Tax Questions for Starting Pampered Chef Business

[jj16]

Okay so I've read several posts on this subject but I still have some questions.

I started with PC in Feb., 2009. I've done a pretty good job on grocery receipts but not so good on receipts from Office Depot. I've kept all my receipts I just didn't write what it was for. Does this mean I shouldn't use it as a deduction? I can say that 90% of what I go there for is for printing of some sort but do I need to be able to specify between printing for flyers and printing for invitations?

I also bought a computer this year but I'm not sure how to assign a percentage toward business?

How do I enter things in P3 for tax purposes?

I bought my airplane ticket for Nat'l conference in 2010 in 2009 would I deduct that on 2009 or 2010 taxes?

If my office isn't used exclusively for PC but I have certain shelves that are then do I take the square footage and divide that by the total sf of the house and apply that towards utilities, etc?

Sorry this is so long but I'm beginning to get worried about tax time. Thanks.

jj16

 

[robochick84]

just my .02 cents worth with an MBA background, my answers are how I (we) do our taxes in general not just PC (medical, house, office, work, etc)

........

Receipts - Save all of them. I tried being specific in P3 in the beginning, but it got to hard when I hard 3+ different things on a receipt to put descriptions in. I always try to relate it to at least one show though. Anyways, receipts - just make sure that the receipts are for PC. We have those clear thee ring binder holders that we can slip receipts into. We file them into a clear folder thing depending on what it is for house, medical, PC, etc.

Computers - You first need to determine how much of the percentage of the computer is used towards PC. For example my computer is 40% work, 40% school, 20% personal. Create a breakdown, and make it legitamate.
Then you can choose to deduct it in one year, or to deduct it's depreciation over the next several years. If you paid anything at all you will fair better by deducting depreciation over the next several years.

Home Office - I am no longer deducting home office. (DH and I file seperately). When I worked full time we had two home office's and each took the deduction (sq ft; expense). Being that I technically am the one who uses the home office, he is the reason we have the home office and will benefit MUCH more from the deduction that I will. You either have a total sq ft home office 500, 800, etc and deduct the whole office or not.

 

[Jennie4PC]

we do not claim our office. We went to a tax consltant last yr and he wouldnt even do it for us. He said we needed to use the office exclusivly for PC, which we dont.

 

[PamperedchefDaly]

The home office doesn't qualify unless it's used exclusively for PC. Keep in mind that a "home office deduction" is a giant red flag when it comes to auditing.

Your expenses for NC should be deducted in 2009 since that's when you incurred them, even though the conference isn't until 2010.

 

[Melissa78]

So how do you claim anything if you are not claiming a home office? Isn't that the business part of it? What if you do have a room dedicated to an office? My spare bedroom is nothing more than an office. This will be my first year with PC and the different tax practices.

 

[esavvymom]

So how do you claim anything if you are not claiming a home office? Isn't that the business part of it? What if you do have a room dedicated to an office? My spare bedroom is nothing more than an office. This will be my first year with PC and the different tax practices.

Home Offices- from what I read once, are a large reason they get flagged for audits (home business). I don't claim it. I claim everything else like receipts, mileage, etc, of course.

But if the IRS were to audit you- ANY part of that office used for something other than your business (like, you have personal files in your cabinet, or if it's a spare bedroom- you actually have a bed or fold-out in there)...stuff like that, then you can get dinged. We use TurboTax- and I believe the one time many years ago we tried to enter the office as a deduction, it gave us a flag-warning. We decided the deduction wasn't worth the stress of an audit.

 

[raebates]

So how do you claim anything if you are not claiming a home office? Isn't that the business part of it? What if you do have a room dedicated to an office? My spare bedroom is nothing more than an office. This will be my first year with PC and the different tax practices.

The home office deduction is definitely one the IRS has no wiggle room with. If it's not 100% business space it's not an allowable deduction. So, your spare room, while it functions mostly as an office, is not technically a dedicated home office space according to the IRS.

