Let's Talk Taxes for Your Business

okay just waiting for the um it's redirecting okay i think we might be good okay all right welcome to thursday night shift thanks for a couple of minutes late so i am so thankful that everybody's here we have everybody's lines muted this time we're trying something new because we are going to have a lot of different guest speakers this year we're super excited about it um so just it'll help keep the background noise quiet utilize the chat if you have any questions um we will try to go through those towards the end to help hopefully get them all answered um if not maybe we can submit some questions to michelle later um but really quick i'm going to just do a very fast plug because i got my things in this today the collection the all is well wax collection if you have not purchased these you guys and you can i mean don't break the bank or not feed your children if you can't get them but if you can get them you guys it's 25 consultants can buy them early i am obsessed with this collection i love every single one of these and they're going into my club so really quick i figured if if you like atlantic air you're going to love the blue one it is it's almost like you were at the beach just that salty air mixed with atlantic air it's wonderful this one reminds me of like orange dreamsicle mixed with some like hint of vanilla a very very nice scent so that's the orange one i don't know any of the names i'm just gonna buy color the green one i felt like i was at a spa or sitting in a bath like i don't know what this is clean laundry soaking in a tub with some great bath salts at the spa maybe so good very surprised by this one um this one's your fruity-ish one so it's kind of like a nice blend of clean and fruit combined together uh i really like it and then last but not least is the purple one which it's got lavender in it mixed with something else and it's a really nice blend like a great spa scent so order these little tiny little felts they're super thin on face on amazon three cubes will get you like a hundred something samples they're flat to male it doesn't cost you hardly anything but it's getting those fragrances under their noses so i just wanted that really quick plug because mine just arrived and we are not going to waste any more what time on wax talk we're going to get straight into tax talk with my favorite favorite cpa in the whole wide world she's been my personal one for years and years and years uh michelle graham who just recently got married michelle hildebrand so take it away michelle thank you so much for being here and volunteering your time to help all of us make some sense out of our taxes oh thank you so much for having me that was a really sweet introduction so um i am going to are you going to share the screen heather or should i i don't know what you're saying i think i think you're sharing already because i see zoom i see your screen oh okay good um oh wait no we're viewing sherry's screen for some reason um i'm not sure hold on just a second that's not good okay i'm gonna click share screen and let you try it again michelle okay there you are all right all right come here you go perfect we're good so um i was here last year and i am very grateful for heather inviting me back that means that i didn't completely confuse you guys um i'm a certified public accountant um i'm licensed in texas but i can file and i do file tax returns all across the country um i'm not just like you know a cpa everyone kind of thinks taxes fixing messes from previous years um but what i'm really passionate about because the place where i come from is small businesses helping small businesses grow and i think the most important part about that is you need to have an understanding of of what's going on behind the scenes you need to take ownership of your numbers so i want to give you some like little tips and tricks to at least like trudge through this tax season and wrap up 2021 so that you can get a good idea what to focus on for this coming year so the importance of tracking your business you really need to know your numbers you need to have an understanding of where you stand at all times not just from you know a tax perspective on what deductions you should be in receipts you should be keeping um but also i mean at some point when you get a full grasp on everything then you should be able to track it every month to kind of see the areas in which you're growing in you know your average number of sales per customer that's a really great key performance indicator um the amount of revenue per event that you host or the amount of money that you put into an event and like the return on it so these are all things that we can track with good accounting practices um i want to just kind of jump into your tax return because i know that that's probably what everyone has on their mind the 1099 necs that is what you get if you make over 600 in commissions so and you probably have seen these forms before it used to be 10.99 miscellaneouses but it changed um last year so what this is indicating is that is as that's the amount of money that you have to put on your return for this business that you have for this business activity the problem with that is that if you were just to plunk this number on the schedule c of your 10 40 tax return that if you don't have any expenses that are offsetting it you're getting hit with self-employment tax at 15.3 percent for whatever you can't eliminate um in addition to federal income tax which if you already have if you if you have another w-2 salary or if you have a you know your husband or your wife and your household is still working then that's bumping you up in your tax bracket so i want to maybe outline i guess what you can look at some deductions that you can take and what you can expect to see so a profit and loss statement is the same thing as an income statement what it's going to start with and this is the simple version last year i think i immediately jumped into you know the idea of the commission that you get but then also if you were to be selling product on your own um i'm going to get to that in the next slide but in this one this is the simple look of it and it's the formula is the total revenue that you earned which is going to be the amount that's reported on the 1099 nec um less just like general operating expenses that you have and i've got a great list that