Taxes & The Pampered Chef by McKenzie Rogers, C.P.A.

Substantiation Substantiate = Proof Keep everything! Receipts, invoices, checks, mileage log

Record Retention Average rule = 3 years If you underreport income by 25% = 6 years If you don’t file a return or commit fraud = Indefinitely Records related to assets = Keep as long as you own the asset

Business Deductions Rule of thumb: “ordinary and necessary” expenses Ask yourself: Does any amount of this expense benefit me or my family personally?

Fixed Assets & Depreciation Tangible items: computers, desks, filing cabinets, machinery, equipment, furniture, computer software These items are not expensed when purchased. They are capitalized and depreciated over a prescribed time period.

Business Deductions Telephone- cannot deduct the cost of phone in your home if you only have 1 phone line- must have 2 to deduct 1 Cell Phone & Internet- only business use portion of the expense is deductible

Business Deductions Advertising Office Supplies Professional fees (accounting, legal, consulting) Repairs Travel- leave town- hotel, plane tickets, car rental Mileage* Groceries* Meals* Education*

Education & Training Expenses for self improvement classes, courses on growing business, etc… probably not 100% deductible. Indirectly related to P.C. have to evaluate deductibility. Training expenses directly related to P.C. products and presentation and those courses offered by P.C., etc… probably 100% deductible.

Meals & Entertainment Business meals and entertainment expenses incurred in the course of business are only 50% deductible Receipt for meal should include the date, names of people at the meal or event, brief description of business purpose

Groceries Groceries you buy to tests recipes that you feed to your family for dinner are NOT deductible Groceries you buy to prepare food for shows and show off products that are consumed at parties are deductible

Business use of home The business part of your home must be used exclusively and regularly for your business If you qualify you may be able to deduct expenses including mortgage interest, insurance, utilities, repairs, depreciation Deduction is based on sq. footage of office to that of the house

Business use of your car If you use your car for business and personal purposes you must divide your expenses based on actual mileage 2 Choices: Standard mileage or actual costs Once you choose you must use forever

Actual Expenses Depreciation or lease payments Gas and oil Tires Repairs Tune-ups Insurance Registration

Mileage 2008 January – June 50.5 cents per mile July – December 58.5 cents per mile cents per mile

Hobby Loss Rules Your business must show a profit for 3 out of every 5 consecutive years to be considered, “engaged in for profit” and there- fore not considered a hobby. Losses from hobbies are not deductible.

Audit Risks Direct Sales Home in Office Hobby Loss Chances of being audited if you file Schedule C- about 1%

Sources of Assistance IRS Publications: 334 Tax Guide for Small Business 463 Travel, Entertainment & Car Expenses, 535 Business Expenses 583 Starting a Business & Keeping Records 587 Business Use of Your Home

Questions?????