After speaking at Seminar to numerous NSD’s Directors and reviewing many more of their websites for tax education, it has become ever so clear how woefully inadequate is the tax information being disseminated in the cosmetics business community. For that reason, let me put forth to you why you should have me prepare your and your Unit(s)’s or Area’s tax returns and educate your Units or Area.
- First and foremost, through 25 years of specializing in cosmetics business tax preparation, I have made it my business to know your business.
- In 25 years, I have personally prepared over 5,000 cosmetics business tax returns – about 400 every year, saving clients millions of dollars in taxes.
- Over 100 Director, including 15 National Sales Director, clients from over 20 states. Can your tax preparer say this?
- Does your tax preparer know what are Section 1, Section 2, (even Section 3), Dovetail, non-recovered sales tax, PCP name fees, Customer Delivery Service, In-Touch, Income Advisory Statement, Top Director Trip, hostess gifts, consultant prizes, etc.? More importantly, does he know how to treat them on the tax return? (I do.)
- Has your tax preparer read the company’s Tax Essentials booklet (see In-touch)? (I have.)
- Does your tax preparer have the memo from MK corporate explaining how to deduct the MK free car? (I do.)
- Does your tax preparer add to or subtract from the gross car prize the auto/insurance payments made by you? (The MK memo tells you, and I have successfully used it on IRS audits. It made a difference of $8,000 in tax for one National Sales Director.)
- Does your tax preparer use the easier standard mileage rate or the more time-consuming actual expense method for computing your car deduction? (I compute it both ways and then choose the biggest amount. For some Cadillac drivers, it saves them thousands of dollars. Nearly every free car driver should use the actual expense method.)
- Does your tax preparer claim the office in home deduction? (Many don’t/won’t; I always do.)
- Do you qualify for, and does your tax preparer use, the square footage method or the “room method” for computing the business use percentage for office in home? Or now, does he/she use the easier standard home office deduction method, which nearly always generates a significantly lower deduction? (I compute it both ways and apply the larger percentage.)
- Does your tax preparer deduct the business portion of your Top Director/NSD trip?
- Does your tax preparer deduct actual expenses or standard meal allowance for out of town meals? (I compute it both ways and then choose the biggest amount.)
- Does your tax preparer deduct your Director suit, as well as the red jacket, Seminar dress and accessories, beauty coat, smock, and tuxedo, plus the dry cleaning for these clothes? (I have successfully defended this deduction to the IRS.)
- Do you tell your Consultants to deduct hair and nails? (That’s a no-no. The IRS disallows it every time.)
- Do you know how to run your cosmetics business income through a corporation? (I do. It is NOT directly, because the company cannot pay your commissions to a corporation. I help you incorporate and even have a special worksheet at the “For Directors” page of our website for clients passing their cosmetics business income through an S corporation. It saved an Exec. Sr. NSD over $15,000 in its first year.)
As you can tell, and as I suspect, there are probably not a handful of tax preparers in the country who know more than I do about preparing a tax return containing a cosmetics business, and there probably is not another single tax preparer, or even firm, that prepares as many cosmetics business tax returns as I do by myself. In fact, I prepare more tax returns containing a Schedule C than many 5-10 preparer firms. In other words, I prepare approximately 10 times as many tax returns containing a Schedule C, and approximately 50-100 times as many tax returns containing a cosmetics business, as most other preparers.
