mileage. I almost forgot.

 

[whiteyteresa]

Excel has some great mileage record sheets. I print one off and keep it in my car, fill it out for every business related travel I do. I even out the beginning and ending mileage onit. Then, I type the data into an excel spreadsheet, and it calculates the total miles for me.

I am extra cautious about it, and put my starting and ending mileage as well as reason for travel.

If I ever forget, MapQuest is a great way to retrieve the total bnumber of miles, then I have to spend a bit back-calculating my start and end.

Robin

Can you tell me where exactly can I find them - I just looked and couldn't them

Thanks

:chef:

 

[janetupnorth]

Here is one...

 

[priscilla]

Can you tell me where exactly can I find them - I just looked and couldn't them

Thanks

:chef:

Go to the search box in Excel, type in mileage log. Search internet if nothing turns up on your computer. I cannot attach because it is an excel file, but try the search.

Robin

 

[lmonninger]

The reason I believe that the IRS is checking is that the fact we are in a ressison and that the IRS wants their share of money. Everyone is hurting everywhere. Especially out here in Ca.

lori monninger
:chef:

 

[whiteyteresa]

I e-mailed my director right after I posted earlier because I remembered that I made her a mileage log a few years ago.

Here is what she sent me back.

I printed off 24 pages plus a front page with her name and a place for the date from start to finish and a back page - I then took it to Staples (the only office store near me) and had it combed binded. She said that it worked great for her. Just the right size to fit into your catalog bag or pocket book.

:chef:

 

[Shawnna]

so, if we are a hobby and not a business, does that mean we don't claim our commission? When you gamble you can show all your losses if you show your winnings.

 

[Shawnna]

I doubt I ever make a profit, but I don't claim all my deductions because some are so trivial. I don't claim food receipts and all of my samples because I use them personally more than for business. I would truly be considered a hobby consultant with my show schedule...I'm hanging on till my kids graduate so I can do full time...or at least get one more graduated. But I think if you claim income from something you should get to claim your expenses to get that income.

I always show a profit or break even.

 

[esavvymom]

Ok. I just happen to have J.K.Lasser's "Your Income Tax 2008" tax-law book on my desk- (my DH is very anal about making sure he understands our taxes...don't ask. )"You are presumed to be engaged in an activity for profit if you can show a profit in at least 3 of the last 5 years, including the current year. ..... The presumption does not necessarily mean that losses will automatically be allowed; the IRS may try to rebut the presumption. You would then have to prove a profit motive by showing these types of facts: You spend considerable time in the activity; you keep businesslike records; you have a written business plan showing how you plan to make a profit; you relied on expert advice; you expect the assets to appreciate in value; and losses are common in the start-up phase of your type of business."
It's probably because there are consultants who do this just part-time 'as a hobby' to get the discounts, etc. But they are still taking all of the tax deductions, but making no profit per the tax law requirements. So when you have enough people bending or breaking the rules, it brings the attention on the whole group.And yes- with the economy as it is, I'm sure more people will be finding all the deductions they can or using those they can't.

 

[mrssyvo]

My DH is a CPA, but is in manufactuiring accounting (He is a comptroller) He does my taxes every year, as well as keeps my expenses, mileage, etc. He has it all on spread sheets, and keeps track of it all the time, so I do not need to worry about finding records if audited. BUT, I am concerned about being audited, because even though I have done this for 3 years, and I do it full time, I have yet to show a profit. I do not understand that, but that is what he says. Maybe because I spend as much as I make, and say it is a write-off???? Not sure on that one- maybe he just tells me that, to curb my spending? I told him about this thread, and he did not appear concerned, so I will just let him worry about it.

 

[ltkacz]

Great Way to keep Milage is to to keep a wall calendar in your car. I have mine tucked in next to my seat and the center consol. So everytime I'm off to a show or a meetting, I write the millage down on that date - then at the end of the year I just tally it up. It always works well for me.

