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By Income Wax, Inc.

Scentsy Business

Scentsy Starter Kit for Christmas

23 November 2019 By LA Leave a Comment

Put a Scentsy Starter Kit on Your Christmas List

Do you have a loved one asking for your Christmas list and you’re just not sure what to put on it? Or maybe you like to buy yourself a Christmas present, that way you’ll know you’ll like what you get.

scentsy starter kitScentsy Consultant Starter Kits make excellent Christmas gifts.

It’s the gift that keeps on giving. Scentsy consultants earn 20%-39% in commission and bonuses (up to 30% on personal sales and 9% for leadership bonuses on team sales).  Included with the starter kit are products and business supplies to get you started as well as your Scentsy webstore hosting will be free for three months.

Not sure you want to start a business?

No problem, just join for personal use. You can be your own best customer. We don’t have a monthly minimum, so you can buy for yourself and/or close group of friends. Order every few months and earn commission on what you purchase.

Tell Santa you want to join Scentsy.

“Santa” can allow you to use his credit card when you go to www.IncomeWax.com to join Scentsy.  For $99 USD, plus $10 shipping & local sales tax you can start a Scentsy business. Or tell St. Nick to just give you cash and you’ll put it on your own credit/debit card!

On the fence and want to learn more about Scentsy? Visit Thriving Candle Business.com

Or if you know this is what you want for Christmas, get started, and join Scentsy here.

Please Like, Share & Post a Comment

__________

What do you call someone who doesn’t believe in Santa?

A rebel without a Claus. 

Filed Under: Scentsy Business Tagged With: join scentsy

Scentsy Incentive Trip Destinations

26 August 2019 By LA Leave a Comment

Do you like to travel? How about travel in style on all-expense paid trips?

scentsy free trips

Scentsy Consultants have the ability to earn FREE trips each year. Take a look below at the destinations by year:

Scentsy Inventive Trips 2020

  • New York to Bermuda on Royal Caribbean’s Adventure of the Seas
  • Amsterdam, Rotterdam, Antwerp and more on an exclusive Amadeus river cruise
  • Salt Lake City UT / N. American Scentsy Family Reunion
  • Birmingham, UK / European Scentsy Family Reunion
  • Brisbane, AU / Australian Scentsy Family Reunion

Scentsy Inventive Trips 2019

  • Marco Island, FL
  • Montreux, Switzerland
  • Queenstown, New Zealand
  • Austin TX / N. American Scentsy Family Reunion
  • Amsterdam, Netherlands / European Scentsy Family Reunion
  • Gold Coast / Australian Scentsy Family Reunion

Scentsy Inventive Trips 2018

  • Mediterranean Cruise
  • Royal Caribbean Cruise
  • Cancun Mexico
  • Anaheim, CA – Scentsy Family Reunion

Scentsy Inventive Trips 2017

  • New York City
  • African Safari
  • Punta Cana (for N. American consultants)
  • Kansas City/ N. American Scentsy Family Reunion
  • Rome Italy (for European consultants)
  • Edinburgh Scotland / European Scentsy Family Reunion
  • Great Barrier Reef (for Australian consultants)
  • Melbourne / Australian Scentsy Family Reunion

Scentsy Inventive Trips 2016

  • Royal Caribbean’s Independence of the Seas Cruise Cozumel Mexico
  • Nashville / Scentsy Family Reunion
  • Disney World
  • Singapore (for Australian consultants)
  • Brisbane / Scentsy Family Reunion
  • Cyprus (for European consultants)

Scentsy Inventive Trips 2015

  • Royal Caribbean Cruise originating from & returning to Puerto Rico (for North American consultants)
  • Las Vegas / Scentsy Family Reunion
  • Tenerife Canary Islands (for European consultants)
  • Bali (for Australian consultants)

Scentsy Inventive Trips 2014

  • Greece
  • Atlantis, Bahamas
  • St. Louis/Scentsy Family Reunion

Scentsy Inventive Trips 2013

  • Whistler, British Columbia
  • Washington, D.C.
  • Charleston, South Carolina
  • New York City
  • Oahu, Hawaii
  • Costa Rica

Scentsy Inventive Trip 2012

  • Punta Cana, Dominican Republic

Scentsy Inventive Trip 2011

  • Disney World

Scentsy Inventive Trips 2010

  • Cable Cars to Coconuts: San Francisco, CA & Kona, Hawaii
  • Beantown Bash, Boston

Scentsy Inventive Trips 2009

  • Banff Canada
  • Alaskan Cruise

Scentsy Inventive Trip 2008

  • Cancun, Mexico

Scentsy Inventive Trip 2007

  • Hawaii

Pack your bags and sunscreen and let’s go! Oh wait … before you do, one minor little detail, you have to enroll as a consultant and then earn the trip. Both very doable!   Enroll here.

