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I've been thinking of becoming a demo - mainly to support my own habit, maybe to do some stamp camps, and see where it goes. I've been reading some of the related threads and I don't need that much more convincing. Everything sounds so good!!!
My questions are related to the business side and what I need to do as far as taxes and claiming the income. Is this complicated? Is there a certain level of income you can make and still not claim an independent business? What about claiming business expenses? Do you have any recommendations for resources? Does SU as a company offer information on this?
I want to go into this as informed as possible so I can avoid any surprises at tax time. Thanks in advance for your responses!
I hope you don't mind me piggybacking a question on your thread but I also have some tax questions related to becoming a demo.
I know that you get a 20% discount off items when purchasing as a demo. My question is do you get taxed on that discount. For example, if I order $100 worth of stamps. Do I pay SU $80 plus tax and shipping and have no income related issues or do I pay $100 plus tax and shipping and then get the $20 back as income and have to pay income tax on it. Hope this makes sense.
I too am thinking about becoming a demo to support my habit and I also have been doing invitations for people so the discount would help widen my profit margin.
Like JoAnn, I just want to be as informed as possible.
As for taxes....my dear husband get the turbo tax program and we go through it one question at a time. Wasn't too painful! LOL. I write down my expenses and miles everytime it happens (or I try too) as well as the income. Then at the end of the month I total it up. It would be easier (and I meant to do that) to start an Excel sheet and categories your expenses right away, e.g. Postage, advertisement (catalogs, SU website, flyers printed, etc.) and so on. It took us two hours I think. Not too bad.
I don't know how little you have to sell to not report it in your taxes. Maybe we have a tax wizz among us.
Hope this helps and takes the fear out of it. Have a wonderful Sunday. Hugs and smiles.
Here is something I was given regarding taxes and it's from the IRS. Suprisingly enough, it is pretty easy to read and understand. A good friend of mine is an accountant and she spoke at our last SU meeting and I've heard other people speak as well. Everyone has their own opinion of what can be an expense and what can't and that is why SU tells us that it is best to speak to your own personal accountant. I also used turbo tax last year and didn't have any problems.
I don't think SU doesn't report anything to the IRS until you have a downline and earn a certain amount in override commission. However, if you earn a cruise without a downline you would be taxed on that as well. I've been told that if you're doing it as a business you better not have a loss for more than 3 out of 5 years.
The most important thing as stated earlier is to keep track from the get go of all expenses and income. This will ease a lot of pain come tax time. Good luck and I hope this helps.
I can't seem to get your attachment to open. It just opens up a blank window. Am I doing something wrong? Is there anyway you can e-mail it to me directly? [email protected] I am really interested in knowing this tax stuff also.
My questions are related to the business side and what I need to do as far as taxes and claiming the income. Is this complicated? Is there a certain level of income you can make and still not claim an independent business? What about claiming business expenses? Do you have any recommendations for resources? Does SU as a company offer information on this?
Fortunately for me, my SIL is a CPA and does our taxes. What she asks for from me (and I assume any program or tax preparer would) are the amounts I earn each month (both the 20% instant inclome, plus any overrides), my costs for supplies, my discounts I give, the milage I drive for workshops and doing orders. For that she was able to do my taxes. Not too bad as long as you keep track each month.
SU does have a handful of forms you can download and print out to keep track of all your expenses and travel, as well as an income report each month.
From what I've been told, SU doesn't report your income until it's pretty substancial, but you are supposed to report it to the IRS as soon as you earn more than $1.
Hmmmm.....does anyone out there have any responses to this, but for Canadian demos?! Didn't even think about that before signing up.... :shock: ...Hmmm.....anyone who can respond, it would be appreciated!
Thanks!
__________________ ~Debbi~
Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending. ~Author Unknown
whaaaaaaaaaa Another file I can't open... This one I really want to read!! lol... I use to be able to open PDF files but since my computer crashed haven't been able to. Can someone reformat it?? I had problems with the Wheel list one too :(
I was able to finally open this document and the wheel list by turning off my antivirus software. I turned it back on as soon as the document was visable. Do not forget to re-enable your antivirus software!!
Did you know that if you order stamps and things on a Demonstrator order you will not be charged tax on your 20% off? I always wondered what the difference was between a customer order and a Demonstrator order besides being able to pre-order stamps and I finally figured it out.
Thanks, everyone for your replies! We have used TurboTax the last few years, so we'd probably just have to upgrade to the Premier version rather than the Deluxe.
Do I need to request a tax ID number? Someone I talked to said you have to get that. It seems like a lot of hassle for the little bit of money I'll probably be making!
Do you consider any of the stamping supplies (stamps, cardstock accessories) deductible business expenses, or are business expenses intended to be postage, mileage, catalogs, and truly "business" types of things?
Geez, I sound like I'm trying to sneak something by someone, doesn't it?!? I'm really not - just trying to get a feel for what other people do. I tend to be over-analytical and never do anything spur of the moment, so this is a really big decision for me.
Thanks again for all your posts! I really appreciate you taking your time to answer my questions!
I used to sell Pampered Chef before signing this year with SU!. I always used Turbo Tax deluxe. Everything is pretty easy if you have everything that the above girls mentioned. You do not need a Tax ID number.
The way I understand it, the cost of stamping supplies you purchase to do workshops, stamp camps, etc. is a deductible expense - just can't deduct the cost of what you use for personal use. If you do a Stamp Camp and serve refreshments, I've been told you can deduct 50% of that amount. Basically, whatever costs you incur as part of running your business.
