TAX Tuesday: Home Party Expenses

There are so many benefits of being an Independent Consultant for Paparazzi Accessories:

-we get to party everyday, while at work
-we can create our own schedule & work from home
-we always look amazing because we can shop our own accessories 24/7
-we make additional income on a weekly-basis 
-we meet new people, inspire others, and help women feel confident without breaking the bank

All of these are awesome benefits, but my favorite BENEFIT comes once a year...on TAX DAY! Because Independent Consultants are considered Independent Business Owners, we qualify for the many deductions set aside by the IRS.


Unfortunately, like everything else involving the IRS, we MUST keep honest, organized records in order to take this awesome tax break once a year!

WAIT-A-MINUTE!  If we are making money, shouldn't we have to pay taxes on our income?  Well, yes!  But, if you maintain your records accordingly, you will see that being a small business owner actually costs you money, even if you are earning it along the way.  Hopefully after today's blog, you will have a better understanding of how this all works.

There are a gazillion business expenses that you probably haven't even considered because they are such a normal part of your normal day.  Of course, we all know of the expense of purchasing our jewelry from Paparazzi, and of our income from parties we hold or events we vend for. Continue to keep these receipts--both from sales, and also from your Paparazzi orders.

HOME PARTY EXPENSES:

For just home parties, there are some expenses that you probably haven't even considered.  

Here's a list to get you thinking about business expenses in a whole new light:

Did you have to drive to the party? Record the mileage driven to and from the party.

Did you have to go to the bank for change beforehand or afterwards to deposit checks? Record the mileage driven to and from the bank, as well as any bank fees charged to you for withdrawals.

Did you drop of invitations to the hostess?  Yep, these miles count too!

Did you put together a door prize or goody bags? Not only does the expense of whatever you put in your door prizes count, but also the mileage driven to and from the store to purchase them. To count your money spent at the store, you MUST keep the store receipt.

Did you have to drive to the post office to pick up your Paparazzi order before the party? Miles, are miles, are miles.  And, if you are driving them, they totally count!

Did you provide simple refreshments like chocolate or water bottles? Again, what a great deduction you may have not considered, not only for the expense, but also for the mileage driven.  Plus, most parties in which I provide a small refreshment, I end up taking the rest home for my family to enjoy. When I host a party in my home, I provide finger sandwiches and chips, and feed it to my family as well.  Dinner-is-served, and my business has provided it!  Don't go overboard with steak and lobster for 100 people, just be conservative and you won't be red-flagged come tax time.


Now...just looking at the mileage your drove for one home party, you should have quite an accumulation of miles driven.  And, the IRS pays over $.50 per mile.  Does that mean you are going to get back $0.50 per mile?  No, not at all.  Taxes are based on your income, and adjusted according to some magical formula.  But, this does add up!

How can you track this and stay organized? 

 Try my envelope system!

I make an envelope dedicated to each Home Party.  I put in all receipts related to the party inside, as well as the receipts from the parties' sales. On the front, I document all my miles driven (to include the date the miles were driven, where I drove to & from, and the reason for the miles--documented as RT to stand for Round Trip).  Also, on the front, I include a total for the expenses, and the total for sales.  And, I tally up the number of miles driven.  I NEVER, ever, EVER add expenses that I can't verify with a receipt of some kind.


So, my envelope front will look something like this:
SARAH's PARTY on 8/14/14
Expenses: $45.12
Sales: $232.50 receipts # 1234-1257
Mileage: 91 miles total RT
8/12/14 USPS to home--12 miles RT--pick up order
8/13/14 Sarah's to home--11 miles RT--invite drop off
8/13/14 Safeway to home--14 miles RT--drop off flyer for party
8/13/13 Wells Fargo to home--10 miles RT--change
8/14/14 Walmart to home--23 miles RT--purchase door prizes
8/14/14 Sarah's to home--11 miles RT--party date
8//14/14 Wells Fargo to home--10 miles RT--deposit checks from party

WOW!  See how quickly that can ADD UP..for just ONE HOME PARTY?  See, Sarah just lives 5 miles from your home, and the little bit of running around you do for her party seems so normal to your everyday.  But...before you know it, you have driven ALMOST 100 miles for 1 party.  At 50 cents per mile, that is another $50 in expenses you probably haven't even considered.  When it comes time to report this to your tax advisor, or your tax program if you do your own taxes, you will simply provide the total number of miles driven for your business.  No real calculating needed on your part, just a little bit of adding it all together on December 31st.

Now, the big trick is to find a way to incorporate these miles into miles you already have to drive.
Finally, your "Mom's Taxi Business" can make some money.  If you are going to the USPS to pick up your order, get your mail that day too.  If you are going to Walmart for "business" supplies, might as well grocery shop too.  Get the best bang for your buck, when it comes to mileage.

GOAL FOR THIS WEEK

This week, start organizing your Party Envelopes for your last few parties.  This is a GREAT WAY to just get started.  In your organizing, if you find receipts that you aren't sure which party they belong to, just set them aside, and we will get to those later.  You will have orders from Paparazzi that don't technically belong to any particular party, or supplies for your display, and even business expenses like stationary/calendars/computer ink that belong somewhere, just not with any individual home party.  Hang on to these...we will cover ALL of this...one bite at a time.

Next week on TAX Tuesday, I will show you how to make your records for the entire month.  I will also explain how to milk it...just a little bit...while still remaining honest about your business expenses. By the time TAX day is here next April, our records will be in tip-top shape and ready for our refunds to come our way!  WOOHOO! Cha-ching!

I.HEART.PAPARAZZI

Disclaimer: I am in NO way a CPA, or certified tax advisor, or accountant. I do, however, like math. Does that count? I am an Independent Consultant, just like all of you.  I believe in being honest about our business expenses, by keeping exceptional records.  I am simply sharing my knowledge and research with all of you.  I do advise that you seek tax advice from a certified and trained individual, as any business owner should.