we can refer to a couple slides down um and include you know home office stuff and mileage and supplies postage all those things so that's going to come to your net income number and the net income number is ultimately what uncle sam is going to say that's your revenue from this and and we're going to apply some tax to it so the next version that i'm going to show you is if you have kind of gotten to the point in which you're saying all right well i'm selling for the website i'm selling you know through the catalog per se but i'm also purchasing product myself and you know i've got a showroom i've got people i host my own events or people come by and they place direct orders through me so how that makes things more complicated for you is that one the irs has started if you have a business account that's that's um getting you know money through zell and cash apps things like that they're going to start sending out 1099 ks so if you're processing credit cards if you're using stripe swear you've already seen these but that's basically showing any kind of like any money that's coming in from outside places that you're accepting as a form of payment so you have your 1099 nac from cincy showing the commission that you earned and then you're also going to have the revenue that you receive from all these other outside sources whenever people will pay you for products outside of that system so we need to add in some additional expenses because you paid for that product that you had to give them so that's where the cost of goods sold comes into play that you see in this little section so the way that you you need to kind of set this up but the problem with this is that you could say you know hey they're running a sweet deal so i'm gonna buy like 10 000 for the merchandise the problem is is that you have to go back and you have to count what you actually did sell in 2021 versus what you still have on hand so the only way that you could write off the entire ten thousand dollars for the products that you bought was that if you in fact sold all of it in that tax year you can only expense or write off product that you bought if it's product that you sold and if you didn't sell it it sits in inventory and eventually you know presumably the next year when you do sell it then you can write it off then so that's why it gets a little bit more complicated um if you are holding on to inventory and you need to find a good way to track that and i think that there's you can use a spreadsheet to track it i know that there's there's programs and systems but i i think that you can probably do a pretty good job if you just track it in a spreadsheet so and then of course after your cost of goods sold is when you have your sg a expenses the same ones that we're going to go over and a little bit sales general and administrative expenses which are basically just like your office expenses for the business so i want to drill into real quick the cost of goods sold an inventory issue because this can get really confusing so the idea is is that you have a beginning balance of inventory each year so say you're starting fresh and new this is this year one balance i'm brand new i just walked in here so i purchased 147 worth of items but i only sold 34 35 worth of those and keep in mind too that it's the cost of the product not the value in which you sell it at so you can't write up the cost of your inventory that's a big irs and generally accepted accounting principles rule so your inventory value includes the cost of the product that you bought it for and you can also include if there's like shipping and sales tax included in there so you don't need to make your life more complicated by splitting those things out so your beginning balance of inventory plus the purchases that you made during the year less what you ended up with your ending value of inventory because a lot of times that's like the easiest thing to reference like okay why you know when the dust clears i know i've got 10 of this and 5 of this so that's going to be my inventory at least i know that amount i know what i bought because it's on my credit card statement i know what i ended up with so you're able to back into a cost of goods sold number and cost of goods sold is the amount that you can expense on your tax return it's 112 that i'm left with at the end of the year that just rolls into the next year and then we add in the purchases we subtract the sales and we come up with our ending inventory for the next year so so that is it's a lot i'm sorry but it's just important that we get this right um because i think a lot of people think that they immediately are able to take this huge expense and write off but that does that is going to open you up to some scrutiny with the irs if it shows that you bought more products than you actually sold so here are all the expenses all the office expenses that you can write off with a little bit of information on each of those so and hopefully this is like jogging some ringing some bells with you on some things that you've incurred that maybe you forgot about so bank fees this is going to include merchant services credit card fees if you're you know using any of those um credit card and credit card fees of course and be sure and kind of keep an eye on that because you'd be surprised these these merchant service processors they tend to kind of slip in some extra fees here and there um software expense if you're using anything to track all of this dues and memberships um this also would include two like some software apps that you might be using apps on your phone equipment repairs so this is going to be anything you know here and there that you're doing or small equipment that you're buying that's like maybe less than a thousand dollars and if it's a larger piece of equipment like you bought yourself a new computer then it needs to go elsewhere and we'll talk about that later telephone the general rule is is that you need to you probably are not safe and just like throwing your entire phone bill onto your tax return for this business you need to have a reasonable percentage of what you're probably using for for business with your phone gifts you're limited to 25 per client so keep that in mind when you're doing giveaways the other thing that you could be doing too so so if you bought product kind of backing up in our cost of goods sold if you bought product and you take it