Monday, December 10, 2012

Why you don't want a big tax refund.

This month we have a very special guest author for the Meeting in Your Inbox.  Shirley Callahan is a Tax Professional and has been my personal Tax Preparer for many years and has been an invaluable resource for me in managing the tax related part of my business.  I've asked Shirley to supply some general tips and information for direct sellers with regards to federal income tax, if you would like more specific information about income tax and how your business effects your personal taxes I encourage you to seek professional advice, and if you don't already have a relationship with a tax professional I highly recommend Shirley and her contact information is at the bottom of the article.   


No! You Don’t Want That Big Refund!
Well, not if you have to pay it back so today we will talk about business choices that make you money. 

Currently the tax code consists of 3.7 million words.  Compare that to the 1913 tax form which had only 4 pages including instructions.  No small business owner such as yourself should really ever attempt to do your own tax return.  Not only could you be putting yourself at risk, but you could be losing valuable tax write offs.  My favorite write offs are called phantom expenses meaning no money was spent out of pocket!  If you insist on DIY, then please have your returns reviewed by a tax pro every 3 years (because that is how many years we can fix).

Accounting is the language of business.  Unless you have a profit motive, IRS will not allow you to deduct expenses against your income.  So we hope you are in the Avon business to make money.  If that is true, we hope you are keeping good accounting records.  The average tax rate today for the self employed is 15% to 40%, and every allowable tax write off is money in the bank for you!

However you have or have not kept your accounting records in the past, a new chance and a new year is shortly around the corner.  Sometime soon before the New Year starts, take a little time to review this helpful video from IRS regarding Direct Sellers. 

In the meantime remember these few rules:

1.      All income is includible unless excluded by law and includes:
Commissions, bonuses, and percentages
Prizes, awards, and gifts
Value of goods or services received

2.      Business Expenses must:
Be commonly accepted in the business
Be kept separate from personal expenses
Meet record keeping requirements
Be helpful and appropriate
No, dining with your spouse while discussing Avon is not a business deduction.

3.      Transportation Expense must be:
Ordinary and necessary
Business trips
Does not include commuting
Documented in a mileage log

If you have any questions, please do not hesitate to contact me.  I am a Las Vegas native.  I have used Avon products since I was a child, and supported myself selling Avon for 10 years before I got married.  I answer my phone from 8 am to 8 pm every day, and I love talking tax.

Shirley Callahan, EA, The Tax Network
NATP Tax Professional of the Year
Your referrals are appreciated.
(702) 437-1500 from 8 am to 8 pm 

Chris Arnold
Avon Gold Leader
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