But, every supply you use for your business, every mile you drive for business, and the percentage that you use your internet connection, cell phone, etc., for business can all be deducted.

 

[Sheila]

You can also deduct the kit enhancements, if you are buying the products to use solely at your shows & not for personal use in your home.Some people like to accumulate 2nd sets of stuff and have a "show" kit and a home kit. In those instances you could write off the "show kit" as a business expense.

 

[Melissa78]

Just seems like you're missing a large amount if you don't claim the home office and all the parts of your utility bills/taxes/insurance etc. I'm sure if audited, you have forewarning and they don't just show up on your doorstep as the 'office police'. Other than the stack of magazines, i don't see anything in there that can't be deemed use for my business.

Since I've started I've been petrified of being the one to get audited but when I hear that people write off artificial nails as an expense, I get a little less worried because I think the nails are the most ludicrous stretch of interpretation of tax laws. And the people that make every trip from their house 'business related'.

Thanks for the input! I've got about 1 month or so to figure this one out before I do my taxes.

 

[robochick84]

My opinion, your nuts if you don't claim your home office if you have one. Like I said, I just don't because DH takes it.

I have done it every year on my taxes as an adult (and DH) and we have two CPA's sign off on our taxes each year. We have yet to set off a so called "flag".

Even if you ever do - if you have an office, as we do, in our home. Which we keep a couple of folders that have "other" information. The IRS has to give you substantial notice before they can come into your home to audit you. The two folders can easily find their way to another room in my house.

It's one of the best deductions you can take. With your home office, you can also deduct INTERNET, CELL PHONE, ETC.

 

[Sheila]

I can't claim my office. I'm in military housing & do not pay rent or electricity! LOL Oh, and we are in a 2 bedroom with an office. We didn't bother moving when baby #2 was born since we thought we only had 8-9 months left on the island. The baby shares a room with the office. It's our "server" for our wireless router. We use the laptops mostly in the living room. Very rarely do we go into Connor's room to use the desktop. And I have a 2nd printer in the kitchen so I can print anything for shows in the kitchen. (My REAL office! LOL)

 

[Melissa78]

Ashley - I agree as I have that stack of magazines on the bottom shelf , a few books (could carry all in one handful) and now that you mention it, a few "house" files with receipts/warranty info etc. Nothing 15minutes couldn't get rid of. Those tax deductions were a big reason PC intrigued me. My bigger decision this year is whether to do my taxes myself (as I have every other year) or pay someone to do them. I thought about doing both and seeing if I came close to what 'they' did. If I'm close, it's worth it to do my own. Or after I see how much work it takes, I might just say screw it and pay someone to do it anyhow.

 

[NooraK]

When I filed, the deduction was based on a percentage of square footage. We have a large space downstairs which functions as a dog room/office/storage/craft space. We only used the square footage dedicated to my PC, not the whole room.

 

[robochick84]

Ashley - I agree as I have that stack of magazines on the bottom shelf , a few books (could carry all in one handful) and now that you mention it, a few "house" files with receipts/warranty info etc. Nothing 15minutes couldn't get rid of. Those tax deductions were a big reason PC intrigued me. My bigger decision this year is whether to do my taxes myself (as I have every other year) or pay someone to do them. I thought about doing both and seeing if I came close to what 'they' did. If I'm close, it's worth it to do my own. Or after I see how much work it takes, I might just say screw it and pay someone to do it anyhow.

I never had the time (when I started doing taxes) 16-22 up until I finished my undergrad. Then I did my MBA the following year, and it is not recommended that if you are a professional within a field that you do anything for yourself, sort of like a Dr. writing his own prescription, and continued with my CPA signing off on everything.

If you put together and document properly, it will save you a lot of money with most CPA's, as they can just review your notes/documents and file the proper forms for you. I pay as little as $150 some years, depending on the forms I need, etc.