out of inventory because you want to give it as a sample then we're going to expense it down here and we're going to track we're going to extract that cost and then move it in this part of the return and basically kind of call it like advertising and promotions those are the samples that you're giving out um interest expense you can write off but that's only related to business debt that you have um office supplies obviously home office expense i've got like a fun little spreadsheet at the end of this that i'll show you where you can you can allocate all kinds of things so rent if you're renting um your mortgage interest interest only not principal property taxes insurance homeowners association dues your cleaning lady um your alarm system all of your utilities if you did a home repair you can allocate that your home office square footage divided by your total home square footage is the percentage that you can apply to all of those overall home expenses that you have to to basically you know kind of show the the space and and the cost of running that home office um any kind of accounting fees contract labor if you're lucky enough to have an assistant if you pay anyone for services in either cash or check or cash out for over six hundred dollars then you need to issue them at 10.99 um postage printing advertisement auto expenses which we're gonna get into that in a second because there's like some some little tips and tricks and rules with that um travel um make sure if so if you're attending a conference for example you know obviously you're able to write off your lead your lodging your meals um your airfare if you go if it's a cruise or if it's international be sure and check with your accounting person because there's some like minimum work requirements that you have to hit against they're not nearly as generous and taking those expenses um so they changed and in an attempt to revitalize the restaurant industry at the end of last year they changed it so if you ate a meal a working meal in which you're discussing work with someone at a restaurant then you can deduct 100 of that which before it was only 50 so be sure and differentiate if you're writing off meals you can't write off any entertainment still that changed in 2018 but you can write off meals that you take in a restaurant 100 and then just keep to the side any other takeout meals um or you know i guess if you're if you're going to an event or a party and you're bringing some food that would be only a 50 expense right there here is some auto expense rules for you so it gets a little it gets a little tricky and i think in some of these areas people tend to get very aggressive um i think that you all obviously should use your discretion the general rule of the irs is that if you're showing a big loss for a company or business for the last three out of five years then they're gonna start to say like well maybe this really is like a hobby and not necessarily a business and they're gonna they're gonna look at that but if you have quite a bit of income coming off of the business some people they might purchase a vehicle and apply a percentage of that vehicle to it being a business asset so in 2021 and before you could write off a hundred percent of bonus depreciation for a vehicle if it was over six thousand pounds um starting in 2022 it drops down to 80 but you know they're still arguing in congress on on what 2022 is really gonna look like from a tax perspective so so we're all kind of up in the air on whether or not bonus depreciation might still be generous so you can physically put your vehicle on the company's books and take a big expense there if you can justify it but if you can't really justify doing something like that you can at least write off the mileage that you incurred so for 2021 it was 56 cents a mile is the standard mileage rate and you do have to have some documentation um they expect you to have a mileage log and there's some apps out there like mileage iq um i think quickbooks has um a part of their app that tracks this as well that's you know you swipe one way every time every time you get in the car and knows that you're driving somewhere you say it's business or if it's personal so you do need to have documentation if you don't have the best log out there um the irs has that you'll go look for a reasonableness test obviously with the amount of business that you're doing and if you have like maybe an oil mileage from an oil change reading at the beginning of the year and then one towards the end of the year you know we can we can reasonably decide what that's going to be but it's always best to have a log and the rule is is that you kind of throw the mileage in one bucket and then in another bucket you put like repairs and maintenance new tires oil changes insurance fuel that goes in another bucket whichever is greater is the one that you use so just kind of have you know i i would say like 80 of the time i always see mileage winning um for leased vehicles the general rule is that you can it's like either or you can either take the cost of the lease or the mileage but there's also some some exceptions to that so just kind of keep all those things in mind and you know if the more complicated you get that's when it always ends up being better to try to consult with a professional to to help them you know with the judgment on which of these you should take and all of these are going to be applied to the percentage that you're using your vehicle for business home office expense this is the little template that i like to use it shows all these different you know components of your house that are allocated to the home office area right here i know that some of you might even have um display dedicated display or storage space so you can add that square footage in there as well um if there's any direct expenses that you made to that space like you know say you got some furniture or you know you painted the office you put new floors in the office then those are considered to be direct expenses that you can take 100 on your home office expense all of these are indirect expenses like just things going on in your general household that you can apply to the home office space so some things that you can't write off just for for you know some people get very excited and very aggressive um i saw someone today trying to write off like all kinds of like political campaign