I also do taxes for H&R Block. If you only are demo for personal sales, there is nothing to report to the IRS. If you do sell anything for a profit, it will go on a Schedule C (Turbo tax will walk you through where it goes) and can go under your own Social Security number (no need for an EIN). You will only have to pay self-employement taxes (which are over and above income taxes) IF you have a profit of over $400. Profit would be total sales revenue (including volume rebates) less cost of SU! hostess/customer orders, supply orders for stuff like catalogs, milage, and other business expenses (e.g. monthly internet fees, postage, stamp camp/demo supplies, hostess gifts like incentive stamps, even supplies for swaps when you only use them for display purposes). Hope that helps!
This is really interesting to me. I think I may have to get my dad's accountant to help us this year. My dad owns his own business, and he has people he hires out for jobs and he makes 20% commission off their jobs (mostly musicians). Anyway, at tax time they send out a form to all the musicians stating what they earned for the year. They don't take out taxes. I'm doing another independent contractor job, so I'm going to have to get all this straight. I DO NOT want to audited. We went through that a few years ago and what a mess!
I never thought this would be my first post!
I am considering becoming a demo and enjoy this site so much, it is so informative.
I run my own home-based woodcraft business and have claimed all my income as a business. We have a financial advisor, who helps us for free. I have a percentage of the basement that I use for my crafts, it can be up to 25% of your total sq. footage. I can then claim 1/4 of all my expenses, electricity, water, gas, mileage if I drive for craft purposes or supplies, long distance phone calls if they are craft related. Any supplies I buy or tools I use for crafting, I keep all reciepts. I do have a business license and it cost me $30 Canadian, it's good for a whole year. I don't have a tax number because then I would have to do the whole GST thing. I don't make enough yet to change the outcome of my DH's taxes. I have never had to pay any income tax and have only ever gotten $2 back. It's worth it if you ever get audited to keep track of any income you have ever made.
Basically, you tot up all the money you earn (and you don't get taxed on the instant income on your own orders...that's a discount, not income), then you subtract your expenses. Whatever is left is profit. If you are like me, you end your first year at a loss. You can do this for 2 out of 5 years if you want to claim deductions for your business.
However, if you are doing it as a hobby and are not turning a profit, you don't even have to file your business expense/income.
That said, there are advantages to claiming your expenses, since you can deduct your computer, your internet provider, all sorts of things. I got a nice return this year. My dad does taxes and his speciality is direct sales and he does mine for free. I'd advise if you are planning on claiming your business expenses, to get a tax advisor.
ok.. have another ? to ask and didn't want to make another post. When a person signs up under their demo, what does the demo get out of it? I probably would just sign up for the discount at first, to much going on.. and hubby grumbling about me even thinking about it RIGHT now! I was just curious on what my demo will get out of me signing up.
I agree with Claudia.....I think. A few points to think about -
SU doesn't "report" your income because they are basically just a supplier of the product to us demos. The amount of "income" we earn is determined by us - not SU. If you take in $1000 in payments from customers and spend $900 to purchase those products, you only have $100 in income....regardless of whether it is on a demo order, a hostess order or whatever. The IRS is not going to look at what type of order form you used. Included in these expenses (the $900 portion) is the cost to purchase order forms, and shipping charges, training videos, photocopying of any forms, long distance calls, etc.....not just the stamp order less the 20%. You will also be able to deduct your mileage as long as you keep track of it. As far as refreshments at an open house, I would have a hard time thinking that they would only be 50% deductible.....they are a cost of doing your business.......but you would need to clarify with an accountant or check the turbotax for more info. Another thing that you might be able to deduct is a portion of your internet charges....since you use the internet to place and track orders, manage your customers, learn techniques, etc. This is something that I would definitely check with someone about first though as it might send up a red flag to the IRS and not be worth the deduction.
I can honestly say that I stamps so infrequently for myself that I consider 100% of SU expenses to be business......and no one is ever going to be able to determine what portion of your stamp use is personal.
Our tax code is so screwy that you will not always get the same answer to the same question - whether from an accountant or the IRS.....because everyone seems to interpret things differently. I read an article the other day that said that someone called the IRS with the same question 20 times - and spoke with different IRS agents......not one answer was the same as another.......pretty scary, huh?
ok.. have another ? to ask and didn't want to make another post. When a person signs up under their demo, what does the demo get out of it? I probably would just sign up for the discount at first, to much going on.. and hubby grumbling about me even thinking about it RIGHT now! I was just curious on what my demo will get out of me signing up.
Your Demo will recieve an override amount of I think 4% of what ever you sell or in your case buy for yourself!!! LOL! that is only if she sells 250 a month herself though...I think it is 250 someone jump in and correct me if I am wrong...I know it is incentive to me to start to be consistent since I am signing my first recruit.
Kar, the 20% discount you receive on purchases for yourself is not considered "income" so isn't taken into account at all. I imagine though that you want to keep good records of that since your personal orders will be mixed in with hostess/workshop orders. So, you'd need to record that out of a party order of $500, the 20% on your personal order of $100 is not included when figuring tax. Hmmm, not making sense even to me! Well, anyway, SU has no way of knowing which you are going to be purchasing for yourself, so you need to keep track of that yourself...
as far as parties, if 1 or 2 parties a year nets you over $400 in profit I'd say you're having some pretty good parties, lol!
Questions before signing up to be a demo
What about as far as taxes?? If I just buy for myself, or have 1 or maybe 2 parties a year... I gotta claim it on the 2 parties?? Taxes just throw me for a loop.... kind of like Lana being loopy I guess!! 