To begin your cosmetics business tax education, let me first direct you to our Cosmetics Business Tax Suggestions that is one of the handouts in our Director packet. You can download it and all our printed resources from the For Directors page of our website. It discusses how to enlarge your office in home and car expense deductions. Specifically, try to use an entire room(s) exclusively for your cosmetics business so that you can use the “room method” to compute the business use percentage for your office in home deduction. Also, HAVE A PRE-DETERMINED, BUSINESS PURPOSE FOR EVERYWHERE YOU GO so that you can convert previously personal trips to business trips and thereby deduct a bigger percentage of your car’s usage for business. (For example, before I left my home office to go to speak to an NSD’s Directors at Seminar, I threw a completed tax return in the car with me. As expected, when my wife asked me to pick up dinner on the way home, I dropped off the tax return in a mail box BEFORE proceeding the 2 blocks to Wendy’s so that I could write off the 26 miles from the hotel to the mail box, not write off the .2 miles to Wendy’s, and then write off the 2 miles from Wendy’s to the office to log my business mileage. Without that piece of business mail, I would have had to forfeit writing off those 26 miles. Oh, while I was at it, I mailed some personal mail, too. But my PRE-DETERMINED, BUSINESS PURPOSE was to mail that tax return.) When compiling your tax data, be sure to provide the actual car expenses FOR THE FULL YEAR. Nearly every full-time Consultant or Director driving a company free car can claim a larger car deduction by using the actual expense method. The ratio of business to total miles will determine what percentage of those expenses you deduct. Therefore, it is IMPERATIVE that you keep a mileage log of your business mileage. (See the For Directors page of our website for a mileage log.) Regardless of whether you use the actual expense method or standard mileage rate for determining your car expense deduction, you ALWAYS get to deduct the business portion of any car loan interest.
For other expenses deductible in your cosmetics business, let me refer you to our Cosmetics Business Worksheet. It is the most comprehensive of any tax organizer I have seen, which is why I strongly urge you to use it and post it on your website for your Consultants to use. If there is an expense that is not on our worksheet, such as “Hair and Nails,” then it is probably not deductible. (Remember, I have been on scores of audits. So I know what passes IRS scrutiny and what does not, which is why only MK specific clothing is on there and not everyday skirts and blouses.) Other tips to maximize your deductions are book business appointments before taking a (otherwise personal) trip out of town. (i.e., Tell mom if she wants to see the grandkids at Christmas, she has to book 2 skincare classes or you can’t come. Once she books the classes, now you have a PRE-DETERMINED, BUSINESS PURPOSE to go see your out of town mom.) Since demos are deductible but personal use is not, use demo-ed (sp?) product for personal use. Keep separate receipts for your out of town meals, because as a sole proprietor you can use the standard meal allowance ($51 per day in 2016) as an alternative method, if it provides a bigger deduction. Be sure to pro-rate some expenses, such as cell phone, internet, and rent car, per their business use percentage. Like the free car prize, Top Directors and NSDs get to claim a pro-rated deduction for their Top Director and NSD trips based on the percentage of days in business meetings per total days of trip. Also, be sure to include the income and expenses of online orders, as well as the (rental) income and expenses for maintaining a training center. (See separate income line in “RECEIPTS” section of Cosmetic Business Worksheet, as well as separate section for expenses at the bottom of the Depreciation Worksheet.) Finally, see Depreciation Worksheet for examples of all home, equipment, and leasehold improvements, as well as other assets used in your business that you can and should depreciate. Does any other tax organizer contain this much data?
For a complete presentation of our typical tax workshop, go to the Speaking Calendar page of our website for the telephone number and access code to listen to our last recorded tax workshop conference call. Before listening you should download the Speech Outline to Units and Cosmetic Business Worksheet from the For Directors page of our website so that you can follow along during my presentation. If you like my live training, consider having me share it with your entire National Area at Fall/Winter Advance. I can either teach this same workshop, expand on the “Enrich Women’s Lives” topic, or inspire your Units to “Be Fruitful And Multiply” (see that speech outline at the For Directors page of our website), or all of the above. Or, have me conduct a tax workshop via a conference call to your entire National Area. Until then, if you wish to share our tax education with your Consultants immediately, please instruct them to go to the Speaking Calendar page of our website for the telephone number and access code to listen to our last recorded tax workshop conference call.
Finally, if you or your Consultants wish to reduce your or their taxes by becoming our clients, then you or they can download all the necessary instructions and worksheets from the Tax Worksheets page of our website. Also, if you or they want me to amend your or their past 3 year tax returns, simply submit a completed Cosmetics Business Worksheet, along with the original tax return, for each tax year being amended. Of course, if you have any questions regarding any of our services, feel free to contact us, or go to the Frequently Asked Questions page of our website. Thank you for entrusting us to help your Units and you “Pay YOURSELF, not the IRS!” I am grateful to God for allowing our paths to cross.