donations you can't do that don't do that um but also entertainment you know i before 2018 um everyone you know thought that they at least could get 50 credit for in you know sporting tickets and all kinds of things um and they did away with that so you know the way that when it comes to the cost benefit of whether or not you're going to provide that to your customers um meals that are part of the entertainment package they said that that if they're included in that like a box meet that you can't write off any of that if you have business debt and you're making monthly payments you can only write off the interest portion of that you cannot write off the principal the taxes that you owe that's kind of like that's like an owner personal expense so you know obviously you can't just kind of go around in a circle like i paid ten thousand dollars in taxes for last year i'm going to add it as an expense this year it doesn't work that way um and then payments to yourself they're not expensive unless you know you're actually issuing yourself a w-2 salary and then it's having to go elsewhere on your personal return anyways so you just kind of created a big administrative nightmare for yourself so those are those are all the things that you can and cannot write off and i want to circle back to the self-employment tax issue because i think that this is one of the biggest like surprises for people whenever they they get into a small business and they start seeing it make a lot of money um and then they do their tax return and be like it seems like 30 of my income from this business got taken away in taxes and what you're realizing is that it's the self-employment tax component when you're on the schedule c of your personal return because you're reporting a 1099 nec that you received the government treats that as a small business and they say hey just kind of like as someone who's getting a w-2 salary the business the company is paying social security social security and medicare on your behalf for that salary that they're paying you and then you're matching it and withholding from your check social security and medicare taxes will you combine the employer and employee portion and that's 15.3 it's self-employment tax and they hit you with it on whatever your net profit is for the business so it seems a little unfair because at the end of the day you might show that you made you know 25 000 and did you necessarily put 25 000 in your pocket probably not because you had to reinvest it in the business so because of all that there are things whenever you start and i know that some of you have different structures because of this but when your business starts growing you need to start evaluating whether or not you want to get a slightly more complicated structure um you know a lot of times that entails forming an llc electing escort tax status paying yourself a w-2 salary but only having to pay self-employment tax on the w-2 salary and then not having to pay it on the rest of the of the income for the business so but you know at that point you just you make yourself a lot more complicated and it can be more expensive to have to run that kind of a system i guess because you're having a process payroll and manage more things so i generally think that unless you're consistently netting 10 to 15 000 a year i don't think it's like advantageous to try to go through all that administrative hassle but it's definitely something to keep in mind if you keep looking at your return year after year and you're like where where's all this money where is where all these taxes coming from because that's that's going to be the answer and then if you do go down that path of trying to get a more complicated structure in place like the llc and um don't don't be tricked by like legal zoom and a lot of these these services that you might google because they're going to sell you like a 1400 package that of things that you don't need you know operating agreements and stuff like that so just be just be kind of cautious about that and maybe you know use some good resources do some research and and you know a lot of that stuff you might even be able to execute on your own so that's that's it i'm i'm sorry that if i gave you a tax hike i was not confused whatsoever and i am so confused by tax talk so the fact that i was like understanding what you're saying i think i'm getting better every single year um we do have a couple of questions in the chat so i'm going to start back up to the top if what about a tablet repair charge if my tablet is used for my business oh okay yes so the repair charge will put under repairs and maintenance because that's a separate line on the tax return if you bought a whole new tablet though then that is one of those assets that i say you know you probably you can write off almost all of it if not all of it under section 179 or bonus depreciation so you can effectively i mean you have to present it as an asset of the business but you can you can expense it out that year it's just i probably explained it i made it really complicated but yes you can write it off you can good okay and then um we do have a ten dollar fee our web hosting that we that gives us our website to shop um so she's asking what about web hosting expenses yeah absolutely yeah i mean all those i would put it and probably do's and subscriptions okay uh what about being taxed from venmo paypal etc receiving a 10.99 maybe i

don't understand it properly but we are already being charge tax for items people are paying us for and will we get taxed on that too is that an expense i do know cincy corporate collects the sales tax for us we don't do that as a independent consultant yeah yeah so so maybe i think these are all maybe several different issues oh okay good because i didn't understand that so the sales tax that yeah the sales tax part of that if you're just completely operating through scentsy they're going to take care of that for you that's not going to be included on your 1099 nac if you were to accept your you're selling product on your own and you have already taken the next steps to making your life more complicated because you decided i'm going to be selling a lot of this product and i'm going to be collecting sales tax and then i'm going to be remitting sales tax to the proper jurisdiction monthly quarterly whatever then the gross amount which would include the sales tax would show up