Tax Talk and Your Home-Based Business
Before you decide you can’t afford to start your own business or you don’t have time to start your own business, YOU”LL WANT TO SEE THIS!!!
You may find that not only can you afford to start that business you've been thinking about, but you probably can't afford not to!
Learn all about home-based business taxes and how to file Paparazzi taxes!
Filing, deductions, faqs, legal entities and more!
Here's a few FAQs for Paparazzi Consultants that you will get answered during the videos:
Q: When to file?
A: When you receive the 1099 form. You receive a 1099 form when you make more than $600 commission through website sales or commission from your downline. The IRS also receives a copy of the 1099 form, so they will be expecting you to file. If you do not file, you may get charged a lot on taxes.
- Money you make during live sales or basket/home parties will not be reflected on the 1099 form you receive. Keep track of your sales.
Q: Why file?
A: Let’s say you only made $500 in sales but spent $2000 on start up costs: i.e. marketing materials, inventory, events, etc., you are now at a $1500 loss. Filing allows you to either offset other income you are making so you won’t owe as much or maybe offset a spouse’s additional income or you will get more taxes back for the loss.
Q: What are the different types of business’?
A: Sole Proprietor- Partner- S Corp-
Q: What kind of business type should I be?
A: If you are just starting out and your business is not big, go with Sole Proprietorship or Partnership (Both are subject to self-employment tax and income tax). Once your business grows and gets bigger, become a S Corp (Not subject to both self-employment tax and income tax).
Q: How to find a good CPA?
A: Ask other business owners you might know. Oftentimes, they have already been through one or more CPA’s and can give you great advice on good prospects. You can also look online in your area or through the yellow pages. Call and tell them that you are interested in possibly hiring them to be your CPA. Most CPA’s will offer a half hour free consultation. A CPA is a good investment because they will assist in getting the best return you can get. CPA’s will ask for a list of your inventory by December 31st. This inventory can be a possible deduction. Keep track in whatever system (categories, color, etc) works for you, a CPA will want a final dollar amount. That amount is based on the wholesale price. Include what you paid in taxes also.
Q: Do you have to charge tax to customers?
A: You should. Here is why: (Using easy round numbers)
Example 1: You pay $3.00 for the item. $.50 for tax. You sell for $5 but do not charge tax, profit is $1.50
Example 2: You pay $3.00 for the item. $.50 for tax. You sell for $5 and charge tax, profit is $2.00
Bigger picture (Using easy round numbers)
Let’s say you made $50,000 in the year: $45, 000 in profit, $5,000 in taxes. In this bracket, you only get 15% of that back. So, 15% of $5,00 is $750. SO, YOU LOST $4,250!!!!! CHARGE TAX!
- If you are going through your current inventory fast within a month, you do not need to keep track of it.
- If you are holding onto inventory, regardless if you have it due to slow sales or you have chosen to be prepared by having a large inventory, keep track.
- Damaged jewelry is a deduction, keep track.
- Jewelry you use to market your business by wearing can be a deduction if it is used to promote your business, keep track.
- Hostess awards most likely will not be a deduction because you did not pay for the item.
- Bank account & credit card should be dedicated to your business. It makes it so much easier for you records and CPA to have this in case you get audited. Plus, it’s an easy way to keep track of spending and buying.
- Keep for 5-7 years.
- QuickBooks is a good program to use.
- Deductr is a good program to use to track as well. Available in your Back Office.
- Keep track of your expenses, marketing and more at least monthly to not overwhelm yourself at the end of the year.
- Home office deductions: *Safe Harbor Act: $5 per square foot up to 300 ft. = $1500 deductibles
**IRS must determine if it is an actual office.
- Internet/Phone deductions: Get a second line that you can dedicate to your business. If you have no choice but to use your main line, you must prove that you are using it for customers/your business. Come up with a fair and reasonable percentage of phone/internet use.
- Mileage deduction: Rate is 54.5 cents a mile. This includes fuel, insurance, license, cost of repairs and cost of car. Have a track log. Ex. 01/02/2019, I drove to this client’s house for a party, it was this many mile. This is important because if you get audited, you must show proof. Deductr works for this.
So, what did you think about this wealth of information? Let me know in the comments. I know I'm super pumped about the upcoming tax year and the money filing taxes is going to save me and my business!