Filed Under: Scentsy Business, Scentsy Fragrance Specific Tagged With: incentive trips, scentsy

This Diet Doesn’t Work

8 July 2019 By LA Leave a Comment

“I work out once a week, and I don’t drink that much soda anymore, yet I’m not losing any weight! This diet doesn’t work.”

If someone said the above to you, it would be obvious that the diet was not the problem.

Yet some consultants will join Scentsy, get their starter kit, maybe tell some family and friends about it (their warm market) and then figure some social media blasts ought to give them good results.

Find a Scentsy Sponsor

Then after only a few short months they’ll inaccurately proclaim, “Scentsy didn’t work.” Or some have even suggested they felt duped by their sponsor because “it is not fun nor easy for them.”

REAL TALK

There’s nothing wrong with the direct sales selling model. It’s not that Scentsy doesn’t work, it’s that the consultant isn’t working it. Or certainly not working it as intended.

Is being a Scentsy consultant fun? It certainly can be. Is it easy? No, or everyone would be doing it. But it is an easy sell, providing the consultant is doing the work, and sharing it with others and asking for the business.

Just like a diet or exercise, or anything else that can give good results, it requires consistency and dedication. Those who put in part time effort will get, at best, only part time results.

Before you decide Scentsy isn’t for you, be honest with yourself and determine if maybe you’re only working out once a week and just having a little bit of soda. If you need help, support, encouragement, training, then reach out to your upline. That’s what they’re there for.

Years ago my mom and I saw exercise guru Richard Simmons when he came to Grand Rapids to do some motivational speaking and a community exercise session. If you don’t know who he is, ask your mom, or look him up.

Anyway, one thing he said has never left me, “It took you more than ten M&Ms to get those thighs. It’s going to take more than ten leg lifts to get rid of them!”

You can do it! Keep Going! Do another set of ten!

Thinking about joining Scentsy? Let’s talk. Visit ThrivingCandleBusiness.com for more information and contact me here.

Filed Under: Scentsy Business Tagged With: business building, tips

50 Ways to Earn 200 PRV

31 May 2019 By LA Leave a Comment

Scentsy Consultants:  Here are 50 tips to help you earn 200 PRV.

Scentsy consultant logoRemember, a qualifying party consists of 200 PRV points. It’s also the amount of PRV points required each month to stay active*.

You need to be active with 200 PRV at least once in every four consecutive months to remain a current consultant. It’s not cumulative over four months; and it’s not required every month. Think: Have a qualified party once every four months.

In the United States $1 generally equals 1 PRV. Ask your sponsor for the few exceptions or the formula if you’re in a country other than the U.S.

This is not a difficult requirement, especially if you work some of these tips below. You don’t need to sell Scentsy, merely share it with others. If you do that, you’ll not have a problem achieving 200 PRV.

1. Host one qualifying party (remember a qualifying party is at least 200 PRV).

2. Sell seven 6-packs. Use themes like Freshen Your Spring Scents, Bring Back My Bar, or Celebrate Summer Scents.

3. Do a poll for favorite discontinued scents and, based on the answers you receive, suggest new scents that are similar to their old favorites.

4. Provide outstanding customer service. Great customer service will get you 200 PRV every month without having to ask for sales. If you make sure your customers have the very best experience, they will come to you with new orders; those add up quickly!

5. Follow up. When a customer orders a new scent, chooses a product they’ve never used before, or simply has an order direct-shipped, call within a week to ten days to check on them. This is often a good time to talk about their wish list and perhaps book a party.

6. Promote Scentsy specials. Specials are a great reason to connect with past Hosts as well as past and current customers. It won’t take long to get 200 PRV in orders.

7. Let Host Rewards do the work for you. Call every past Host to let them know what they could earn from a qualifying party.