in a 1099 k that you would get from like square stripe or you know venmo i i don't know if venmo is doing it just yet i know that they're threatening too and and paypal i know it's kind of hit or miss but if you were to get a 1099k for any of that it is going to include the gross amount which would include sales tax that you collected on your tax return you don't include the sales tax that you collected because it's a pass-through it's just washing in and washing back out but you're proving it back up on your return because you're able to show the sales tax and going out when you pay it so if you have the proper documentation you're good you're fine that's good um can i add my scentsy 1099 with my personal income or do i need to file for personal and business separately no no so you're putting the 10 the scentsy income you're putting it into your personal return and it's going on form schedule c so you don't need to file a separate return it's all it's all lumping in together so if you had some income on the scentsy side but you over withheld federal income taxes from like your day job or something like that then then that day job the w-2 taxes that you already withheld can offset some taxes that might increase because you're sensing income awesome um so back to device repair can be deducted from your taxes could a phone be deducted as well if it costs less than a thousand dollars so long as it is a device you use to work so the phone gets a little tricky just because that has been a hot topic with the irs um i think that you probably i mean i would i would take a percentage of not only the monthly phone charge but the actual cost of the equipment so in in my and i hope i didn't confuse people you can deduct equipment or things that are thousand dollars is just you're going to be calling it something else on your return you're going to need to include a depreciation schedule with your schedule c because you're showing it as an appreciable item and not just you know something that um like a consumable that i'm just kind of gonna kind of use up that makes sense so let's say i have a personal phone here and i go buy a second phone that's strictly for business i could do not nothing on personal but a hundred percent because i have a separate account yes okay otherwise if i'm doing like 50 50 i'm like i better write off 50 of my phone bill and my me buying the item because i don't use it all the time only for work yeah so in a court case several years ago they actually the irs said that their expectation is that a taxpayer would go through and itemize every single one of their their bills to break out business and personal which i mean that just sounds very unrealistic 100 i'm just saying just like come up with a reasonable percentage yeah the whole gas thing is a little confusing um terry's asking i keep track of my miles when i am delivering an order or meeting with the team member but i was told that was not a valid way to track your mileage i think that is i mean i don't then that should be the only um it gets more complicated and and so if you had like a normal commute during the day and i think that this would probably more so apply to someone who is like um like i remember for example that i had like a home office when i was an auditor and so i had like my normal daily commute from my house to my home office but if i drove to a client site that was further away i couldn't deduct all the miles from my home to the client i had to back out my normal commute miles so that could be where that confusion came from but definitely if it's for deliveries then then i would think that you should be able to do 100 of those miles how do you account for product that they have purchased and it's discontinued in your inventory is it still considered the same yeah so if you and okay two ways if it's discontinued and you're like well this is obsolete or if you have like damaged items right then in the year in which you determine that like hey i can't sell this this is worth nothing then you you can write off your cost and that's going to be you know like obsolete inventory adjustment that you're doing that's that's going to be expense let's write it off let's get it out of there right if it's something that's discontinued um i mean assuming that you're still the cost isn't going to say that the value to you what you paid for it isn't going to change so you don't need to write it write it down that way if you're still able to sell it now you know perhaps you might sell it for less than what you paid for it that stinks but you can still write off your cost so there at least you're getting credit for it awesome how do we pay towards our taxes she's a little confused about that yes okay so that's a really good question if you do find when you're doing your business return that you owe taxes because of your cincy production then the irs is going to want you to start making quarterly estimated tax payments and it's as simple as you can go on the irs websites irs.gov direct pay or payments is the website they actually have a really good um they revamped their um their individual like accounts so they have an id me biometric screening and all kinds if you go through the process and it's going to have a lot of tax forms on there that you're going to need access to like advanced child tax credits in the the third economic recovery stimulus so all those are on that portal but anyway so you can use that portal and what you're going to want to do is you if you if you're on an estimated tax a quarterly estimated tax paying payment schedule you're going to need to go log in in and make those payments in general the irs just expects you to pay into the system at least ninety percent of what you're going to owe when you when you do your tax return so by january 15 of 2023 i need to make sure that through my regular job withholdings through my quarterly estimated tax payments and anything else i might send in that i have met that burden or else i will get some small penalties typically it's like a hundred dollars or less so i wouldn't i wouldn't like beat yourself up over it um but it is a good like out of sight out of mind it is like a nice thing to do there's also the installment method if you you can do an installment plan so if you do do your return and you decide you're like oh my i wasn't expecting that um you can elect to pay over 72 months so and as long as your