The IRS laws for Avon representatives are the same as for other for-profit retail operations. Representatives must keep accurate records of their income and expenses in order to compute their net profit and report it on their tax return. Avon representatives sell Avon products, mainly cosmetics, from their home-based business and website. Each Avon representative is essentially running her own business, and must report any profit to the IRS and pay the necessary taxes.
- Skill level:
Keep an accurate accounting of your inventory, income and expenses. Have the numbers on hand when you are ready to complete your federal income tax return. Use "Form-1040 Schedule C - Profit of Loss from Business." You may not use Schedule C-EZ because it does not allow for inventory. The federal forms and instructions can be found on the IRS website. You can complete the form by hand or use a computerised tax return system like Turbo Tax, which will guide you through the process. You will need to enter your name, business name (if applicable), address, social security number and business tax identification number (if applicable).
Enter your gross receipts on line 1--this is the total amount of money you have been paid for selling your Avon products. Line 2 is for any returns or credits you issued.
Find the inventory section and enter the corresponding figures. Cost of labour is for anyone you paid to work for you, not what you paid to yourself. You must deduct the cost of products for personal use (not the price you would charge if you sold them). Enter the cost of goods sold on the appropriate line on page 1, and calculate your gross profit by deducting your cost of goods sold from the gross receipts, and enter this where indicated.
Enter all expenses you have incurred that are related to your Avon business. These may include office supplies, printer ink and fees paid to accountants. If you kept a log book to record miles driven to deliver your Avon products, enter that information in "Information on Your Vehicle." Enter the total on the "other expenses" line on page 1. Add the expenses and enter the total. If you qualify for a home office deduction, you will need to complete Form 8829 and enter the deduction. You can then obtain your net profit or loss. This number can be entered on "Form 1040 - Profit or Loss from Business".
Tips and warnings
- Tax preparation software will lead you through the process and help find deductions to minimise your profit.
- If you are not familiar with tax regulations you should have a tax professional check your return to avoid problems later.
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