Tag Archives: TurboTax

How to Prevent Audits at Tax Time

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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Tax Review for Direct Sellers

It’s the New Year!  While I know you are busy working on getting sales going again and keeping those resolutions, one thing that you should be thinking about is getting your taxes ready.  I know some people like to file as soon as they possibly can in February so here is some past articles about taxes to help you either finish off your 2012 year or to get 2013 started on the right foot.   Tax

These articles cover all sorts of topics from what you can and cannot use as a business write off, how to keep track of everything through the year so you are not as overwhelmed and how to get the most bang for your buck.  Of course, please remember that I am not a tax accountant and that you are best to talk to your personal accountant to know what will work best for you and your situation.

A Quick Tax Overview – Direct Sales
Keeping Track of Papers for Tax Time
Tax Information – Advertising Write Offs
Tax Information – Vehicle Write offs
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Tax Season in Direct Sales – Everyone’s Favourite!

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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