balance due is under 25 000 they automatically accept your payment plan they charge a little bit of interest until you pay the balance off but at least you know that's an option that you have at your disposal too um that was a great question um and next one is as a franchise business owner will having a scentsy income complicate things i mean it's gonna be and i don't know how the franchise is reported if it's on um i've got like a guest here oh that's all right about these things we all have that happening in our house one way or the other it's totally fine you can't write off your toddler so yeah it's probably it's just going to be one extra form on your personal return that you're going to have to do i mean the only part that it's going to make potentially more complicated is it could just add more tax that you're having to pay okay one question here is can you clarify sales tax if we pay scentsy sales tax when we purchase a product and then sell that product to a customer with the sales tax they pay us just be reimbursing us since he has already collected it and sent it to the state yeah so so that's where it does get pretty complicated so the rule is is that whoever the end user is is paying sales tax now at the point in which you purchase it from cincy to go resell it to someone else in theory you should be able to provide sensei with a resale certificate saying you know hey i'm no longer the i'm not really the amuser i'm gonna charge this person tax i'm gonna collect it and i'm gonna i'm gonna remit the tax myself so um i can but i i doubt that that's what they're allowing you to do and that seems like that would be really hard on their business model so if sales and you don't want to have you can't have double taxation so i mean i think that you're probably say i don't know what the corporate policy is honestly i think you're probably safe if you if you're paying the sales tax and then you're not charging your customer sales tax i i don't know you might want to look at your your own state law and i think that was from lynn lowe i think you're her girl anyway it says lynn so i'm like i think it's linlo which you're her tax lady so yeah yeah okay so we'll have to we'll have to dig into what that means for you and your state and like see the exposure there too so it could be you know each state is a little different in the way that you report it so it could be that you're basically recouping the tax then that you had to pay through your monthly or quarterly reporting on their website we'll look into it awesome um uh the next one so she's saying if you use your phone a hundred percent of your business and your bills are around 200 how much that may include when doing taxes but you can't like is are people getting it confused like if you're calling your mother not scentsy related it's not being used 100 of your business then right yeah yeah i mean i think just just make sure i mean at the end of the day here's the rule with all of this right now but he came out that's so great oh my goodness yay at the end of the day you're the one that's going to have to to have the documentation support all of that so you know i mean i mean like you use it personal you use it business you decide percent how much you're using for personal how much using for business yeah yeah okay yeah um and then the 1099 form again is something that cincy gives us if we make 600 or more in commissions is that correct yeah okay which you can find on your account tab when they upload it by the deadline um i have business internet is any of that deductible so in general i i put and this is the way that i do it for myself too because i work from home is i use the home office allocation and i just take a percentage of the internet um that i use you know because i i know that that's something that the irs is kind of like you know they're cracking down on and people have high speed internet because they've got five kids sitting around on devices so i would just i wouldn't i wouldn't be so bold as to take a hundred percent of that unless you're actually like renting out office space and have like dedicated space with its own utilities um another one about the paypal when people pay pal her money for orders um i have to order for inventory i don't have how can they tax us for money that's not mine okay so they're sending pain they're sending you payment and then you're turning around and ordering it yes immediately so like we were there i need to order you a warmer and laundry stuff and so you pay pay me the money and i go to cincy and order it immediately then then you should be capturing your order when you ordered it through cincy you should capture that cost and that's going to be your cost of goods sold so it basically crosses each other out like it's next together out it doesn't really sit in inventory especially and that's going to be an important part too right so if this is like a drop ship kind of scenario so it's like it never really touches down at your house it just immediately goes to my house um it never would hit inventory it's just going to go straight you know it's it's immediately going to be an expense okay is there a loophole i know a lot of people are saying can we put say send as a birthday gift or whatever to avoid the tax issue like is there a way to put code words to change it up or they don't catch it you know um that's kind of yet to be seen i i had seen it it was a everyone was losing it um on this accounting forum that i'm in and then they realized that they were only doing that for like business accounts right now they're they're trying to figure out a way you know because they're like oh my gosh you know i sent my mother a thousand dollars they're gonna track that in 10.99 it and and i think that was kind of blown out of proportion i think okay like business accounts right now okay so um but it's good to keep good records of it anyway of money coming in coming out whether no matter how you're accepting payment just keep track of it because it's still income but if you're buying the product it's an expense like it's okay it's not scary and i think it i think that i mean they're they're slow to catch on but they're catching on to the fact that everyone's just selling and then mowing people nowadays you know i mean they're gonna find a way to bring that in yeah um i have a question in regards to donations i donated my commission from one party