8. Have a Host of the Month Club. Find 4 people who commit to purchase 50 PRV in product per month. Make a schedule designating each person the Host for four months out of the year. Every month you would have one 200 PRV party and you’d have four happy customers who get to be the Host four times a year without too much effort on their part!

9. Post that you are getting ready to send in an order in three days and would be happy to include their order with yours. Let customers know about new fun products available now. Refer them to your PWS for contact information.

10. Be your own best customer. One Consultant shared, “I just ordered Washer Whiffs and hand soaps as I always keep those items in my cupboards. I used to buy gallon jugs from Costco; now I buy from myself.” The good news is, you not only save on shipping but you earn commission on your own order.

11. Work to get four 50 PRV orders. A few phone calls, a little follow up, and you’re on your way!

12. Change the way you purchase for personal use. Think about placing an order for everything you need for personal use only once every three months instead of a little each month. Chances are you will have at least a 200 PRV order. Remember you’ll save on shipping AND get free product.

13. Sell four NCAA collegiate football helmet warmers. Be sure to check the workstation for licensed product marketing guidelines.

14. Have an open house.

15. Brand yourself! One Consultant tells us, “I never go to the grocery store without wearing my Scentsy shirt, my ‘Just getting warmed up’ jacket, and I brand my kids…yup, they wear their Scentsy t-shirts to the store, too. I don’t always get a sale or hand out a catalog but eight out of ten times I do. Even if you get one qualifying party out of this method, you have your 200 PRV.”

16. Give Hosts two catalogs and five order forms. Tell each one if she has $100 in orders she gets any warmer at half-off. If two of these are successful, you have your $200 for a party, one half price item and one Perpetual Party Reward for the Hosts, $20 free product and probably four to six new customers! Note: This should be part of a Host coaching process. It may not be posted in a forum, social media, or otherwise advertised.

17. Talk to a day spa about our Scentsy Diffuser and Essential Oils. The quality of our diffuser and our oils are a natural fit for spas. Leave one in a salon for a week to let your customers try them out. Don’t forget to tell them about the enhanced limited lifetime warranty.

18. Pick up the phone. Make three calls about your business every day. It can be customer/order follow up, calling your list of 100, letting customers know of new products, or following up on leads. But if you do this consistently, you will sell product and book parties.

19. Sell two Perfect Scentsy packages (two $40 warmers and six candle bars). This represents great savings and is a good topic for those three calls you’re making every day.

20. Use Scentsy Body for party favors or birthday gifts! You can mix and match fragrances and products to create kits and packages.

21. Just ask. Start by talking about Scentsy and asking for the sale or at least offering a scent sample. Follow up quickly on the scent sample. The more people you talk to, the more opportunities you have to sell Scentsy! It won’t take long for 200 PRV to become routine.

22. Find four people to use our Laundry Love bundle.

23. Give Scentsy as Host gifts when you go to a party. Never go empty handed. Scentsy is better and lasts longer than a bottle of wine or a pie.

24. Have an open party on your PWS. This can be a standing party. Post the link to your social media sites. Close the party and open a new one at least twice a month so hosts are not waiting long for their orders. All customer orders placed online will be direct shipped.

25. Call your customers until you have collected five referrals. Follow-up with the referrals with a view to sell product or book a party.

26. Use old fashioned communication – one on one voice via telephone or in person. It’s too easy for people to ignore you or say no when you’re communicating digitally.  This business works best when you build relationships.

27. Brand your car with a car vinyl.

28. Be ready. Have some items on hand in your “mobile office” so you can sell on the go. Collect orders while you sit in the bleachers at your child’s game. Give the women at your bank a catalog. Hand out a business card and sample to a waitress or drive-through attendant.

29. Create a Facebook customer group. Stay engaged with your customers. Offer simple tips for an excellent Scentsy experience, update when new products come out, post corporate specials.

30. Mail past customers the Scent of the Month flyer with a scent sample. Break up the customer list so you can afford to do this monthly. Even if you only send 15 a month, you will start to see orders come in.

31. Invest in a set of basket testers.  Get one, two, or three basket parties out there working for you.

32. Hand out samples everywhere you go. Not sure how to get out of your comfort zone to talk to strangers in a non-obnoxious way? Hand them a biz card and sample then say “if you know anyone who likes candles will you please pass this along?”

