INCOME TAXES for Your Premier Designs Business
Three important things to remember when preparing your tax returns: DISCIPLINE, GOOD
RECORD KEEPING AND HONESTY.
Box A – Direct sales – jewelry
Box B – enter code 454390 – Other direct selling – party plan merchandisers
Box D – N/A
CASH VERSUS ACCRUAL ACCOUNTING METHOD – Cash is much easier. Cash in – cash
Did you materially participate in the operation of this business? YES.
INCOME – Items to include in income:
1) Retail less Commission Volume; You can leave out hostess ½ price items, as they are just a
pass-through (no profit). Make sure you handle both sides consistently (i.e. if you include ½
price items in your retail income, make sure you include them in your CV also). Don’t forget to
include wholesale orders. You can use your monthly CV reports: subtract CV from retail sales.
2) Commission checks;
3) Any award you received from Premier (retail jewelry certificates). The amount to include in
income is the CV amount of the jewelry award.
The total of these items will go on line 1 of Schedule C.
Returns and Allowances – if you gave any customer refunds, include here.
EXPENSES – Set up a separate file for each major expense type for each year (for example:
samples, postage, phone charges, supplies, etc.). Save all receipts from expenses related to your
business and file on a regular basis.
Information obtained from home show forms: jeweler share and bonus cost, special shipping.
It is not incredibly important on which line you put your expenses; you should just try to be
consistent from year to year.
Line 9 – Car and truck expenses. You can either use the standard mileage rate (The rate for
January 1, 2008 through June 30, 2008 is 50.5 cents per mile. The rate for July 1, 2008 through
December 31, 2008 is 58.5 cents per mile. The rate for 2009 is 55 cents per mile.) or your actual
expenses for gas, repair and maintenance, tolls, insurance, depreciation, etc. It is much simpler to
use the standard rate. You must be consistent from year to year. Keep a mileage log and record
all trips related to your business – home shows, hostess coaching, training, obtaining supplies,
etc. You MUST have a written log to support your miles claimed. On January 1 and December
31, record your car’s mileage in your log. Then, every day you use your car for business, write
down where you go and how many miles you drove to get there. Parking fees and tolls should
also be included here.
Line 15 – Insurance – If you insure your samples.
Line 16 – Interest – b. Other – if you paid interest on your Premier card or other credit card
related to your business.
Line 17 – Legal and Professional Expenses. Your $395 A&A fee or your $350 renewal fee;
jeweler’s share and bonus costs; CPA or tax preparation costs;
Line 18 – Office Expense. Computer, copier/fax, software program, stationery, pens, etc.
Line 22 – Supplies. Catalogues, invitations, folders, booking gifts, display items, jewelry
samples (including President’s package and CV for any awards received).
Line 24a – Travel. Hotel, airline tickets, rental car, etc.
Line 24b – Deductible meals and entertainment. Meals to and from rally, etc. You can deduct
50% of the total amount of these costs.
Line 25 – Utilities. Second phone line (you CAN’T deduct a portion of your regular home
phone), long distance and possibly some of cell phone bill.
Line 27 – Other expenses. Postage, credit card charges, return/exchanges, cost of rally, bank
charges, business gifts ($25 limit per person), awards and contests, etc.
Line 30 – Expenses for business use of your home. Be consistent from year to year – either take
the deduction or not. IRS Publication 587 addresses this issue. Your home office deduction
can’t allow you to report a loss from your business.
You also must complete Schedule SE (Self Employment Tax).
BACK PAGE OF SCHEDULE C – Cost of Goods Sold Section – leave blank. This is for
businesses that carry inventory.
Information of Your Vehicle – Fill out info about your car used for your business.
Other Expenses – list the detail for all expenses included in Line 27 on page 1.
Income less expenses shows your taxable profit for the year. This amount will (hopefully) look
shockingly low! We take every possible business expense deduction allowable so that our
taxable income is the lowest possible amount. Thus, we minimize our taxes to maximize our cash
flow! You should have more cash in your checking account than you show profit on your return.
NOTE – Keep a separate checking account for your business!
P.S. I did not include as an income or expense item sales tax or shipping. The Premier tax guide
says to include these items as income and expenses. However, most jewelers do not show either
on their return as they are just pass-through items.
P.P.S. I called the IRS (in Jan. 2006) and asked about the home office deduction. I told them my
specific situation. They told me I could not take the deduction because I use my office for a
minimal amount of personal use (I check my email on my computer and some of them are
personal messages!). They said you can deduct a part of your home if you use it for storing
inventory or samples.