Doing the Paperwork for Your Avon Business is Important
You have joined Avon and started your own business, but you don’t have a degree in business or accounting, and you don’t even know how to keep track of the financial part of your business! So what do you do now? Basically “income – purchases – expenses = taxable income.” Taxable income is what you will pay income tax and social security tax on for yourself.
Keeping Records for Tax Purposes
Remember: You are NOT an employee of Avon so you will not get a W-2. You are an Independent Business Owner and as such you will be expected to act as if you have a regular store made of brick and wood. Just because your store is made of paper does not negate your responsibility of filing taxes! If you purchased more than $5,000 worth from Avon during the year, you will get a 1099 and IRS will also get a copy of it.
Okay… this is the easiest and simplest way to keep tract of everything. And it is easier to do it every campaign… as you go. If you are making a huge income from Avon, then you need to file and pay an estimate income tax each quarter so you will not have a ton of taxes to pay at the end of the year… and yes, we do have Avon representatives that make a six-figure income and they are required to pay their income taxes quarterly. I just wish I was one of them!!!
So to keep tract of your Avon business, each campaign take a new file folder and write the campaign number and date on the front. Put all your Avon doings for that campaign in that file folder. EVERYTHING. On the front of the folder you will make sections for the following: Income, Purchases, Expenses, Mileage, Meals, and etc.
Make a list of your “income” by listing your total amount of sales. I break my income up as to the following customers, helpers, personal, leadership income… but you don’t have to be so detailed. But if you took items out of your purchases for personal use, you will need to note that figure as “personal use.” You will also need to make note of any eRep online income you received from the Account Statement and include that as “other” income. When you do your taxes, there is also a place where you plug in the information from your 1099 if you got one. That is also “other” income as the information from the 1099 includes such items as leadership commission checks, recruiting incentive checks and prizes... such as the TV several of us just won. Remember that if you sell any demos, that is an income. And when you sign someone up appointment fees are income too.
If you have gotten this far, may I suggest you also think strongly about getting your business it own separate checking account with debt/credit card. It helps to keep the records separate as well as the money. You can always transfer the profit into your personal checking or savings account!
Cost of Income
Next, figure your “cost of income” by listing your purchases, less returns, plus taxes paid. There are several ways to figure your Cost of Income. The way I do it is to turn to the Order Summary page in my Avon invoice. You have several columns: Sales – Estimated Earnings – Award Sales. In your calculator plug in all the figures in the Sales column for Products at XX earning level and then subtract all the figures in the Estimated Earnings column for the same items. This will give you the cost of your purchases for that invoice. Then add the taxes you were charged from the Account Summary. This gives you the total Cost of Income. (You add in the tax you were charged because you added in the taxes and order fees charged when you figured your sales income. All you are doing is “washing” out those figures.) Write down the “returns” figure also as you will need this later for your tax return.
Don’t forget that you will need to do inventory on the entire inventory you have in stock for sale every January 1st. This is something you must do so you can plug the amount into your tax form. You need to also keep tract of those items you take out of inventory for personal use. Write yourself a sales ticket.
Then you have your Avon “expenses” such as demos, business tools, and etc. These figures you take from the Order Summery as well as those in the Account Statement. Also write down all the FEES including eRep or leadership fees from your Account Statement or the One Simple Fee, any and all fees you are charged including late fees. Also pull the cost of any leadership supplies from the Account Statement.
A separate section needs to list all the actual “Avon mileage” you had for that campaign. Since mileage is 50¢ per mile in 2011, it will be your biggest expense at the end of the year. You need the total number of miles to plug into the program or to give the tax preparer… not the total dollars you have figured up. And this needs to be written down, either on your folder or on your calendar… which should stay with your tax records for the required six years.
You also need the total amount of meals you ate at Avon meetings or on the road for Avon related programs, as this figure also needs to be plugged in to the program. If you are doing it by paper… just follow the instructions, but be prepared to start doing it by computer as that will soon will be a requirement.
Also keep your other expenses such as postage, office supplies, and etc., in a separate list.
Filing Taxes for Your Sole Proprietorship
If you keep tract of your income and expenses each campaign, you will just need to add up all the twenty-six campaigns and you are done. A reminder list on Campaign 26 folder needs to include your internet connect fees, your cell phone fees, and any other information such information that needs to be contributed to Avon earnings, but it is easier if you write the amounts down each campaign or at least on the campaign in which you actually paid the bills for those expenses.
The more detailed tax return you file, the less problems you have with IRS. They just want to know the details. If you need more information about filing taxes, go to www.irs.gov and click on forms and instructions. You may want to download the Publication 334: Tax Guide for Small Business as well as the instructions for the 1040 Schedule C... and Publication 17: Your Federal Income Tax for Individuals.
Also note if you have a special “separate” room in your home for your Avon business as you can file “Business Use of Home” statement for more deductions. This can not be a part of your guest bedroom. It has to be a separate room used just for your business.
At the end of the year, add up all the separate figures from the front of your file folders and list the totals on a piece of paper. I actually do an Excel spreadsheet for mine, but you can do it on just a regular sheet of paper. This paper is what you will work from when you either do your own taxes or take the paper to your tax preparer. Make sure YOU keep a copy of the paper if you use a tax preparer. And all tax returns as well as the accompanying information (receipt, invoices, etc.) are to be kept for six years in case IRS decides to audit you. Make sure you what you claim is deductible and you will have no problems.
If you want or need more information: call me... or email me... or text me... or Facebook me... I will give you any information you need to make the decision to go out and tell/show others what Avon has to offer. Keeping tract of your Avon business is not hard if you do it by campaign. If you start making a six-figure income, you might want to expand into having an accountant help you out as you just won’t have the time to do the bookkeeping yourself... but it is your business so never let someone else be totally responsible for your money! And if you are not yet an Avon representative but have finally decided to take the plunge into direct sales, you can join my team by checking out the information on my Avon website at www.youravon.com/owomack
Just something to think about...
Books on Bookkeeping for Small Business
Miranda on March 25, 2016:
Thank you very much! I couldn't figure it out, but you made it very simple!
Annette Womack (author) from North Louisiana on August 24, 2011:
But understandable when you have reps that have problems balancing a check book, but are great at direct sales.
saif113sb on August 23, 2011:
Very interesting hub.