33. Set up a fundraiser. When your orders come in, remember to label all product with your contact information to encourage repeat orders.

34. Call ten different customers each day for a week. Simply ask if they would like to try any of the new spring/summer fragrances.

35. Invite all of your past Hosts to a “Host Appreciation” event at your home. Express your appreciation for them, talk about new opportunities, explain Scent or Warmer of the Month and offer them a chance to book a party.

36. Host a “Mystery Host” party. This is like hosting your own Open House, except you let all your guests know that if they make a purchase, they will be entered into the Mystery Host drawing. At the end of the party, choose one name from the bag and that person gets to collect the Host Rewards from the party! You can choose to set a minimum spending limit for entry. For example: they must spend at least $50. This helps ensure you will get at least the 200 PRV needed to make it a qualifying party. Note: You may do this at a party, but you may not post or advertise this as a reason to come to the party.

37. Be your own best customer when it comes to gift giving. Babies, birthdays, and holidays are all great reasons to give a gift!

38. Talk to brides! During the slower summer months, focus on weddings. Suggest warming fragrance at the reception, as gifts for the bridal party, or a honeymoon package for those special “in the room” moments. Suggest Scentsy for rehearsal dinner, shower, honeymoon, or house-warming gifts.

39. Have a Scentsy bridal shower. Have the bride create a wish list, then share her list with those attending the shower.

40. Subscribe to the Warmer of the Month (60 PRV), & collect four 35 PRV orders.

41. Sign up for a small Scentsy Fragrance vendor fair. Use Combine and Save options to buy supplies for your fair. You can have a great display for 200 PRV and you will get free shipping, free and half-price products, and earn commission on your purchase.

42. Focus on high school and college grads. Promote the Make a Scene warmer for the gift giver to customize with school colors and mementos.

43. Contact local businesses with lots of employees in a small location (real estate offices, dental offices, medical practices, schools, etc.). Ask them if you can do a quick lunch time demo for their employees one day. Offer them the Host Rewards if the staff purchases enough to make it a party.

44. Host a Scentiversary party. It’s like a launch party. Invite all your customers, family, and friends to come celebrate the occasion and see the new Scentsy family products!

45. Create a system for customer follow-up. Put all customer order forms in a binder organized by month. Each month, flip three months back in the binder and call five customers a day to see if they are ready to reorder. By the end of the month, you will have contacted approximately 100 customers and are bound to have gathered 200 PRV in sales. Be sure to enter orders at least twice a month.

46. Make a simple flyer to include in your deliveries or to hand out with business cards or catalogs. Showcase simple Scentsy gifts that can be given to teachers on Christmas, their birthday, or at the end of the school year. Suggest gifts that range in price from $5-$20. If 20 people buy a 10 PRV gift, you will reach your 200 PRV. Set your gifts apart by wrapping them or including a cute tag to go with the gift.

47. Promote Bundle and Save. Let party guests know that if they purchase a Scentsy “Bundle e and Save” warmer system, they will be entered into a drawing for a special warmer. The prize will be awarded at the end of the month. Again, please note: this can be announced at a party, but may not be posted to Facebook or advertised in any other way. Use the Bundle and Save bundles properly. They’re intended to upsell – to give the customer an additional savings by buying a bit more. You’re hurting your business if you’re promoting them as a discount without purchasing more.

48. Throw a Mother/Daughter Spa Party. How about a Scentsy Body party featuring the new fragrances? With eight people at you party placing orders totaling 25-30 PRV each, you’ll easily reach 200 PRV. Offer wine and virgin strawberry daiquiris.

49. Provide “Off to College” Ideas. Make up examples of gifts to give new college students to spark ideas: Sleek White Warmer with inspirational saying instead of photo; Skin or Groom gift bag arranged in bathroom organizer (with cotton puffs, loofah, etc.); Washer Whiffs and Dryer Disks with roll of quarters and a stain stick in a laundry basket; Collegiate Warmer with 3- pack of bars. You can do this as a home party, open house or even a basket party.

50. Have a Scent Circle Fundraiser. Seek out schools, sports teams, school clubs like band or cheerleaders, explain the value and ease for the organization, and you can easily be at 200 PRV for the month.

“When you’re interested in something, you do it only when it’s convenient. When you’re committed to something, you accept no excuses, only results.” ~ Ken Blanchard

*This change from 150 to 200 PRV was effective March 2017.

