Pampered Chef Business Struggles: A 6-Year Journey of Losses & IRS Audit Risk

[pampered1224]

I am in my 6th year with PC and I have taken a loss on my business every year. Last year my tax guy warned me that the IRS looks at these losses. If you have too many, they may audit me. I have all my reciepts so... But still! I found a problem though with my accounting system. I can see my expenses as far as the supplies, samples and kit enhancements and that that are ordered directly through PP but, I do not always "see" what I have going out for food, napkins, plates, decor for displays etc. Most of this comes out of pocket for me. Then I don't always record this info until the last minite. I made over $7000 in commission last year but I spent over $8000.
Can anyone who has been in for awhile, tell if they have ever reported a profit? And if not, have you been audited?

 

[jwpamp]

I am new to PC, but have run my own home-based business before, and have filed taxes with business expenses that overtook my profits...but not for 6 years in a row....so I may not be of much help.

But if it makes you feel better, I find it hard to believe, that with milage at 40+ cents/mile, and you making $7000 you would have shown a profit at all. Also, with a 1099 that says $7000, I am certain that the IRS will turn their attention to the bigger fish in the pond...

 

[pampered1224]

ThanksThe milage did take quite a chunk out of everything! I do shows that are an average of 92 miles round trip. So...
I hope you're right. There are worse out there so...

 

[maryhenderlite]

just keep in mind that if you use it for personal use (which I am sure that we all do) you should only be reporting a percentage of it. Not the entire thing, otherwise my "whole" kitchen would be a tax write off!!! I am pretty sure on one of the forms that I feel out, that it says if it is solely for business, or something like that. I know that we could take a percentage of OUR stuff, but not the entire thing. Also, don't forget a percentage of your cell phone bill (say 25 - 45%) But yes, your tax man is right, this would be a flag to the IRS if it is year after year. Hope this helps.

 

[pampered1224]

Funny thing is...I don't record any phone bills, I only record what I use for PC shows, not what I purchase for home and I rarely even record foods stuffs I buy to try recipes. One of the thing sthat got me bad too was some advertising I did. I deceide to try. Well, I won't do that again but I spent well over $400 just on that. Well, I am going to go in tomorrow and just do it. If I get audited, I get audited. I even have allt he stuff I did not record fro prior years so, they better watch out. They'll end up owing me money!

 

[ange13]

you could always just show a few dollars as profit. I did that one year just to break things up. I had alot more that I could deduct as losses, but it was easier to just say I made $10 in profit and pay taxes on that(not much!).

 

[Mystik]

If I remember correctly someone (my director?) told me the IRS doesn't mind a loss for the first three years while you establish your business, if you report losses each year after that they may consider it a hobby and not a business and are more likely to investigate.

 

[pampered1224]

Decided to knock off a few expensesI decided too that it would be a good idea to show a profit, even if it is a small one. I think it's funny though, they complain if you owe to much, and with this profit and my full-time job, I will, but they get awfully pissy too if you do write everything off so you don't owe so much. I guess you are just darned if you do and darned if you don't.
So I made alittle over $400 this year. I also had to update my full time job's
W4 so I am taking more money out for taxes. I work a part-time job to make more money to pay bills, not to give it all to Uncle Sam!

 

[beepampered]

whY?Just curious, why do you sell PC if you lose money every year? I think the products are great, enjoy meeting new people and like having new goals to reach, but I will not do this for too long if I always lose money. What's your motive and do you believe it's possible to actually make a profit at PC? Thanks (this is a question I'd never ask someone I actually knew in real life)...BEE

 

[pampered1224]

This sounds odd but...I do this for the fun of it. However, I do get a little carreid away when ordering catalogs, advertising, etc. So, I have a tendancy to over spend to make my business work. So this year, with the help of my H&R block person, I only lost $46. I will be OK as far as the IRS goes as because it is not over $300. Someone here said something about bigger fish to fry, and I qualify as a minnow. So... I am safe. Part of the loss is to also divert money from income so the taxes aren't so bad to deal with. So my plan is to be much more careful of my spending. Order less but order more often so I only order what I need rather than what I think I need. Get it?
Hope that helps.