 

[sklay723]

I keep a small notebook in my car's door pocket. When I started my business I "trained" myself to take the notebook out as soon as I was in the car to go somewhere for PC or volunteer work, and write down my destination, the date, and the odometer reading before I left...then I would note down the reading before I got out of the car when I was back at home later. It has worked really well for me, too. At least I have one thing organized for PC expense tracking...my receipt-keeper system is a wreck.

 

[Shawnna]

I think because as a business we can legally deduct mileage, samples, extra purchases we make, ingredients...just about everything...doesn't really mean that we should deduct all those things. That is why I usually show a profit or break even. Because I don't buy everything I have to use at shows...some of my samples are for gifts to family and friends...I don't deduct all of it. I look at how many shows I have had that year and what I have given away...or is sitting in a box never opened for whatever reason...and then try to figure out how much I should deduct. You don't have to deduct everything. When I sit down with our tax lady we get it done and then sometimes I take deductions away. I want to be as honest as I can be. My DH and I have several businesses...our small farm, his catering and our restaurant, and my PC...and I do this with each one. Not everyone cares about being honest and so we get into this audit situation.

 

[ChefBeckyD]

I think because as a business we can legally deduct mileage, samples, extra purchases we make, ingredients...just about everything...doesn't really mean that we should deduct all those things. That is why I usually show a profit or break even. Because I don't buy everything I have to use at shows...some of my samples are for gifts to family and friends...I don't deduct all of it. I look at how many shows I have had that year and what I have given away...or is sitting in a box never opened for whatever reason...and then try to figure out how much I should deduct. You don't have to deduct everything. When I sit down with our tax lady we get it done and then sometimes I take deductions away. I want to be as honest as I can be. My DH and I have several businesses...our small farm, his catering and our restaurant, and my PC...and I do this with each one. Not everyone cares about being honest and so we get into this audit situation.

I agree. I use TurboTax and do our taxes, but I always make sure I show a profit, even if it's a small one. We've still never had to pay, and have always gotten a refund - probably not as big as it could have been if I'd deducted everything, but I'd rather get a smaller refund than deal with the audit!

 

[chefsteph07]

I use Turbo Tax as well and I just told my husband about this and he says that I make a profit every year. I KNOW I do not spend as much as I make...
I think it might be a small profit, or at least I break even. We file joint so it's kind of hard to tell...we just input both of ours and then look at the amount we get for refund. This year I got a laptop for Christmas and I was planning on writing that off for business...now I wonder if I should write the whole thing off like I wanted to, or depreciate it over a few years so it doesn't generate any "red flags".

My dh was audited a year after we got married and it was NOT pretty. They asked for records 3 yrs back, it was a PAIN and in the end he ended up owing the IRS something like 3k back. It was honest mistakes that he made while filing when he was single, all stemming back from claiming his son, etc. I never want us to go through that again. It really messed us up for a while financially. They will take your return until you have it paid off, but they won't wait year by year, you will have to make payment arrangements with them to pay through the year. It totally sucks.

 

[Intrepid_Chef]

OK, dumb question ....

I sold jewelry for 3 years and never turned a profit.

I sold PC for 2 months of 2007 ... plus jewelry for part of that year, and technically turned a profit between the two. Part of it was shoddy record keeping, part of it was minimal expenses on the jewelry end, part of it was a $600 payment for being a guinea pig for a medical study for which there were no real expenses.

Sooooo ... THIS YEAR I expect a big loss because I went to conference and worked the business ...

ALSO ... I've been told that thanks to my wage cut and my unemployed roomate, I am eligable for an EIC. So I really hope they won't bother with auditing me. That is why I use an accountant.

 

[pcchefjane]

You can't claim EIC unless you have a dependent child under 18 or in college until 22. I can no longer claim EIC without dependent children. Roommates don't count.... My DD & SIL can't claim me as a dependent even though they paid a lot of my expenses last year with me being out of work 7 months except for PC...

 

[Intrepid_Chef]

Hmmmm ... the paperwork I saw said "dependent" and not "child." Last year said roomate was listed as a dependent but I didn't get EIC. My friend's sister claimed her as a dependent and got EIC but I'm thinking her income was low and that's why she qualified.

