Tag Archives: direct sales writeoffs

Tax Write-offs – Miscellaneous

Not only can we write off advertising and our vehicle in direct sales, there are a multitude of other items that can be written off.  Of course, the rules vary by where you live and the local rules, so make sure you are checking the relevant websites or your tax accountant to find out what you can write off.

Supplies – Chances are you already know that you can write off any supplies you purchase for your business.  This means catalogues, order forms and even product that you purchase for demonstration purposes.  If you do end up selling the demo products though, you have to report this as revenue.

Meals – If you meet a potential recruit for coffee or a meal, you can write this off.  Make sure you get a receipt and mark on it what the occasion was so you do not forget later.  In Canada, you cannot write off 100% of this expense, but every little bit helps.  If you are at a vendor event and purchase a meal, you may not be able to write this off, but again, it is best to ask.  Typically you can only write off a meal if you are away from your home area for a certain amount of time.

Samples – If you have purchased samples that you give away to customers, these are a write off.  These are items that you can typically only purchase through a supply order and that you cannot sell for cash.  You may put them in customer bags, give them away as prizes at events, or hand them out at trade shows.

Home Expenses – This is a category that can be complicated and difficult to determine if it is a valid expense and write off.  Typically, to get to write off a portion of your home, it has to be allocated specially to business use only.  For many people, this can be difficult as they do not have a lot of room that is not already in use somehow.  Your bills, such as your phone and Internet, are also tricky as you have to be able to prove what portion is used for your business.  For instance, you would need to prove that you use your Internet 25% of the time for business.  If you have a dedicated phone line, that is easy to prove, but it may be difficult to write off your regular home phone line.

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Tax Information – Vehicle Write offs

One of the biggest concerns that those in direct sales have is what all can they write off at tax time. The simple answer is lots of stuff!  But I know that is not the most helpful answer.  This article is going to focus on your vehicle and what you can write off and how to keep track of it.    Please keep in mind that I am not a tax accountant and I live in Canada, so the rules where you are may be different.  Talk to your favourite tax person to check the specific rules.

Mileage– The best thing you can do is keep track of the mileage that you use your vehicle for.  I like to keep a notebook in my car alone with a pencil (pens freeze in winter) to keep track of this.  It is really quite simple, create the following categories and fill them in each time.

English: Volvo highest mileage car approaching...

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Date   Starting Mileage   Ending Mileage    Task

So for instance, I would write down “Christine Party” or “Parcel pickup” or whatever works for you.  If you are doing errands, and some are business related and some aren’t, then you can estimate the ending mileage either from prior trips or what you think it is.  No one is likely going to come to your house and drive the route to verify it.  If I am going out of town, I will put down something like “Christine Party – Town name” so I remember why the mileage is that much higher.

At the end of the year, I use a spreadsheet to calculate my mileage for me.  The only difference between my note book and this spreadsheet is that it has a column to calculate how far i drove.

Date    Starting Mileage   Ending Mileage   Distance Travelled   Task

Don’t forget, on January 1, write down what your mileage is as you are going to use that for starting mileage for the year and as the ending mileage for hte prior year.

Now, you may be wondering what to do with all this wonderful data.  You are then going to use it to determine how much of your car expenses you are able to write off.

With the data we collected above, we know the following:

January 1 Mileage   103,000

Dec 31 Mileage   110,500

Mileage for business   3,000

Percentage used for business   40%   (3,000/7,500)

So you can write off 40% of your vehicle expenses for the year.

Another option that you may have through your taxes is to claim a flat fee per kilometre/mile that you drove.  Depending on how much you put into your vehicle in the year that may be the better way to go.

Vehicle Expenses

Basically, anything that you have put into your vehicle during the year is going to qualify for a write off, with a few possible exceptions.

You can write off

  • Gas
  • Repairs
  • Insurance

But, as in the example above, you can only write off 40% of these.

Hopefully this has helped to clear up some information about using your car as part of your direct sales business.  If you have a question related to this, please post it in the comments and I will reply.

 

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Tax Information – Advertising Write Offs

One big tax issue is what all you can write off for your business.  And a bit one of these is what counts as advertising.  I’m going to go over some ideas in this article about what you can and cannot use for your direct sales business.  Please remember that i am not a tax accountant and that I am located in Canada.  Please talk to your tax accountant for the most accurate advice.

The general rule of thumb when it comes to advertising is that you have to be able to attribute it to the business.  If you cannot say that it is for the business, or directly related, it can be difficult to justify it.

For instance, let’s say you buy some new clothing for your business.  Typically, you cannot write it of… but… if it is logo clothing with the name of your company on it, or has some saying on it like “talk to me about earning free product” or “girls night in – ask me more”, that can be written off.  That would qualify as it is directly related to your business.  If you buy clothing, non-logo’d, and only use it for your business; it can be a bit trickier and I likely wouldn’t use it as a write off.

Another type of advertising is doing trade shows/vendor events.  These are a write off which is pretty obvious.  Do your best to get a receipt so that you have something stating what you paid and that you can put in with your tax time papers.

If you put in ads anywhere that cost you money, this is advertising.  Again, this is pretty obvious but as this article is about types of advertising you can write off, I am including it.

If you give away any type of product for people to try, or for a door prize, you can also write this off as an advertising expense.  And don’t forget to make sure that your label is on it somewhere so you can get repeat business!

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