One of the great aspects of your Mary Kay® business is that you can write off products that you use for different purposes, but all tax write-offs may not be the same (a lot depends on your state). It can be confusing with all the different types of write-offs and we get a lot of questions regarding what the different kinds of write-offs mean.
So, we thought we would explain the differences between some basic kinds of write-offs (but please know this is basic tax information and not legal tax advice. Contact your accountant for that!).
Here are the basic types of Write-offs
1. Demo products/ Samples (some people would call these “advertisement samples as well”):
– A demo product/ Sample is just that; it’s a product that you use for demonstration to show off the product or a smaller products (often sample size) that you give away to see if your customer likes the product. Most states will let you write this off 100%.
2. Personal Use Products:
– Personal use products are products that you use yourself. Be very careful trying to use these as a full right off! Some consultants will simply create an invoice under “demo” products so there is a full write-off (because you are using your face as a demo), HOWEVER, we are not advising you to do this…. But you may want to ask your accountant anyway to get their opinion.
3. Personal Gifts
– Personal gifts are items you give to a non-charity, so often, they are not going to be a good write-off (again, check with your accountant how they would like for you to handle this). If you give a “gift” to a charity, that’s actually a “Donation” (below). That type of give away is MUCH easier to justify as a write-off.
4. Lost/Stolen/Damaged goods
– The lost/stolen/damaged goods category is used for several things like Expired products, any items that “walked away”, items that may have been left in the car or maybe an item that the dog actually did eat…… These are normally full tax write-offs (but again, check with your accountant).
– A donation is a “Gift to a Charity” (not to be confused with “A gift”). It’s important that the charity should be filed correctly under the tax law in your state and that you get a receipt for the donation.
6. Hostess gifts/Earned prizes
– A hostess gift is generally considered to be a “cost of doing business”. It’s very similar to a demo product. Most states will allow you to use this as a full right off… but (you guessed it), check with your local accountant.
I hope this helped explain the basics of the different kinds of Tax Write-off invoices and when they are used. I’m including a short video below if you would like to see how you can automate your tax write off tax filing using QT Office (The software system for inventory control, tax tracking and customer management for the Mary Kay® world).
And if you would like to learn more about QT Office, and how we can help your Mary Kay® Business thrive, then click the link below:
This entry was posted in QT Office® on April 26, 2012