 

[wadesgirl]

Ashley - I agree as I have that stack of magazines on the bottom shelf , a few books (could carry all in one handful) and now that you mention it, a few "house" files with receipts/warranty info etc. Nothing 15minutes couldn't get rid of. Those tax deductions were a big reason PC intrigued me. My bigger decision this year is whether to do my taxes myself (as I have every other year) or pay someone to do them. I thought about doing both and seeing if I came close to what 'they' did. If I'm close, it's worth it to do my own. Or after I see how much work it takes, I might just say screw it and pay someone to do it anyhow.

For me it's totally worth paying someone else to do it! But I know there are others who have a great time using any of the tax software.

I do claim a home office but we have a room that is strictly for my PC business. I don't do anything else in there (except for right now it's storage for Christmas presents).

 

[Melissa78]

I guess when I said I had a spare bedroom as my home office I used the wrong wording. I have 4 bedrooms, I only use one (master) for me and the other 3 I call spare bedrooms as that's what they were designed for. 2 of the 3 have beds and the 4th 'room' is just used as an office. No bed, so technically then not a bedroom. Just habit of calling the 'spare bedroom that serves as my office'. Desk, dresser (filled with PC supplies only), book case & storage cubes, office chair and puter....that's it.

Ashley I know you say some years you only pay $150 but when I see that I think OMG...ONLY!?!?! I've never come close to triple digits to file taxes so that makes me want to stroke even though I knwo that A) you can claim tax prep costs and B) it saves me most of the work but that's just a chunk for me to digest.

It's prob a double red flag to claim a home office AND do your own taxes. Should I just send the invite to the IRS now? I have a few tax books in my cart on Amazon, think I need to move them from the cart to the shopping bag before tax time hits.

 

[raebates]

I understand, Melissa. There's a room in our house that will eventually be my office. Currently it's a storage room, but I still call it my office. Of course, I'll never be able to deduct the space because I'll use it for church stuff, personal stuff, Publication Design stuff, . . .

 

[robochick84]

Ashley I know you say some years you only pay $150 but when I see that I think OMG...ONLY!?!?! I've never come close to triple digits to file taxes so that makes me want to stroke even though I knwo that A) you can claim tax prep costs and B) it saves me most of the work but that's just a chunk for me to digest.

I am guessing you do your own with a software program at least? To stay up to date on all deductions, you would have to repurchase said software each year. Plus any fees you have for filling (if you don't e-file).

Yeah, $150 is a bargain for my four or so tax forms every year and the reassurance (such as this year; moved a couple of years ago and other state is trying to continually claim back taxes for those years I have lived and worked in another state) when something goes wrong - my CPA takes care of it. I wouldn't want to know what it would cost to hire a CPA if you didn't have one do your taxes and you were audited!

Plus DH, has so many forms between house, work, medical, foreign accounts, and properties - his is usually around $350 (and this is with him doing all the leg work). I know individuals who pay into the thousands every year - but they also need that kind of guidance.

Good Luck! Just remember if it's you doing it or a CPA - keep as much information as you can - receipts, etc.

 

[leslieprichett]

I usually wind up paying around $300 each year to my accountant to do our taxes, but we usually get $4000 plus back each year, so that's well worth it. He is awesome and finds all the savings for us

 

[Melissa78]

I usually wind up paying around $300 each year to my accountant to do our taxes, but we usually get $4000 plus back each year, so that's well worth it. He is awesome and finds all the savings for us

I see you have chilldren - they are a nice deduction. I keep telling my dog he needs to get a job and a SSN so he not only starts earning his keep but then I can claim him at tax time. He see's no humor in it. He's my only 'child' so I don't have that luxury and I have never gotten near $4k back except last year when I got to claim the Bush "loan" tax credit for first time home buyers. Now I get to pay back $500/yr for the next 15yrs. (we won't go there...still a bone of contention)

