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4/09/2015 9:25 am  #1


Tax question

Don't know if you all have any knowledge of tax stuff, but I have a question that I haven't been able to figure out while doing my taxes, and I'm wondering if I should even worry about it.

My wife has a part time selling jewelry. It's basically one of those deals like Pampered Chef or Oragami Owl where you harangue your friends to host a part at their house where they get thieir girlfriends drunk and then my wife swoops in and tries to sell them attractive, moderately priced, but poorly made necklaces and earrings.

My wife has been doing this since last October and probably made, I'm guessing, $2,000 in commissions in 2014. But she also had expenses like buying the jewelry, items for her display table, shipping costs, travel to vendor shows and these parties.

She didn't get a 1099 from the jewelry company for the commissions she made from being ordering jewelry on-line.

So my question is: I'm guessing when you add all the numbers up, she probaby made a small profit last year.

Is it worth it to factor this into our taxes?

Any advice is appreciated.


I think you're going to see a lot of different United States of America over the next three, four, or eight years. - President Donald J. Trump
 

4/09/2015 11:32 am  #2


Re: Tax question

I think you need the advice of an accountant on this one, Lager.  Certainly expenses can be deductible, but I'm wondering why she didn't get a 1099 that shows the commission profit she made, however, technically they don't have to do that.

If she is considering this a business, then she will have to fill out a schedule 'C' form.  She can then deduct her expenses and then pay the 33% that is assessed to her profit.  For example, if she made $2000 in profit and had $1000 in expenses, then she would owe 33% of the $1000 profit.  Personally, I'd wait and see if she keeps working this as a business or considers it to be a hobby.

As I said earlier, it doesn't hurt to make a quick call to an accountant.  Let me know what happens.

Last edited by Just Fred (4/09/2015 1:30 pm)

 

4/09/2015 1:04 pm  #3


Re: Tax question

I think that you need some professional advice.

This publication says that the IRS considers you a business if you do > $400 in sales in a year.
http://smallbusiness.chron.com/small-business-need-start-filing-taxes-4090.html

http://www.lbtaxservices.com/Forms/Direct%20Sellers%20Guidance%20%28Avon,%20Mary%20Kay,%20Pampered%20Chef,%20etc%29.pdf

I am surprised that she didn't get a 1099Misc.


We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists. 
 

4/09/2015 6:31 pm  #4


Re: Tax question

Goose wrote:

I think that you need some professional advice.

This publication says that the IRS considers you a business if you do > $400 in sales in a year.
http://smallbusiness.chron.com/small-business-need-start-filing-taxes-4090.html

http://www.lbtaxservices.com/Forms/Direct%20Sellers%20Guidance%20%28Avon,%20Mary%20Kay,%20Pampered%20Chef,%20etc%29.pdf

I am surprised that she didn't get a 1099Misc.

Thank you Fred and Goose. 

 


I think you're going to see a lot of different United States of America over the next three, four, or eight years. - President Donald J. Trump
     Thread Starter
 

4/09/2015 7:13 pm  #5


Re: Tax question

Here was an interesting Turbo Tax question that related to the same thing where a person was a Pampered Chef consultant that had received a 1099 from them (I understand that your wife did not receive any thing like this, but the situation appears similar)

https://ttlc.intuit.com/questions/2776779-i-received-a-1099-misc-as-a-pampered-chef-consultant-how-do-i-enter-that-the-business-is-not-owned-by-me
 


"Do not confuse motion and progress, A rocking horse keeps moving but does not make any progress"
 
 

4/09/2015 9:45 pm  #6


Re: Tax question

With no 1099 there is no "paper trail" for the IRS to follow, so, essentially, you are on your own (and left solely to your own integrity) as to report the income or not.

At first glance it might be very tempting to just let it be part of the "underground economy".

But look again:  If she files as "Schedule C" sole propriator profit'/loss there are beaucoup business expenses which can be claimed.  Keep in mind that for "employees" business expenses are deductable on Schedule A only to the extent that they exceed 2% of adjusted gross income (AGI) which for a dual income couple fiiling jointly is likely to be quite high.

For the independent contractor expeneses are 100% deductable from gross income right off the bat.  No  ≥2% of AGI.  That should more than offset the need to pay both federal income tax AND Social Security Self Employment tax on the profits.

And one more reasons to plunge into the wateres of long form (1040) and Schedule C filing:  This year she turned a profit (great!)---but supposed next year she has a net loss.  That loss can be reported on form 1040 as a NEGATIVE number meaning that it can offset other income.   If you have had a profit for just one year, you can run a business as a loss for the next 20 years.   

If you start up an independent contractor business you must have a proift within 5 years or the IRS will consider it to be a hobby and there can be nasty consequences.   

Bottom line:  File the Schedule C.  Pay the Self Employment Tax.  And then enjoy the tax advantages that are denied to employees.


Life is an Orthros.
 

4/10/2015 11:04 am  #7


Re: Tax question

Thanks gents. Last night, I was kinda thinking I would just blow it off. As I said earlier, if she made a $1000 last year, I'd be surprised, so why go through the time and hassle of trying to figure out revenues and expenses, especially when I don't have a 1099-MISC to just pluck the revenue numbers from.

I'm not even looking at this from a "hey, I can screw the government out of a small amount of tax money" but rather from a "I'd rather watch the dreadful Phillies get whooped by the Sox then sort through my wife's disorganized receipt pile."

But you all have made a strong case that I should just suck it up and do it. So that's what I'll do.

Thanks.


I think you're going to see a lot of different United States of America over the next three, four, or eight years. - President Donald J. Trump
     Thread Starter
 

4/10/2015 2:19 pm  #8


Re: Tax question

One more thing--just because your wife did not receive any 1099 does not mean the income wasn't reported to the IRS. The company could be lax in processing or didn't see a reason to send it to her and only they could explain that.

 

4/10/2015 2:38 pm  #9


Re: Tax question

Flowergirl is right.  Although it's nice to get the 1099 from whoever your wife received compensation, they really don't have to send it.  Been down that highway.

 

4/10/2015 2:56 pm  #10


Re: Tax question

Make sure that you account for all of your costs of doing business.
Even miles put on the car, etc.
Income is not profit.


We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists. 
 

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