 

[chefsteph07]

My friend has a roomate who is unemployed and she considers her a live in nanny and she told me she writes her off as a dependent?

 

[Intrepid_Chef]

Last year I claimed my unemployed roomate as a dependent but was not eligable for EITC. It may have been because my income was higher last year, but I don't think so. I think without a child, you have to make less than $12,500 to get anything from EIC.

ETA: Figured it out. My friend's sister claimed her as a dependent and got EITC. She didn't understand why I could not do the same since my roomate has no income. So she directed me to a site where I figured it out. Roomie fails the "relationship test."

 

[chefsteph07]

I would like to know if anyone who is reading this has been audited for their direct sales business, or knows anyone is DS who has been.

 

[ChefBeckyD]

I would like to know if anyone who is reading this has been audited for their direct sales business, or knows anyone is DS who has been.

I would like to know this also. One of the reasons I use turbotax is that I have heard and read that Turbotax users are less likely to be audited.

If I were audited, I'd be okay - I'm not claiming stuff I shouldn't or fudging numbers - but even with that, I've heard that it is a huge headache - and I'd rather not have that stress!

 

[chefsteph07]

I use Turbo Tax as well...I have been legitimate w/ my expenses, and I've even NOT claimed things I could have...I am hoping that as long as we show a profit we may stay under the radar?

My dh says I have nothing to worry about, but still, I have been thinking about it all weekend! It makes me afraid to file now...not that I am NOT going to, but I'll be sweating when I hit that button...

 

[elizabethfox]

I was talking to some people about this yesterday and they were pretty skeptical that the IRS would be auditing 1 out of 3 people this year. They don't have enough agents to handle something like that....

 

[cwinter474]

Last year I claimed my unemployed roomate as a dependent but was not eligable for EITC. It may have been because my income was higher last year, but I don't think so. I think without a child, you have to make less than $12,500 to get anything from EIC.

ETA: Figured it out. My friend's sister claimed her as a dependent and got EITC. She didn't understand why I could not do the same since my roomate has no income. So she directed me to a site where I figured it out. Roomie fails the "relationship test."

Do you have a link to the website?

 

[Sheila]

I was talking to some people about this yesterday and they were pretty skeptical that the IRS would be auditing 1 out of 3 people this year. They don't have enough agents to handle something like that....

My thought exactly. I doubt very seriously that the IRS would be able to audit 1/3 of the nations returns this year. Maybe the poster meant that 1/3 of the Schedule C's that have Pampered Chef, Tupperware or the 3rd company listed as the source of the income would be randomly audited??? That would sound more reasonable.

- - - - -

cwinter... you can look up anything at Internal Revenue Service There are stipulations (and you must be able to show proof) on how much support you provided for the person AND the person has to pass the IRS's relationship test to qualify as a dependant. You can't claim an unemployed roommate. But if your 14 year old nephew lived with you the whole year & you provided all (or the majority of) his support as outlined by the IRS ... then you would be able to claim him as a dependant.

- - - - -

For those of you not claiming all of your deductions ... make sure that you keep the receipts/documentation! If you were to be audited, you could use the old "oh, by the way, here's some more deductions that I forgot" trump card with the auditor to get back more money.

 

[Kodeysmom]

Yeah I asked her and she did say that they told them 1/3 of everyone, but I don't see that either. I think they are are just trying to scare people. Maybe it will work and people will be more honest-who knows.

 

[dianevill]

I've always wondered if we are sometimes audited without knowing it. Do agents look over a return (thus, "audit") to see if it looks legitimate? Then if there are red flags they bring the person in? The reason I ask this is about 11 years ago, before DH and I were married, he got a letter from the IRS that said errors were found in his return, and they actually sent him a check for the difference!

 

[baychef]

I do think that they all get a quick scan, but I am just guessing!

For those of you who have a hard time with receipts, this is what I have done.

I have taken about 4 of these boxes and put each month of the year on the front of each drawer. It makes it so easy to just throw all of my receipts, etc. in them.

I then take a 3 inch binder and have purchased dividers that have each month of the year on them. I take two way tape and card stock that has been 3 hole punched and put my receipts in each month. Then I record them in P3. Each receipt and invoice it checked off as it is entered in P3 so there is nothing forgotten.