I'm sure if I attempt my taxes I will get fed up with the time it takes. Last year was the first year in my life that I could itemize as I bought the house. STill got screwed though b/c I bought at the end of November so I lost most of the value of the closing costs/fee's etc b/c I didn't have any interest to deduct. Even with the house and the forms that went with that, it was easy to do. I keep thking accountants would know more ways to get around things, find me more money/deductions or know how to stretch the tax law without me worrying about it. (I sound so honest don't I? You all know what I mean...) I just gotta get past the cost associated with someone else doing them (yep, I either used Tax Cut/Turbo Tax or years ago I used good ole pen/paper/my brain and did it myself). Also choosing who to have do them is the bigger decision.

So what's the difference between a CPA, someone who does it on the side or going to somewhere like H&R Block? Sounds so simplistic but are there more pro's to one than another?

 

[robochick84]

So what's the difference between a CPA, someone who does it on the side or going to somewhere like H&R Block? Sounds so simplistic but are there more pro's to one than another?

IMO... people who go to H&R Block are only looking for trouble. My parent's went once years ago the problem's that were caused led to H&R Block offering for "X" amount of years of free tax service - they never walked inside of one again.

It's basically just a place that individuals sit for a few months to be paid to enter the information into the same software program that you can have at home. They are not educated.

Usually, when you hire a CPA, they sign off on your taxes, and you continue to go to them through the years - they have your back through everything.

 

[Jen1409]

how do you determine the percentage of internet and phone bill?

 

[Beth1170]

IMO... people who go to H&R Block are only looking for trouble. My parent's went once years ago the problem's that were caused led to H&R Block offering for "X" amount of years of free tax service - they never walked inside of one again.

It's basically just a place that individuals sit for a few months to be paid to enter the information into the same software program that you can have at home. They are not educated.

Usually, when you hire a CPA, they sign off on your taxes, and you continue to go to them through the years - they have your back through everything.

I am sorry your parents had a bad experience. However, I think that you have an uneducated opinion about the employees of H&R Block. I have been having my taxes prepared by them for 10 years now and have never had a problem. The only time we had a red flag was when we used a CPA 2 years prior to going to H&R Block.
As far as calling the employees uneducated people who basically do data entry you are highly mistaken. I just went through their tax course and interview process for the upcoming season. They look for employees that are the best in the field and have several CPA's as well as enrolled agents in the their offices. They also guarantee their work and will represent you before the IRS if you are ever audited, at no additional cost.
By the way H&R Block is the leader in tax prep... above that of CPA's and any other tax services.

Also if they were so bad, why would home office have their services posted on consultants corner?? They offer a $25 discount to PC consultants. I would think that home office has done their research and would not accept solititation from a company that is not honest and complete in their services.

To answer the question about home office... IRS tax law states that any home office must be used exclusively for your business. This means only desk, filing cabinets, computer and storage for your business products. If you have other furniture such as a bed or sofa then it cannot be used as home office deduction.

 

[Beth1170]

For those of you with questions, I strongly suggest you consult a tax specialist.
If you want to be prepared with questions ahead of time or if you do your own taxes you can get info from the IRS website. You can also order Pub. 334 -Tax guide for Small Business from Internal Revenue Service at no charge and have it sent to your home.

 

[robochick84]

how do you determine the percentage of internet and phone bill?

It is based off of your usage of them. It totally depends on your household.
Our Internet is nearly 100% business, but our phones are not - since we only have a cell phone and no land line.

You need to analyze this question based off of your personal consumption.

 

[PamperedchefDaly]

To answer the question about home office... IRS tax law states that any home office must be used exclusively for your business. This means only desk, filing cabinets, computer and storage for your business products. If you have other furniture such as a bed or sofa then it cannot be used as home office deduction.

I would think a sofa is permissible. Where else would everyone sit during a cluster meeting?

 

[Melissa78]

I would think a sofa is permissible. Where else would everyone sit during a cluster meeting?