to a friend's husband husband's medical expenses how would i incorporate that into my taxes if she gave her commission yeah so so actually so you're gonna if you gave the commission i mean that's pretty easy because you have like the actual dollar amount that you gave um if you were to be like donating product i guess for example then you can take the cost of the product not the sales price like what you could have sold the product for right so that's important you can't inflate these things um but that's actually gonna it's gonna stay on the non-business side of your personal return it's gonna go into your itemized deductions so that gets kind of tricky because you ran that through your business but it's not you might not get credit for that expense because the standard deduction is so high so if you're still taking the standard deduction then you might not be itemizing at all in in that extra donation and then the work to track the donation is all for nothing that makes sense um is there a percentage of a monthly income that you recommend us to put into a tax account that we set up yeah yeah so um a good formula to use you you got that 15.3 of self-employment tax and then you also have what your what your um like top tax bracket that you're hitting in is so that second component of that is really going to vary from person to person and then you have to add a complication of people that have to pay state income tax so i would say you know probably starting off just until you can really figure out what your expenses are in your tax bracket at least 25 maybe put that into a savings account just so you're not you're not completely broadsided at the end of the year okay and yes we can file quarterly um we can buy your website irs.gov and there's a direct pay and then there's payments okay slash direct pay or slash payments um we buy new bundles for samples we can write that off is there a dollar amount of annual income that a consultant receives that they should consider becoming to an llc i know you said what fifteen thousand dollars a year um is that like home income or the amount after write-offs what do you think so i would say the amount after write-offs okay um because and here's here's why right it's it's going to cost probably um you know it varies between state what the state charges you but like texas charges us 300 and then if i was filing for someone i charge another 300 on top of that right so you got like six hundred dollars to four in the business you're gonna have an extra like you know probably incrementally two or three hundred dollars more to do the annual you know that tax return because it's a separate tax return you're going to have to run payroll for yourself and you know some of these things you can do yourself but i mean that's going to run you probably at least 50 bucks a month so it's like you have some extra costs associated with it you just have to make sure that you're going to get that savings okay i also have a full-time job can i fill my scentsy on that tax form as well yes yeah yeah if you put your w-2 on the top of your tax return and then you just complete the schedule c for your for your scentsy business okay um someone did a fundraiser gave 100 of her commission to relay for life so it's whatever she paid the organization just keep track of that amount that you donated and it goes in donations is that correct yes that's going to go on itemized deductions special for 2020 for 2021 is you can add up to if you're married filing jointly you can add up to 600 of cash donations not not items not like goodwill donations but cash donations you can put in addition to the standard deduction as an adjustment to income on your return okay uh the next question is if you ordered from scentsy for a customer and the customer paid you back the total including tax and shipping how do you log this so you ordered okay so my concern we're going to assume that we run the risk that we know that the income that you received from that person is being reported right so i guess in this scenario it's like you know they gave you ten dollars and then they they give you ten dollars you place the order um and the ten dollars covered ten dollar shows of expenses that you incurred um for getting the product right yeah so it would be income ten dollars and then cost of goods sold which would include like shipping and freight for ten dollars so it would ultimately be a wash you're just and i think it's depending on how they're paying you back right so if you're paying if they're paying my credit card since he takes accepts all of our credit card payments we don't have to do anything it's if they're giving you cash check or paying venmo or you need to keep check of that maybe if you want to keep a log what create an excel spreadsheet maybe and keep track of how the payment's coming in if you're worried about it yeah yeah and it really depends on like the volume that you're doing and how complicated you get but i would imagine you know it could be just as simple as listing out everything you sold in one column and then listing out like the actual product that you then pulled either pulled out of your inventory or ordered for them as an expense so you're tracking the cost kind of side by side even by customer okay um what about items that you've purchased to raise more money for fundraisers or to donate or like prizes for a fundraiser if i want to give to top class can i write all those off as well yes um so on your tax return again that's all going to go under the charitable donations part of your itemized deductions perfect you're going to you can't put it in the cash donation the cash contribution section you have to put it in like the um like in-kind or um like item not the non-cash donation section so you have to put a little bit more information on this the description of it and what your cost was it and like the date and stuff like that if it's over um like 500 okay um we have a set and warmer of the month subscription that we get every month um it's eight scentsy bars the warmer flyers a tester um a lot of times we use a couple of the bars to make samples have some to give us hostess gifts some to sell so which she usually puts half of the bars out for samples so would she just claim 50 of the cost of that well so you're gonna be technically writing off 100 of the cost so it sounds like in this instance it's just whether or not you