Please Like, Share or Post a Comment!

About the Author: Laurie Ayers is a Michigan work from home mom and a Superstar Director with Scentsy Wickless Candles. She enjoys helping men and women start and maintain a home based business in the US, Canada, Mexico, Australia, New Zealand, Puerto Rico, Germany, Ireland, UK, France, Austria and Spain. To download a FREE Start Up Guide which provides more details about how to start a home business as well as to learn about our compensation plan go to www.thrivingcandlebusiness.com/how-to-start-a-candle-business/ 

Be sure to connect with me on Pinterest

Filed Under: Scentsy Business Tagged With: tips

Scentsy Income Tax Advice

11 January 2019 By LA Leave a Comment

My #1 Tax Tip for Scentsy Consultants is to Seek Professional Advice.

Find a CPA or accountant who is familiar with the direct sales industry. Every individual and household has unique situations and there is not a one size fits all answer.

While my corporation name is Income Wax, Inc., is rather clever, it’s not daunting like the dreaded Income Tax. Scentsy independent consultants are independent business owners. We must pay taxes on our income. Other consultants are not the best people to be asking for tax advice.

Below is an income tax guide that was compiled by Scentsy.

It may be a little too mumbo jumbo or legal-ese for some, which is why I advocate my number 1 tax tip: See professional advice. This was also produced a few years ago, and we know how tax laws tend to change annually. But for the most part, this should be fairly accurate, with the exception of perhaps percentages in the illustrations.


DISCLAIMER Scentsy does not advise on any personal or business income tax requirements or issues. Content from this reference is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance.

INTRODUCTION As a Scentsy Consultant, you encounter a myriad of tax issues. This document provides a quick reference for questions consultants commonly face regarding operating a Scentsy business from a tax perspective. Many of the explanations and examples are of a technical nature and may require multiple readings. Exploring the document as it applies to your questions rather than from start to finish is recommended.

BUSINESS STRUCTURE

The majority of Scentsy Consultants are sole proprietors. What does that mean from a tax perspective?

Being a sole proprietor means you operate a business for yourself and a separate legal entity under which the business is operated is not established with the IRS. Sole proprietors are required to complete Schedule C Profit or Loss From Business which demonstrates items of income and expense realized by the proprietor related to their business during the year and is submitted together with Form 1040 to the IRS annually.

I’ve been told sole proprietors are required to pay self-employment taxes. How do sole proprietors pay these taxes?

A sole proprietor operating their own business is required to pay self-employment taxes on income which exceeds $400 as calculated on Schedule C. Self-employment taxes are the equivalent taxes an employee and employer pay in an employment relationship. Employees have 7.65 percent of their pay withheld to pay Social Security and Medicare. The employer matches the 7.65 percent withholding amount and remits the 15.3 percent (7.65 percent employee portion + 7.65 percent employer portion) tax to the IRS. As a sole proprietor, you are both the employee and the employer, so both portions must be paid by you. This tax is remitted to the IRS in the same way your federal taxes are remitted – either in estimated payment vouchers (found at www.irs.gov by typing 1040-ES in the search box) throughout the year or simply when you complete your Form 1040 and pay the amount due when your annual return is filed.

How can I know if I need to complete estimated payment vouchers during the year or if I can just pay at the end of the year when I file my 1040?

This is not an easy determination to make, since the answer depends on what types of other activities exist besides your Scentsy business. Examples include your federal tax withholding if you have employment other than your Scentsy business, a spouse’s federal withholding amount from his/her employment, etc. However, penalties will not be assessed by the IRS on underpayments of taxes as long as 110 percent of the amount of federal taxes owed in the prior year is paid in during the current year.

Illustration: If the total tax on line 61 from your 2012 tax return (prior year) was $5,000, no underpayment penalties would be assessed, regardless of the total amount owed for 2013 (current year), as long as $5,500 of federal taxes were paid in during the year through federal withholding from employment checks of you or your spouse. However, if no employment earnings exist outside of the Scentsy business on which federal taxes are withheld during the year, quarterly payment vouchers would need to be prepared equaling $5,500 to avoid underpayment penalties (assuming a tax liability ultimately exists), as no federal withholding occurs on Scentsy commissions.