Makes my life so much easier and keeps this nightmarish task under control. Now the rest of my house is not this organized!!!

I use Turbo Tax too. For me, it saves money. I can't see paying someone to input the information I give them into a computer and charge me double of what it costs to do Turbo Tax.

I still need to master the mileage thing but there is progress!

Just stay organized and honest and don't sweat it! If they are going to find something, they will and if you are being dishonest then they will find that too! I am keeping my records for 6 years. Thought I read somewhere where "business" records must be kept for that period of time.

 

[Sheila]

Diane, if you mail your return, the IRS has to pay someone to data entry it into their computer. If they find an error, they will let you know that you are getting more/less as a refund. If they find an abundance of errors, then they will flag you for an audit. Electronic returns do not go through an individual at the IRS, they automatically go into the system. Unless you are already flagged as being suspicious or unless what was reported to the IRS does not match what you claimed (ie missing W-2's), then it's my understanding that your chances of being reviewed and/or audited are much lower.

 

[candiejayne]

Last year my BF and I were both "audited" neither of us actually had to sit down with an agent, but we had things that did not come out right. (we used the same program to do ours). His problem was because of his son being claimed by his ex's mother prior to him filing, so additional paperwork had to be filed. Mine, my electronic pin was rejected and I also had additional paperwork to file. We called the IRS on both occasions, and they refered to it as an audit. Neither of us were in trouble, but our accounts were looked into.

 

[pampered.chris]

How much do you pay for Turbo Tax? I go to an accountant and pay about $75-$90 for my tax preperation. I was just wondering if Turbo Tax is cheaper?

 

[c00p]

Turbo Tax Premier is $62.99 right now at Costco!!!! It's normally $72.99, but then you get an instant $10.00 with a coupon (that you get at their customer service desk) at the checkout. This is the cheapest we've found anywhere - and believe me, we've checked everywhere!! This is the version that you'll need to do your taxes with itemized deductions and has some small business features too.

 

[pampered.chris]

Turbo Tax Premier is $62.99 right now at Costco!!!! It's normally $72.99, but then you get an instant $10.00 with a coupon (that you get at their customer service desk) at the checkout. This is the cheapest we've found anywhere - and believe me, we've checked everywhere!! This is the version that you'll need to do your taxes with itemized deductions and has some small business features too.

I have never even seen a Costco!! Ugh!!

I did read some testimonials and am thinking I will stick with my accountant. I will spend enough time getting all my deductions together and figured out, I don't need to spend hours putting them in the computer. He does it all for me in about 45 min. The first year was slow until I started using his forms for deductions...now it is super fast!!

 

[jwpamp]

My DH is a CPA, but is in manufactuiring accounting (He is a comptroller) He does my taxes every year, as well as keeps my expenses, mileage, etc. He has it all on spread sheets, and keeps track of it all the time, so I do not need to worry about finding records if audited. BUT, I am concerned about being audited, because even though I have done this for 3 years, and I do it full time, I have yet to show a profit. I do not understand that, but that is what he says. Maybe because I spend as much as I make, and say it is a write-off???? Not sure on that one- maybe he just tells me that, to curb my spending? I told him about this thread, and he did not appear concerned, so I will just let him worry about it.

I think that it depends on how much you actually sell to show a profit....I showed a loss my first year in the biz (3 years ago) and then have shown a profit ever since. I do sell $50,000 + every year, though. If my yearly sales were less, I can see how it would be difficult to show a profit.Also, the perks definately add to the income...trips are $3500-$4500 added onto your 1099 and free samples for Directors twice a year are another $1000 added on....plus the $360 from TPC AND the cost of the ring, additional $$ that you got from recruiting incentives, etc. They are ALL ADDED IN to your 1099 as income!!!!

 

[ChefAlicia]

If Pampered Chef is considered a hobby for tax purposes you are to claim the income from the activity but can only claim expenses up to the income. So if you made $700 and you had expenses of $1000 you culd only claim $700 in expenses.