want to get granular and you want to like it sounds like that would be like a like a dues or subscription you know like reoccurring costs that you have so really at that point it's just a matter of are you showing all that and then do some subscriptions category are you splitting that out between like advertising promotions for saying you know so i think bottom line is like keep your life simple and to stick it in one place okay keep it all in and do some subscriptions okay um if i pay an accountant to find my taxes but it's combined scentsy and spouse employment is the filing fee still considered an expense that could be listed yeah i would because i mean the argument there too is that you know my life is more complicated i had to file this business and you know this is how i had to do it and it just so happened i couldn't file my business without filing my personal tool so okay um someone says i'm on ssi how does this affect me oh okay so so what your scentsy income is going to do similar to i mean any other kind of income source is that it might affect the amount of social security that you have to pay taxes on because there's different levels i mean i i think that unless you're um making quite a bit of money that you're probably not gonna impact too much your social security benefits but you you might see that the um the box indicating what portion of that was taxable that might start to go up okay so um when you have a catalog and sample packs how do you log those so we're buying the product which is an expense and if you're handing it it doesn't cost you anything if you mail it that's a postage expense so you're just tracking that as as business supplies coming in to buy right yes okay yeah no double dipping with any of that like if you already expensed it off because it was like a dues and subscriptions like sample pack that you get every month you can't like take the expense there and then say that you're charging some you know that you're taking the cost of goods sold for that same bar that was included in the pack that you already right just leave it in one if we have that yeah okay um is there a limit to charitable donations uh so that's going to be again like on an individual level so um i think it's still we're still in that provision in which they were allowing people to almost completely offset their income with terrible donations okay yeah okay um it looks like the last question we have before we wrap up um with keeping up with orders when they pay cash check debit card paypal is scentsy receipts okay to keep up with it i hope you say yes because that's how i do mine yeah absolutely yeah yeah that's one of my method is i'm old pen and paper when anybody somebody right order something i fill out an order form and i write the method of payment but i also am printing off all my monies coming in through paypal through venmo and i just give that all to michelle so he figures it out but i have the access just to run the reports and give it to her yeah that you're very organized when in doubt just just keep it all the the rule is is that after seven years you can get rid of um all this extra documentation um unless you commit fraud and then like all bets are off so then you're in deep trouble okay how can people reach out to you if they want to contact you um to find out your fees or if they question i mean whatever how how can we get your info out there for them if they want to contact you sure i think the best way is probably email um i know i'm so neglectful of my like facebook messenger i'm very i'm very bad with that um so i think the best way is my email which is michelle at michelle graham cpa.com

and i think heather i think you have that one too i think so michelle michellegram cpa vpa dot com dot com it's in the chat folks grab it before it disappears and one last one last question before someone just put it in here really quick so we can just get them before we leave hopefully not off topic but if you're separated for one year but still legally married can you file head of household since you're technically our head of household yeah so so the rule of thumb was that you had to be living separately for at least six months in order to file for head of household yeah awesome but be careful if you're in a community property state things could get really complicated with all that stuff like yeah just even if you divorce like like in november and then the way that you have to i'm so sorry been there done that yeah well michelle thank you so much you are absolutely wonderful i every time i listen to this i feel like i'm just going to do better next year i'm going to get a jump start who am i kidding i just i really want to be so organized um yeah i'm gonna make you pull out this recording yeah you're gonna maybe watch it monthly yes so we're gonna maybe start a monthly let's put our receipts together at the end of the month zoom meeting while i drink wine maybe we'll do that i don't know um but thank you so much michelle i really appreciate you taking an hour of your evening with your little ones um i appreciate you very much thank you oh you're welcome well i'm gonna pop off so i can deal with the situation yes no problem you guys have a great evening thank you so much all right guys well that is it thank you all so much for um tuning in on this thursday night shift next week we are gonna dive in to scentsy club in depth and i don't know if y'all listen to that training call yesterday that they did it was phenomenal i took four pages of notes i highly recommend you go into the training center and watch superstar director emily goodnight listen to what she says listen to the key words we're going to go over them again next week but it is so powerful that in 24 hours of listening to her video and training i already have two more people signed up with club because of listening to her training so listen to the training on the workstation grab this collection and get those samples made before it releases to our customers february 14th because it's going to be a really big seller i can feel it all right guys y'all have a great night thanks for tuning in uh oh i forgot to record this oops there's not going to be a playback except only in the monthly movement i told you i should not be in charge of this oh crap okay well thanks for joining us sorry kelly bye

2022-01-30 02:57

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