What Lia Sophia Recruits Need to Know About Tax Deductions

[nikkijo]

wow are some lia sophia people going to get into trouble if they ever get audited! My friend sells lia sophia and she just received this email from her recruiter on what they can deduct (found out this is all second-third hand info, so not from anyone that spoke directly with an accountant)

The initial $149.99 for the starter kit!
1/2 your internet, cell phone, land line & electricity
The $6.00 that is deducted from every party
The 30% that they take when you give Gift Certificates
Any receipts that pertain to the business
Any receipts for supplies/postage for mailing invitations
Any mileage to/from parties/monthly meeting

Now this is my first year and I have not met with my accountant yet so correct me if I am wrong. I was under the impression that you could not deduct 1/2 your electric bill. I thought you could declair one room an office and that square footage is figured out as a % of total square footag and that amount you were able to deduct.

for the land line i thought we could not deduct local calls because it's not itimized on your bill because it's one flat rate so only long distance calls and this is why most consultants use their cell phones.

What have your accountants told you??

Plus I think we can deduct part of the internet as well....i know i'm on this website enough to qualify

 

[chefann]

I've heard of people deducting things that I'm just not bold enough to try, but half of those utility bills is excessive.

When using the home office deduction, you can deduct a percentage of your power and heat, based on the square footage of your office compared to the rest of your house. But there are specific rules about doing that.

Some that I've heard of are: cable bill, if you predominantly watch Food Network or other cooking shows as training; all groceries used to prepare PC recipes because it's practice for shows (this can be tricky, so I know someone who just figures that half of her groceries are used for PC recipes, and that's what she deducts); a portion of internet bill, especially if you wouldn't otherwise have it.

That said, I'm not a tax professional, nor do I play one on TV. Please take all advice from me with not a grain, but a whole shaker of salt.

 

[ange13]

not all phone bills are local calls lumped. With ours every call is detailed out, so some people could do that, but, I use my cell and deduct just about all of it--I rarely use it for something other than business--and the things I do are all included minutes so it doesn't matter!

you're right about the sq footage of house too, not just 1/2 of the bill!!! yikes!

But there are ALOT of deductions that you can do. I'm with Ann about the cable bill, I just get a bit nervous about deducting that! How could you possibly prove or not that all you watch is food network! too risky if you ask me. I've asked about deducting hair and nail things since we need to look professional--but my acct said that is big red flag. I never planned on doing that-but I've heard some people do it!

 

[pamperedbecky]

Wow, 1/2 the electricity bill. I haven't heard of THAT one! I submit receipts to my accountant for things like a portion of the grocery bills (food related to PC recipes), a portion of my cell phone bill, a portion of my high speed internet bill, a portion of my phone bill (I have a separate business line, so that's easy to keep track of), mileage, and all the other typical stuff. I'm not sure what the percentage is he takes of the internet, phone, and cell phone bills.

Unfortunately I wasn't on the ball enough my first year to deduct $$ from the starter kit, but that one would make sense because it's completely a business expense.

Has anyone on here ever been audited? I know one tricky thing is claiming the home office (I know there was a thread on here before about it). What I've heard is you can ONLY claim it if it's entirely dedicated to your business and NOTHING else. No toys, no storage areas for other things, NOTHING. That won't work for me because our finished basement (BOY, would that have been nice to write off!) is where my office is. We had installed a whole peninsula counter thing along with my desk, upper cabinets and extra lower filing cabinets. But, right there is also the kids' play area with way too many toys and everything else. So, I didn't even consider writing off any of that.

I need to get busy organizing all my receipts! I'm bad and I save them all up til the end and I don't enter them along the way in PP. I'd save SO much time if I did that. Maybe next year. Ha! That's what I said last year.

 

[supergirljennie]

I know one tricky thing is claiming the home office (I know there was a thread on here before about it). What I've heard is you can ONLY claim it if it's entirely dedicated to your business and NOTHING else. No toys, no storage areas for other things, NOTHING. That won't work for me because our finished basement (BOY, would that have been nice to write off!) is where my office is. We had installed a whole peninsula counter thing along with my desk, upper cabinets and extra lower filing cabinets. But, right there is also the kids' play area with way too many toys and everything else. So, I didn't even consider writing off any of that.

Becky, you can claim a home office if you have any space at all entirely dedicated to your business. I have a corner of a room with a filing cabinet and desk. It counts!

 

[Jennie4PC]

I talked to an accountant and she said just as Becky stated it can not hae anything else in there but stuff for your business I hae school books on shelves so I dont count my office for taxes

 

[chefkristin]

I would only things to write off if I can prove it. Like I bought my laptop this year for PC. I will claim that and all the software to go with it. I also bought a wireless Printer and regular router that I will write off as well.Of course all my PC expenses that I can prove. I am really BAD at keeping all my receipts so it won't be as much as it could be.