Many Consultants organize themselves as an LLC or an S-Corporation rather than operating as a sole proprietor. What are some of the common motivations for this?

Limited Liability Company (LLC) – The most common motivation for organizing a Scentsy business as an LLC is to form a partnership with friends or family so that more than one person can operate the Scentsy business under a single Scentsy Consultant identification number. Benefits of LLC formation are therefore usually not tax related but are pursued because of unique circumstances, as active LLC members receive no tax preference in operating as an LLC over sole proprietors. Active LLC members pay the same amount of self-employment taxes as sole proprietors.

S-Corporation – Although an ancillary benefit of S Corporation formation is the ability for more than one person to be a shareholder, the most common motivation for organizing a Scentsy business as an S-Corporation is to minimize self-employment taxes paid. While a sole proprietor is required to pay self-employment tax on the business’ annual net income, S Corporations pay employment taxes only on wages.

The process for determining the tax bill on the same amount of income earned under an S Corporation organization is different than for a sole proprietor or an LLC. An IRS requirement is for a reasonable salary to be paid to an S Corporation shareholder providing services to the entity on which employment taxes must be paid. The IRS’ intent with this law (§1366(e)) is to prevent small business owners from avoiding employment taxes entirely since the income of the S Corporation itself is not subject to employment taxes. If the IRS believes the salary you paid yourself and on which you were required to pay employment taxes is not sufficiently high and an appropriate representation of the services rendered, an agent can propose a salary adjustment for an accurate reflection on audit.

The difference in the amount of employment taxes paid because of S Corporation formation is illustrated in the tables below.

Illustration: Tax savings on employment taxes will grow as the difference between the total S Corporation income and the amount of salary paid to the shareholder increases. If the S Corporation business income grows significantly and justification for the salary not increasing proportionately is present, tax savings will increase, as illustrated in the two examples shown below. The first example shows that at a level of income of $30,000 and a salary paid to the shareholder of $20,000, it is a disadvantage to incorporate when considering the cost of unemployment insurance, not to mention the administrative burden of filing Forms 940, 941, W-2, and W-3 to be compliant with employee reporting requirements. Additionally, extra tax preparation fees will likely exist to file an S Corporation tax return. However, the second illustration demonstrates that at a level of income of $60,000 with the salary remaining at $20,000, tax savings can be significant, and potentially outweigh the administrative burdens of having an employee (yourself) and other costs involved with unemployment insurance and tax preparation fees

scentsy consultants tax

scentsy consultants tax

TAX DOCUMENTATION – FORM 1099-MISC

What is the purpose of the 1099-MISC? Can you provide additional guidance on why it’s issued, to whom it’s issued, and what the amounts represent?

The IRS requires Scentsy to send an annual 1099-MISC (by January 31) to all Consultants with commissions and awards of at least $600. If a Consultant’s earnings does not reach $600, a 1099-MISC will not be created since no data is required to be transmitted to the IRS regarding the Consultant. The purpose of Form 1099-MISC is for the IRS to be able to cross-check that amounts reported by Scentsy, as payments made to Consultants are appropriately represented as items of income by the Consultants to whom those commissions and awards were paid.

Each March 31, Scentsy transmits an electronic file to the IRS of the amounts shown on the 1099 provided to the Consultants on January 31, two months earlier. The two-month difference between when forms are provided to Consultants and when they are transmitted to the IRS is intended to provide sufficient time for the recipient (the Scentsy Consultant) to notify the issuer (Scentsy) of any reporting errors such as an incorrect Social Security number, a misspelled name or inaccurate amounts.

For Consultants filing tax returns as sole proprietors and completing Schedule C, the IRS will expect to see as gross receipts on Line 1 of the income section of Schedule C at least the amounts transmitted by Scentsy to the IRS in Box 7 of that form. “At least” is emphasized above since additional income which Scentsy does not report on the 1099 such as the Consultants’ resale of free or half-price items should be tracked by the Consultant and reported in addition to commissions and awards received.

The amount shown in Box 7 represents commission payments made to a Consultant during the year as well as awards that were granted because of services performed such as incentive trips. The Box 3 amount represents the fair market value of prizes given to Consultants that are not for services performed, such as random drawings.

Why does it matter whether amounts are reported in Box 3 or Box 7 on my 1099? Does it make a difference?

