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Posts Tagged ‘Tax deduction’

Chances are you have been invited to various training events within your company.  Some are local, some require a bit of driving and some will require you to get on a plane to get to them.  But is it important for you to attend and how can you pay for such an event?

English: Trainings in International Academy of...

Training. (Photo credit: Wikipedia)

I think the first thing that you need to ask yourself is what are your goals with your direct sales company?  Are you doing this for some extra cash in your pocket, are you hoping to make this into a part time job or are you looking to do this to make full time cash and make a full time wage?

Extra Cash

If you are selling just to make an extra hundred or two hundred bucks a month, the trainings likely will not end up being worth a lot for you.  I would recommend attending anything local but do not spend a lot of money to attend those where you will have to drive and spend a night at a hotel.  Chances are you will spend more than what you will be inspired to make when you get home.  Phone call trainings would also be good to attend as they only cost you your time and long distance (which is tax deductible if not included with your plan).

Part Time

If you are looking to make a part time income, then I would recommend a bit more for trainings.  It may be worth weekend training if it is close enough to drive.  Again, phone trainings definitely should be attended and talk to your upline about doing training calls on a regular basis.

Full Time

For those that want to make this a full time career with their direct sales business, it is best to attend any meeting or training that is it possible to attend.  This includes attending the yearly convention that the company holds.

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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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Filing your federal tax return is probably either your favorite time of year or a tedious task that depletes your savings account. If you’re self-employed, you may have already figured out that you can deduct all sorts of things when April rolls around. Independent contractors who work in direct sales enjoy many different benefits at tax time, including deductions for business-related expenses and the ability to write off debts from self-employment. Make sure that you only deduct applicable expenses if you don’t want to find your tax return on the local auditor’s desk.

Don’t Get Greedy

Make sure you’re only claiming real deductions as you fill out your federal return. It’s okay to claim meal expenses and mileage for some professions, but review current IRS rules first. Auditors are said to have a strong interest in returns filled with deductions, so keep that in mind before you take off a few bucks for that lunch at Applebee’s.

Don’t Tell Them More Than They Need to Know

When you file a federal return, there’s no reason to mail in receipts or a copy of your self-employment earnings.  If the IRS wants this info, they’ll ask for it.  Don’t trigger an audit by offering extra documents or information.

Don’t File Too Early or Too Late

Self-employed folks should avoid filing on the first day of tax season or preparing a return long after April 15th has passed. Play it safe and file in February or March with the majority of the other taxpayers.  Avoid doing anything to call attention to your return, like requesting extension after extension or amending it at the last possible minute.

Final Thoughts

Tax time is never fun, but it’s even more stressful if your expenses are audited.  Play by the rules and keep an eye on your deductions to avoid receiving an unexpected letter from the IRS months after submitting your return.

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Did you sense the sarcasm in that title?  Personally, I do not mind doing taxes, but I have done my own ever since I started working and I also work in accounting so they are not the scariest thing to me.  But for many people, they are not comfortable with doing accounting or taxes for their direct sales business.  Hopefully this guide will give you some ideas to take the scare factor away.

Tax

Tax (Photo credit: 401K)

Revenues – You need to claim the funds that you made from your business.  This is the proceeds that you made on your sales.  For instance, if you made $100 on a sale but your cost was $75, then you need to claim that $25.  If you had a team, then you may have made commissions on them which will also need to be claimed.  Your company will issue you a tax receipt when the money they have paid to you is over $600, regardless of the mix between revenue from parties or team commissions.

Deductions – There are lots of deductions that you can take with a home based business.  Various expenses to keep your house running, costs associated with your mortgage, expenses associated with your vehicle and of course, those that are encountered in the course of your business. For many people, these deductions make the difference between owing money and paying in.  It is always best to consult your tax agency or tax accountant to find out what is and is not deductible and what you qualify for.  The deductions that I get may not be the same as the people on my direct sales team.

Expenses – Not only do you get deductions from your home and your car, you have legitimate business expenses.  Did you purchase postage to mail out catalogues?  How about paid for advertising in the form of business cards or a car decal?  Did you give away any product for raffles, hostess gifts or just to allow people to try the product?  All of these are valid expenses and ones that you need to keep track of for tax time.

 

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International Money Pile in Cash and Coins

International Money Pile in Cash and Coins (Photo credit: epSos.de)

Previously I have talked about buying supplies that don’t cost a lot of money for your business.  Things like business cards, brochures, and other items.  But chances are you need other items for your business that you may have to get elsewhere.  Here are some ideas to help you save on those items.

Table Coverings – I recently discovered this one and I can’t believe it took me so long!  If you have a thrift store where you live, check to see if they have an area with sheets and other home items.  I picked up a huge black sheet for 4 dollars and a pretty white lacy runner for 2 bucks.  I was previously using sheets but they didn’t look as nice as this one does.  A quick wash and I’m ready to go.

Risers – Chances are, if you look around your house you can find a lot of items that you can use for risers in your display.  Recently I changed how I was doing things and started to highlight our seasonal products in a different way.  I took one of the boxes that I hauled my product in, flipped it over, and covered it with another table covering I had.  This distinguished it from the rest of my table, and kept my area looking neater as I didn’t have this big random box.  If you do this, just make sure you don’t have anything you may need in that box.  You can also use other smaller boxes at various points on your table with the same effect.

Candy – Depending on what you are selling, you can use candy to help decorate your table.  Around valentines, heart shaped candies can be cute, as you move towards Christmas you can purchase chocolate balls.  This is multipurpose as you have a snack while at events, and you can invite people to your booth, take a candy, and browse.  And of course, you get the tax deduction!  If you use this method, make sure you buy wrapped candy.

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