 

[nikkijo]

I'm with you Kristen...I am not the best at keeping receipts and I will not write off anything if I can not prove it. I'm not sure on what the chance's of being audited is, but I do not want to take the chance. I was just amazed that she was telling her team that they could write off 1/2 of the electric bill. Up here in Wisconsin that can get expensive in the winter.

 

[SillyChef]

Tax DeductionsI actually got a print out from my upline director. She gave us a list of what we can claim on our taxes.

SUPPLIES
- Super Starter Kit (your initial start up costs)
- Super Starter Booster Kit
- New Product Samples
- Any products you purchase for yourself.
- Door Prizes
- Hostess gifts
- Envelopes, folders, pens, etc.
- Bowls, Bins or towels used for demos
- Copies
- Business Cards
- Stampers
- Catalogs, order forms, etc.

TELEPHONE
- Telephone expenses (separate line for computer, or portion of your local/long-distance charges used for your business)
- Long-distance calls to customers, home office.
- Cell phones (based on % used for business)
- Internet fees

POSTAGE
- Hostess packets, thank-yous, flyers, etc.
- Bills related to PC
- Newsletter mailing to customers, consultants, etc.
- Customer Care

TRAVEL EXPENSE
- Hotel costs
- Monthly meetings (mileage, food expenses, etc)
- Out-of-town shows (airfare, etc.)
- Meals (50% is tax deductible unless you prepay for gift cards in advance, then 100%)
- Taxi's or airport transfers (just ask for a receipt!)
- Tips for bellman, etc.

DUES AND SUBSCRIPTIONS
- Cooking magazines, recipe clubs, etc. (online or magazine)
- Business related dues (Chamber of Commerce memberships, etc)
- Meeting and Conferance registration fees

ENTERTAINMENT EXPENSE
(Entertainment and meal expenses are deducted at 50%)
- Recruiting interviews (buy a potential consultant lunch, coffee, etc)
- Planning meetings with spouse, other consultants, etc. Be sure to document your agenda. ( if you meet for lunch with another consultant to share ideas, etc.)
- Entertainment expenses. They gave the example that if your husband golfs, you can give him some catalogs to pass out at his gold game, and he can legally deduct his golf fees!

HOME OFFICE EXPENSE
- Office equipment such as; computer equipment, fax machines, calculators, scanners, etc. Percentage based on how much it is used for business.
- Internet expenses - based on percentage of how much time it is used for business.
- Computer software used for your business.
It is extremely beneficial to have your own "home office". A home office does NOT need to be a separate room. It can be a corner of a kitchen, bedroom, etc. To qualify as a home office the area must be used "regularly and exclusively" for your business. When you have a home office you can deduct the following:
- A percentage of your real estate taxes, mortgage, and utility bills. ( Based on square footage used for business use) To determine the percentage, calculate the square footage of you home and your home office. Divide the footage of your home office by that of your home. This is the percentage you can deduct. For example, if your home is 2000 square feet and your home office is 100 square feet, you can deduct 5% of your expenses.
- Mileage to and from your shows
- Mileage to another job you may have, with restrictions. In order to take this deduction you must do some type of Pampered Chef work at home before you leave for your other job. The tax law reads that you can deduct mileage " from your first job to your second job". If you are working on Pampered Chef as your first job in the morning, then you leave for your other job the mileage is deductible. This could be as simple as sending out a few emails or entering orders on your computer.
- All computer-related expenses, considering that your computer is only used for your business. This includes internet connection fees.

MILEAGE AND TOOLS
- to cluster meetings, conferences, grocery store, post office, bank, etc.
- Current rate is .445 per mile.

ADVERTISING AND VENDOR FAIRS
- Logo clothing, hats, pins, etc.
- Newspaper ads, church bulletins, or newsletter ads.
- Free gifts to vendor fairs, etc.
- Vendor Fair booth fees.
- PC LOGO apparel. ( deduct this as advertising not work clothes) (all of these are considered advertising)
- PC LOGO stickers for your CAR!

GROCERIES
- Any food you use to practice Pampered Chef recipes (According to our source, you can deduct grocery expenses more than once for a particular recipe if you are working on "perfecting" it- like feeding it to your family all the time!)
- Any food you take to shows, meetings, etc.

INTEREST AND FEES
- Tax Preparation fees (business portion on Schedule C at 100% - Personal portion on Schedule A - Itemized deductions)
- Bank fees
- Credit Card interest that relates to any business expenses.


Hope all this information helps!

 

[lisacb77]

I plan to deduct the % of my cell bill that is PC calls. I have it listed as my PC number. I also buy practice groceries on a separate receipt.

I would also think we can deduct the $2/month insurance, as it is itemized on our commission statements.

 

[supergirljennie]

Also the current mileage deduction rate is .445 cents/mile.

 

[lisacb77]

Yes and it's going up to 48.5 cents for 2007!!

 

[raebates]

I'm with you guys. The Lia Sophia consultants under this recruiter could be in some serious trouble. I have two rules of thumb when it comes to business deductions:

1. Keep receiptes and records of EVERYTHING.

2. Deal with a competent, honest tax professional.