Tax Tips for New Pampered Chef Consultants

[ChefMoore]

Again, as this has been my first year as a consultant I'm trying to learn more about preparing to file my taxes.

I've read on some of the other threads that people are deducting thier cable bills (because of the food network) and cooking magazines.

Since I'm new to the whole filing my own taxes thing in general (I'm 22 and was a dependent under my parents while I was in school and then got married right after graduation.) I'm just learning about filing taxes.

How do you know what things you can deduct because of being a Pampered Chef Consultant?

Even if I wasn't keeping track of the right things to use them for filing my taxes for 2007, I would like to know what all I should keep track of so I can be prepared for 2008.

Any advice you have would be greatly appreciated. Even if it seems like it's basic, because I'm just starting out.

Thanks!

 

[chefann]

There is some tax info on Consutlant's Corner, with the other financial stuff. I think that some of it is a document from the IRS that has deduction guidelines. If it isn't, then you can go to irs.gov and get info.

My policy has always been to err on the side of caution. Someone in my cluster deducts her cable bill, but I can't prove that I watch Food Network, so I don't bother. The easy stuff is: anything on supply order form, PWS fees, CS registration, mileage to shows and meetings, office supplies, consultant insurance (the $2 HO takes out each month), conference registration, conference hotel, conference transportation, food for shows, and products you purchase to demonstrate.

 

[redsoxgirl]

I know I should talk to a tax consultant about this and look in CC (both of which I will do), but just looking for general info kind of.

Do people deduct their cars/payments?
Parts of Mortgage for office space?
Computers?
Other big stuff?

 

[ChefMoore]

This may be seem basic as well, but then do you need to have all the receipts from these things for proof in case you are audited?

 

[Jennie4PC]

I do not deduct my car payment but I do count mileage.
If I purchase something big for my business then I would count it but I havent purchased anything like a computer . I also keep all reciepts.

 

[redsoxgirl]

Oooo... I was just looking through my email. I need to save Vista Print stuff too!

 

[chefann]

Keep receipts!! I've tried to do this, but I'm too lazy (even though it would save effort in the long run). A cluster-mate gets an accordian file, but not the letter-size one, the one that looks like a thick plastic business envelope. She labels the tabs with common deduction categories: office supplies, food, postage, etc. It "lives" on her counter. Whenever she comes into the house from a shopping trip, she takes the receipts out of her purse and puts them into the appropriate slot in the organizer. Then, once a month, she enters those receipts into PP and files them in a file folder for the year.

There are complicated rules about deducting a portion of your mortgage - check with a professional on that one.

 

[cewcooks]

So speaking of taxes, I did not use Turbo Tax last year, it was a liitle frustrating, does anyone ou there use Tax Software like Turbo Tax for Home and Business???

 

[redsoxgirl]

I have one of those files Ann. I put stuff in it sporadically.
Need to make sure I keep up with it this year!

 

[chefann]

There's already a thread about that. The various software options are very easy to use, and you don't even need the "Business" version. As long as the version you use includes Schedule C, you'll be OK.

 

[jrstephens]

I have a box for all my PC reciepts. I throw them in there. I keep them laying on my desk until I enter them into P3 and then I put them in the bax. At the end of the year they go in an envelope and go in the folder with my other tax information and copies of returns.

I did so much better in 2007 than I did in 2006 with keeping up with what I wanted to deduct.

I do not deduct any utilities or house expenses b/c I do not think my "office" will qualify according to the IRS guidelines (since it is the corner of the soon to be baby's room) and I would rather be safe than sorry. I am not going to depreciate my new laptop either, I want to keep it simple and I do not think it would give me enough money back to fool with it.

I do make sure to remember to "reinvest" the things we earn, so, I can deduct the expense of them.

 

[JAE]

Unfortunately for me I don't know how to utulize P3 for my expenses. So....
I deduct groceries for recipes that I try. If I make something again because I liked it, I don't deduct it the second time. I circle the ingredients on my grocery list and put the total at the top with "PC" next to it. Then I file it in my "expense" folder. I keep all postage receipts. I try to keep track of mileage. That's a pain because I forget. I keep all receipts for Staples and Office Max. I circle whatever I bought for my business unless the whole receipt is for my business. I keep all my packing slips for supply orders, kit enhancement and sample orders. When I get around to it I write how much I paid for those things. I deduct anything possible. My husband has his own business, too, so he deducts a lot, and I don't mess with it. He bought me a printer/scanner/copier, but he deducted it. His business pays for my cell phone, etc.

