Every time April rolls around, I think of all those Mary Kay meetings I attended, where the Directors would spend the entire time advising all us Consultants on what Mary Kay expenses were tax deductible.
Turns out they tried to find a way to make nearly everything a deductible expense.
But the trouble is, deductions do not equal income, and if you’re not careful with those deductions you could find yourself in trouble with the IRS.
While it’s true that things like your cell phone costs, if used for your Mary Kay business line, and other things like mileage and meeting costs can be deductible, it’s not the same as income.
So what if you have thousands of dollars of deductions? Your goal as a business person is to create income. Deductions reduce that income, sure, but there was so much emphasis on how Mary Kay created tax deductions that it missed the point.
If you’re showing a loss on your income taxes, guess what? You didn’t make much money. Sure, there are things you can deduct that you would have as expenses anyway, perhaps. But loss is loss. And if you show a loss on a business you’re reporting on a Schedule C for several consecutive years, the IRS may not see that as a business and you could be in trouble.