Taxes: Worried About Tax Season? Get a Ball Park Figure

[PCCHeather0506]

How much have you had to pay in taxes? I'm getting nervous with tax season coming up and I haven't saved anything yet for this?? Can anyone give me a ball park figure? I can imagine everyone is different...but anything would be helpful! I think I sold around $15,000 or so for the year. Any idea?

 

[jrstephens]

We ahev always gotten a refund. Last year was my first year with PC and I did not notice a reduction in it. I mean to do everything first and then add PC to see exactly what the difference was but forgot to do it and did not want to go back and re-do it. I know that doesn't answer your question though, ha! Keep up with all of your write-offs and that will make a BIG difference.

 

[chefann]

It depends on how much you spent, too. Don't forget that there are a lot of things that are deductable as business expenses:
mileage
Conference/Leadership registration
Conference/Leadership hotel and transportation
products, if used at a show
ingredients for shows and testing recipes
office supplies
PWS
catalogs and other supplies
postage
insurance (the $2 HO takes out every month)
any incentives you earn, if you then use them to build your business (so if you earned the SS Saute pan free, it will show up as $48 on your income form from HO, but if you use it at shows, you can include $48 as an expense - same with PC$)

That said-- I am not a tax professional. Consult a professional before you implement any tax advice.

 

[lterman]

I'm new at this. So just keeping track of receipts and writing mileage is good enough? I haven't really been tracking things just keeping my receipts in folders. For a rookie, I need some advice!

 

[Debala715]

I keep each show in a large manila envelope (the kind with the clasp on the back). On each envelope I print out the Host Information Form (available on CC and on the Printed material CD-R) on a full page label, which I then stick to the outside of the envelope. Inside this envelope goes all sales receipts that I've used for this show, the drawing slips, any expense receipts for just this show (groceries, postage, tolls, etc.), and copies of any letters I've sent to the host. And since I take this envelope with me to the show, I can write down on it my mileage when I leave the house and when I get home, so I have a record of what my mileage was for that show.In a separate envelope, which is marked "2007 expenses", are all general receipts I've generated for any expenses for my business (office supplies), I also keep all non-commission order print outs in here too. Plus, keep anything you've spent for conference in this envelope also. In the last envelope marked "2007 income" are copies of commission checks. Oh yes, I almost forgot, you might want to have another envelope for your bank statements.I prefer envelopes because they can be closed up and are generally cheaper than the accordion type file folders because if you use regular type file folders, the small expense receipts might fall out. At the end of the year, I box them all up and put into a bankers box. I would also make use of the Income/Expense section in PP or PP+, so all you have to do is print it off at the end of the year to do your taxes. But you need to keep your records for I believe 7 years in case you are audited by the IRS. Then you'd have backup of your write offs.Hope this helps!

 

[lkprescott]

How much have you had to pay in taxes? I'm getting nervous with tax season coming up and I haven't saved anything yet for this?? Can anyone give me a ball park figure? I can imagine everyone is different...but anything would be helpful! I think I sold around $15,000 or so for the year. Any idea?

Keep track of everything you do for PC. You can write off mileage (to and from shows)... if memory serves this year's mileage rate is .485 cents a mile which can really add up. Also, office supplies you buy for your business, software you purchase to keep track of expenses (like MS money or Quicken or for the more advanced Quickbooks or Peachtree)... you can write off expenses incurred for your shows, your biz cards, brochures.. ink to print out stuff. You don't get taxed on what your commissions are... you'll have a Schedule C filled out to go along with your 1040 and that will highlight your commission yes but also any and all business expenses that you incur throughout the year. You can even write off 50% of meals and such like if you take a potential new recruit out to lunch... just write the names of who was there on the back of the receipt.

Keep as many receipts as you can and track your expenses. The least expensive way to do this is put all receipts in a folder after writing them in a columnar pad (you can get one at the office supply store and it's a write off!)... write down every time you make a business purchase... date/payee/description and amount. At the end of the hear tally up your different types of things like add all your office supplies together... telephone bills together... they'll be itemized on your Schedule C.

It's best to track this throughout the year and monitor whether you need to make any payments into the IRS or to your state taxing agency (or local tax agency if applicable) and make quarterly payments if necessary. I've been an independent freelance bookkeeper for years now and have gotten used to monitoring this and only finding that I need to make payments to the state (or they penalize you if you don't submit a certain percentage... but that's for PA)... and the local I pay at tax time (it's 1% so usually not a big deal)... if you have a spouse that pays in through an employer you may find that he may need to adjust his withholding so you won't have to worry about it. There's a lot of shortcuts you can do throughout the year to minimize paperwork.

Your taxes will be based on your net... gross commissions less your business expenses = net taxable income. I always recommend that freelancers have a good CPA... it's worth it to pay someone to make sure all the proper forms are filed and ... the cost of the CPA is deductible in the next tax year...

The biggest mistake folks make is waiting until the end of the year to prepare for the end of the year but if you do your paperwork throughout the year it's a lot easier. This included balancing your bank account (either in the software system you use or manually) and keeping proper records. Like it's important to claim the mileage deduction to have odometer readings. In the case of an audit having actual readings holds up a lot better than some arbitrary [in the eyes of the IRS] total mileage. Keep a log in your car or make a memo of it in your cell phone and enter it into your P3 software/columnar pad/where ever you're keeping such info.. when you get back.

The IRS website has a plethora of information that you may also find useful.
Small Business and Self-Employed One-Stop Resource

 

[finley1991]

Yes... definitely get a good CPA and one that understands the direct selling business.

One area that is debateable is mileage. My CPA doesn't allow me to deduct my travel to and from shows because that is where I do my work. (People don't get mileage to commute to their offices). I can, however, deduct travel to meetings, errands I do for PC, etc. So be sure to check with your CPA.

 

[lkprescott]

Yes... definitely get a good CPA and one that understands the direct selling business.

One area that is debateable is mileage. My CPA doesn't allow me to deduct my travel to and from shows because that is where I do my work. (People don't get mileage to commute to their offices). I can, however, deduct travel to meetings, errands I do for PC, etc. So be sure to check with your CPA.

I define my home address as my business address so when I go to a show I'm going from my place of business to a client's place. It may depend on the CPA of course. I've done this though for all the years as a bookkeeper just keeping in mind where my business address was... so when I had an outside office, my mileage to and from my office from my house wasn't deductible but from my office to clients' was.... in this instance, my house IS my office. My commute is down the basement stairs. At least that's what I plan to tell the agent if I'm every audited.

 

[lkprescott]

I define my home address as my business address so when I go to a show I'm going from my place of business to a client's place. It may depend on the CPA of course. I've done this though for all the years as a bookkeeper just keeping in mind where my business address was... so when I had an outside office, my mileage to and from my office from my house wasn't deductible but from my office to clients' was.... in this instance, my house IS my office. My commute is down the basement stairs. At least that's what I plan to tell the agent if I'm every audited.

"Office in the home. If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)"

That's from: Publication 463 (2006), Travel, Entertainment, Gift, and Car Expenses

 

[finley1991]

That totally makes sense.

What my CPA told me is that since shows are the primary place we earn our income, that is where we "work." I don't earn my money when I work at home.

I just go by what he says because he's the one who's names on my return along with mine...

 

[lkprescott]

That totally makes sense.

What my CPA told me is that since shows are the primary place we earn our income, that is where we "work." I don't earn my money when I work at home.

I just go by what he says because he's the one who's names on my return along with mine...

I understand... and if you're ever audited and the IRS allows the deduction they could end up owing YOU money (it's been known to happen)... wouldn't THAT be a treat!