 

[urbnk8]

I have a friend who is a tax preparer (and she used to be a PC consultant). I asked her a question about mileage and this is what she sent me so I thought I would share....

Uggh, mileage. Everyone has their own opinion on that matter, but I'll tell you what I know. I've learned things by the book and I don't like to bend the rules. I feel if you can go by the book you are way better off as I am not a gambling sort of gal.

The best thing you can do is one of the following:

1) Keep your receipts for everything related to auto use throughout the year (gas, oil changes, repairs, washes, etc.) Keep a statement of insurance paid for the year.

2) Keep a mileage log. Every time you go to a "job" that is outside of your tax home (which for you would be your house) you will write in it the date, where you are going, the starting odometer reading and ending reading. You can add up the number of miles later on.

In either case you need the odometer reading from the beginning and the end of the year. You need to determine how many miles the vehicle was driven, and how many miles were for business use, personal use and commuting use. You'll need the date you first placed your vehicle in service (for business use). You need record showing when you purchased the vehicle, what you paid, make, model, etc. Whichever method you choose: deducting mileage or actual expenses, you have to depreciate the vehicle. Once you sell the vehicle, you must recapture the depreciation you previously took. Even IF you choose not to take depreciation, and you get audited, they can force you to pay back recapture, because you COULD have taken it although you didn't. It's one of the sucky things about business taxes.

Besides auto expenses, you'll need good records of your business expenses. In direct sales, it gets tricky because you need to sort things out into their proper areas as best you can. Before I did taxes, and I was selling PC, I used Turbotax and I know I messed stuff up. It walks you through a lot of things, but makes it too easy to take things that don't apply to you (like home office; I never should have taken it but didn't realize the rules were so strict). Be careful with that stuff; they are big red flags. Schedule C's (business returns) in general are red flags; especially first year ones. READ thoroughly, and understand that a $200 deduction to your income may gain you only $15 in less taxes owed/or refund due you. So decide if it's really worth it or not to take the risks. You can do this yourself Heather. You just need to be organized and thorough. A lot of people just throw caution to the wind and say "hell with it". Not me. I've been through an audit with my brother and trust me, it wasn't fun. You get through it, but it's a nightmare while it's happening.

 

[climbercanoe3]

Just noticed the last couple of posts and thought I would bump it.
I also talked to one of the other Directors in my cluster and she said you can deduct manicures. I guess it goes along with presentation. Just like you can deduct a certain amount of clothes you wear to work for presentation.
She said they haven't ok'd pedicures, yet!

 

[frozenchef]

My husband does our taxes and I'm scared to show him my receipts for all of the items I've purchased on supply orders, personal orders, etc.

 

[mommyhugz1978]

You can always enter your expenses into Pampered Partner or P3 as you go. I save all my recipits but this is just another way to keep track of everything.

 

[RebelChef]

she said you can deduct manicures

I thought about that but couldn't find any specific info on it. It makes sense considering we have to have well-groomed hands and they're on display. That just bumped up my deductions by a bit. lol

The only thing about deducting clothes is they have to be used specifically for work to be allowed. If you wear them in your everyday life, they're not deductible. Our PC logo clothes should be though, since that's advertising.

Aimee, he'll love you for it. You're getting deductions you didn't have before and depending on how much income you generated, it will probably increase your refund or offset any amount you owe. Especially in your first year because that's when you incur all the startup costs. Just make sure you show a little profit to be safe.

 

[GourmetGirl]

As far as showing profit, I heard you are allowed to be negative every 2 out of 3 years or something like that (someone please correct me as to what the year requirement is). If it's anymore than PC would be seen as a hobby, not a business. But in your first and second year, you definitely can be negative as you are getting started and figuring things out (My accountant told me that last year, as 2006 was my first year. This year I am hoping to have a loss as well - I need the money back. But I know he'll tell me to make next year a profit year. and by my 3rd year - 2nd full year - I hope to have it be a profit!).

