Winning In Accounting As A Sales Consultant

​When you know your winning, you can only get excited about whatever it is your doing.  Right?!  This is the kind of attitude I want replicated in all small business owners as they sit down and review their business finances.  When making the decision to become a business owner, you have already indirectly accepted the additional roles and responsibilities that come with making sure your business is successful.
 
Believe it or not, Accounting is a great place to build your positive habits and structure for managing your direct sells business. 

​Owning a business, even a small one, adds a layer of complexity to the filing of your income tax return.  If you are a direct sales consultant, yes -- you too are considered a business owner, the IRS calls you a Direct Seller.  Your business structure is identified as a sole proprietor, a solo business owner, and one of the important elements to being a sole proprietor is ensuring that you understand your tax obligations. 
 
As a sole proprietor, your personal and business income tax filings are filed together using IRS Form 1040 in addition to the Schedule C or C-EZ forms for reporting business income and expense.  The direct seller is generally classified as an independent contractor by their company rather than as an employee.  This classification means, once a direct seller has earned more than $600 he or she will receive a Form 1099-MISC.  The form will report the gross income earned from the company, only.  It is the direct seller who is responsible for keeping track of business expenses throughout the year, therefore ensuring for factual tax reporting. 
 
To file accurate tax returns let’s start with identifying some of the different sources of revenue for a Direct Seller, as recognized the IRS – those include,
 

• Sales
• Commissions
• Bonuses
• Prizes
• and Awards for meeting sales quotas, just to name a few 

 
You can find the complete listing on the IRS website.  
 
The tracking of income and expenses can start simply with maintaining an Microsoft Excel worksheet, also known as, the good ole faithful and the most commonly used method for tracking or by utilizing an app or software feature such as Evernote or Google notes.  Remember, it is all about finding the tools which will bring the most convenience to you and your day to day business deliverables.
 
Assuming you earned over $600 in a year through direct selling endeavors and received a Form 1099-MISC, here are a few tax tips to remember:
 

• You must pay self-employment tax and income tax
  • Self-employment Tax is a make-up of Social Security and Medicare taxes.  Self-employed individuals pay both the employer and employee portion for themselves, 15.3%.
  • Income Tax must be paid through estimated tax payments throughout the year because they are not being withheld like an employee’s tax are.
  • Annual Tax return must be filed if your net earnings from self-employment were $400 or more.

 
Another important key process to remember and implement in your business is the importance of separating your personal and business bank accounts.  Yes, I kid you not, having two separate accounts can save your business, financially.  It will help with providing supporting documentation in the event of an IRS audit plus it allows you to avoid the penalties of underreporting income to the IRS.
 
Please feel free to contact me at [email protected], if you have questions or need support with creating business solutions that will help you build clarity and maintain success in an industry, such as direct sells, that takes grit and persistence.