Income Tax Deductions for an Independent Contractor with Our Brand
Use this information as a guide:
These are tax benefits business owners have always enjoyed that are not available to wage earners.
Keep good records but don’t spend your time on unnecessary bookkeeping instead of on building your business.
One business builder spent all year long making entries into a very sophisticated bookkeeping system, and then found to her disappointment that the tax people didn’t even bother to look at her books.
They are only interested in your bank statements, and your “back up” proof of your expenses. (i.e. cancelled checks, receipts, of notations, etc.)
Step #1:
Get a separate checking account and set aside a desk drawer somewhere as your “tax drawer.”
Step #2:
If you sell any product from your home (most customers will order directly from your website but there are distributors who like to keep products on hand for local customers who need items quickly or prefer to get directly from you – it is up to you how you handle this), deposit the money your get from sales into your business checking account.
Step #3:
Again, any personal sales you make from home must be deposited into your business checking account as well as all compensation checks that you get directly from Shaklee.
The deposit slip should be marked on your copy with Shaklee Sales, bonus check, personal deposit, or some notation. When you add your own personal money (money you earned outside Shaklee or borrowed for the business) it is especially important that you mark the deposit slip “personal deposit capital.” Otherwise you’ll be taxed on it!
If you have done these simple things faithfully throughout the year, you have taken care of half your records – the income side. No entries into any bookkeeping system are necessary. Income will be figured from your deposits.
Now let’s move on to the other half – the expense side.
Step #4:
When you spend money, get into the habit of asking yourself, “Is this related to the business in any way?”
Best is to write a check on your Shaklee account. If this isn’t practical get a receipt. If you can’t get a receipt, keep a small notebook for these notations, or use a Daily Planner Notebook and make notations in it. This will be acceptable if it explains the nature and amount of the expense and the date.
Then put these proofs in your “tax drawer” and save them until the end of the month. If you have a cancelled check plus a receipt, mark the receipt “paid by check #____” so that the expense is not counted twice.
Here is a list of things you should keep receipts for:
Telephone bills
Utility bills
Office supplies
Office equipment
Postage
Restaurants & entertainment
Parking
Tolls
Professional fees – Tax or Attorney
Meals while traveling
Motels
Shipping expenses
Babysitters if on Shaklee business
Room rentals/meetings
Convention tickets/registration
Household service (if business related)
Clothes if they have a sewn or printed logo
Courses/books/magazines that improve skills & knowledge
Payment for typing, printing or repairs of business equipment
Any other help you’ve had in the business, including your children
Business meals, record who was there, phrase of what was talked about, where it was, a receipt if over $25
Products, sales aids, or literature you feel you wouldn’t have had if you were not in the business
Step #5:
If you work your business seriously and do quite a bit of driving, you may designate one of your cars as your business car. You can then deduct all expenses for this car. You can either deduct $.___ per mile or you can keep track of actual expenses for the car. Often, especially for a big car, actual expenses give you a better break.
Get a little notebook to keep on your dashboard. For every trip, write down beginning mileage, date, purpose, and destination of the trip. Either keep track of the actual expenses or use the standard cents per mile deduction. You can compare at the end of the year to see which gives you the best break.
There is a new car plan that has been introduced. You can earn money toward a car payment on a new car or one that you bought within the year before you become eligible. More details are online, inside the Independent Distributor back office.
Step #6:
Do not bother to keep records of the following expenses:
losses because of bad checks broken products
samples given away (you may want
to keep track of this just to see what
you have given away)
Using our system, these expenses will automatically be accounted for because there will be no income from the sale of these but there will be an expense when you purchased them.
Step #7:
At the end of the month, go through your checkbook and break down your expenses as per checks or other receipts paid by cash.
Write these down on a columnar pad in the following headings (add any that apply to your business):
Online expenses related to business
Business Entertainment
Travel
Office Supplies
Phone
Utilities
Stamps & Other Postage
Tapes, Films, Books
Freight & Shipping
Taxes
Personal Diary Expenses
Checks & Service Charges
Advertising
Products Purchased
Sales Aids, Literature
Promotion & Meetings
Auto (if applicable)
Then add these together, subtract from the income you have deposited and you have your profit for the month.
If you have a computer, you can use a software program for business management.
Step #8:
Calculate what percentage of your utilities is used for Shaklee. Calculate what percentage of your telephone expense was for business. These are then added to your deductions, even though you probably paid for them from your personal account.
Step #9:
Gather up all the above plus last years’ tax returns, all personal (non-Shaklee) financial information, all bank statements and deposit slips.
Either use tax software that will help you complete your tax return or make an appointment with a knowledgeable tax person. Pass on the information to this person, explaining each item. Let them do your returns. It is important to have a tax person that understands our type of business and will talk with you.
If you omit income you have had – that is strongly frowned upon by the IRS!
However, if you deduct an expense that shouldn’t have been deducted, it will simply be thrown out. Some business people, for example take $200 – $300 each year as “miscellaneous expenses” that they feel they have spent, but didn’t bother to get receipts for. If IRS doesn’t accept it, it is simply thrown out, but there is no problem involved.
Use the information above to help you to simplify your bookkeeping and let you spend the majority of your work time growing your business: by presenting the Products & the Business Opportunity including helping others you know get SMALL BUSINESS TAX BREAKS!