 

[ChefMoore]

How do you keep track of expenses in P3?

 

[chefann]

There's an expense report. It has categories for many typical expenses and income types, and there's a slick report you can print for the year.

 

[PamperedTammy]

HOW TO ORGANIZE YOUR BUSINESS EXPENSES
Written by Lydia Martin, Senior Director

For those of you who haven’t used your Pampered Partner program to keep track of personal business expenses, what are you waiting for? It is so easy to do, once you have it set up. To help you get started, here is the list of categories that I use. I highly recommend that you use a professional tax advisor who is knowledgeable about home-based business deductions. If you have always done your own taxes and don’t like the idea of paying someone else, I can tell you from personal experience that it is worth it! My tax advisor helped me think of most things on this list. Also – you will have even more deductions if you can claim a “home office”. With a home office deduction you can claim a percentage of all your utilities and home improvements. Ask you tax advisor for more information. That has saved us a bundle! I will put in my own disclaimer that these categories are listed as tax-deductions according to my knowledge. You are responsible for submitting your taxes correctly, so please check with your tax advisor if you have any questions.

All you need to do to get started is enter categories in the Income and Expense report. Here are my codes and the descriptions of each as listed in the computer. My explanations are in ().

Income Categories
Code Description
Bonuses Products/Awards/Bonuses (This is anything that you earn from Pampered Chef outside of your
paycheck. For example, free products, trips, awards, etc. If you don’t know the value, just wait
until you get your statement from Pampered Chef at the end of the year. All of these bonuses are
considered income. However, most of these things can then be deducted under “Products” if you
keep them or “Gifts” if you give them away.)
Check Commission Check (This is any money that you earn.)

Expense Categories
Advertise PC Promotions (Every once in a while, I will pay to advertise in a home-school newsletter. Other consultants have placed ads in small town papers. Be sure to read the guidelines in the Consultant Business Guide on advertising before placing any ads.)
Training Cluster/Regional/National Meetings (This would be the cost of attending special functions such as the January Kick-Off Meeting ($5) or registration for National Conference.)
Food Food expenses for demo practice (Any time you practice Pampered Chef recipes, the ingredients are tax-deductible. As with everything – save your receipts and circle the items specifically used for business purposes!)
Gifts Hostess/Customer Prizes (This is any gifts that you purchase to promote your business.)
Insurance Liability (This is the $2 that is deducted each month for insurance. Rather than entering each month, I just enter $24 each year.)
Meals Business meals (Anytime you go out to eat with a potential host/consultant/guest to conduct business, the meal is tax-deductible. Also – if you go out of town to do a show, you can claim an automatic daily meal deduction. Last year it was $32 per day! We get credit for 50% of it.)
Mileage Miles (Double check the current amount per mile – it is around 32 cents. Track your mileage to each show, the post office, and the grocery store – anytime you are conducting business.)
Paperwork Paperwork/Supply Orders (For paperwork orders through Pampered Chef)
Phone Long Distance Charges (For long-distance phone calls to hosts, to home office, etc.)
Postage Stamps/Postage (Buy a roll of stamps and use it only for business. That way you can deduct the whole receipt.)
Product PC Products (Any products that you purchase to use for your show demonstrations.)
ShowExp Show Expenses (This is anything that I have to provide for a show – such as an extra ingredient, extra food, paper products or whatever I may have provided for the host.)
Supplies Office Supplies (This would be anything I purchase for use in my business such as paper, pens, computer desk, folders, briefcase, etc.)
Travel Travel Expenses (Airfare, hotel, taxi, tips, etc. for shows or PC conference.)
Cell Phone Cell Phone (Use to deduct the portion that you spend on business calls.)

Note: This list is not all-inclusive. There may be other categories that apply to you. Or you may decide to organize
your categories a little differently. Either way, if you consistently enter your income and expenses throughout the year,
then at tax time all you need to do is push “PRINT”!!! Best wishes!

*If you do not use Pampered Partner to track your expenses, then keep a notebook that lists each category and allows you to store receipts.