Agreed - I'm thinking of getting a small love seat for mine so that when I want to watch training DVDs on the TV in there, then i have a place to sit other than the office chair. Also when I think of offices, many have diff style chairs, chase loungers or a couch. Should one get audited, I'd prob just to be safe pull it out but I wouldn't see the issue. Just me though, I'm far from being the IRS spokeswoman.

 

[merriebaby]

I would like to ask a question here, I joined in June but have had a very hard time getting started, I just got qualified today do I need to have someone do my taxes or can I use tax software. Mostly I have mileage, I have bought some supplies, my desk is in the living room and I badly need a new computer but can't afford one right now. I just put my first ad in the paper. I don't use a cell phone.

 

[j&k'smom]

I have purchased most of my supplies, samples, and personal orders with PC$. Do I claim them as expenses since they didn't technically come out of my pocket? What have you all done?

 

[mom4angela]

Good Evening! Does PC give mail a 1099 to us? Haven't seen one yet, just curious! Just LOVE paying taxes.....NOT!

 

[esavvymom]

I have purchased most of my supplies, samples, and personal orders with PC$. Do I claim them as expenses since they didn't technically come out of my pocket? What have you all done?

I would, yes! Because those PC$ will show up on your 1099 at the end of the year and you'll pay taxes on it as income. Just as they'll also include any promotion products you've earned.


and yes, the 1099's will be mailed soon.

 

[PamperedchefDaly]

I have purchased most of my supplies, samples, and personal orders with PC$. Do I claim them as expenses since they didn't technically come out of my pocket? What have you all done?

PC dollars are considered "taxable income", and will be listed on your 1099. So will any "free" products you earn, such as sell-a-thon, etc.

So, the answer is YES. Claim it as an expense.

 

[NooraK]

Good Evening! Does PC give mail a 1099 to us? Haven't seen one yet, just curious! Just LOVE paying taxes.....NOT!

It'll be mailed Jan 31st

 

[vonfirmath]

My mother was a H&R Block employee during tax time for about 15 years. (Even an enrolled agent the last few years of that) I took the classes and my husband's done it for a few years as well.

These employee are VERY well educated. They even have to KEEP taking classes every year. But there is still something about doing it yourself that is different than all the book learning. Sitting there with real people. so yes, I believe some people will go to H&R Block and be disappointed. Just like some employees go to H&R Block and get disappointed at the caliber of customer they have.

In many ways, its a lot more likely you will hear the stories about H&R Block because there are SO many of them out there, and the sheer number of customers they service. (and they may have more first year employees than other companies? Not sure)

 

[StacieB]

Would you claim the Gift cards and PC dollars that you earn for different promotions?

 

[esavvymom]

Would you claim the Gift cards and PC dollars that you earn for different promotions?

Those would be included on your 1099. They'll be the "Other income"...check your 1099 (and check the 2nd page/back of the 1099 for itemized list).

 

[StacieB]

Yes I know they are in the spot, but when doing deductions on your taxes can you deduct those items?

 

[NooraK]

Depends on what you used them for. If you earned PC dollars and then used them for supplies, I would deduct the supplies as an expense. If you earned a gift card and used it to take your family out to dinner, I would not deduct that. But if you used the gift card to buy logo wear and products from Merrill, then I would deduct it.

 

[jenniferm]

It's prob a double red flag to claim a home office AND do your own taxes. Should I just send the invite to the IRS now? I have a few tax books in my cart on Amazon, think I need to move them from the cart to the shopping bag before tax time hits.

I have been doing PC for 4 years now and have done my taxes every year. I use H&R Block online. Last year I paid the extra and did their big plan that has a tax consultant look over your taxes before they are submitted...worth every penny and I spent less than $100 on my Fed and state returns. WE get a discount through out Pampered Perks for H&R. The first year was the hardest but now I know what to do and my filing of receipts throughout the year has gotten better...I am not an organized person. My taxes are just about done...I am just waiting on one W2 from my husbands work and I will send it in.