The location on Form 1099-MISC where amounts are reported is dependent on whether services were rendered towards receiving the commission or prize. Box 3 is for prizes and awards, not for services performed, while Box 7 is for prizes and awards for services performed. Box 3 amounts flow to Form 1040, Page 1, “Other Income,” and are not subject to self-employment while Box 7 amounts are generally subject to the self-employment tax and are reported on Schedule C of the Consultant’s annual tax return.

Which commission payments are included in the calculation?

The amount shown in Box 7 represents check amounts sent to the Consultant during a calendar year. For this reason, the December commission check of the previous calendar year will be included in the 1099 since it was sent in January of the current calendar year. The December commission check of the current calendar year will not be included since it wasn’t sent until January of the following calendar year.

Illustration: The December 2014 commission check will be included on the 2015 form since it was paid to you in January of 2015. The December 2015 commission check amount is not included on the 2015 form since it was paid to you in January of 2016.

EXPENSE DEDUCTIONS

I have heard there is a special law which allows you to immediately write off the purchase of a vehicle used for business rather than gradually expensing the cost of the vehicle (depreciation) over five years? Is that correct? Are there any limitations for this?

  • 179 is a special law that allows immediate expensing of assets for small businesses rather than depreciating the asset purchased for the business over time. However, to be eligible for §179 expensing, the vehicle must be used for business purposes more than 50 percent of the time. Listed property is property whose nature lends itself to personal use and therefore the IRS creates additional limitations. Automobiles (vehicles with gross vehicle weight (GVW) less than 6,000 pounds) and trucks (vehicles with GVW exceeding 6,000 pounds) are considered listed property and §179 is limited to $11,160 for autos and $25,000 for trucks. In other words, if a truck with a GVW of 5,000 pounds is purchased for $40,000 under a sole proprietorship, the maximum amount available under §179 is $11,160 since it will be classified as a passenger vehicle because of the GVW under 6,000 pounds. The remaining cost will be depreciated using the standard tables over five years. If the truck has a GVW greater than 6,000 pounds only $25,000 of the vehicle can be expensed under §179 because of the listed property limitation on vehicles.

Electing §179 immediate expensing on assets occurs on IRS Form 4562. Although utilizing the election may not be overwhelmingly advantageous for vehicles because of listed property limitations, it is a valuable election to use on the purchase of other business assets not subject to special limitations.

Illustration: A Consultant purchases a computer for $1,000 for their Scentsy business and does not elect §179. The depreciation expense in year one would be $200. Therefore, the Consultant’s income on which they are taxed for that year will be $200 less because of the depreciation expense calculated from IRS tables. The computer would continue to be depreciated over its IRS defined useful life according to IRS depreciation tables. However, the Consultant could instead elect §179 on the computer purchase. The effect of this election would result in entirely expensing the cost of the computer in the first year and lowering the Consultant’s taxed income for that year by $1,000. Although no depreciation expense is allowed after the first year when §179 is chosen since the entire cost has already been expensed, a Consultant seeking to lower taxable income sooner rather than later can benefit from this election by speeding up the timing of allowable deductions. Ultimately, the amount of the depreciation expense will total $1,000, but the timing of the depreciation can be altered based on whether §179 is elected. The difference in the depreciation by year is illustrated in the table below.

scentsy consultants tax

I’ve heard that I can deduct either actual miles driven for my Scentsy business or other expenses such as gasoline or repairs associated with my vehicle. What information must be kept to substantiate the deduction? Which method is more beneficial?

Expenses on a car or truck used in a business can be substantiated in a couple of different ways. First, you could keep all the business expenses on the car and deduct that amount. Examples of actual expenses include fuel, oil, license, insurance, repairs, depreciation, parking fees and tolls. If you choose to deduct expenses this way, you must have a receipt to demonstrate the amount placed as a deduction. Also, if you select the actual expenses method you’ll need to remain consistent using that method in future years. See IRS Publication 463 under the section “Actual Car Expenses” for more information on how to figure your auto expenses.

Another method for deducting business vehicle expenses is to deduct the Standard Mileage Rate for business miles. This is a rate determined by the IRS that is intended to represent the above stated deductions. For 2015, the rate is 57.5 cents per business mile (https://www.irs.gov/pub/irs-drop/n-14- 79.pdf). If you choose to use the standard mileage rate, you must keep a timely logbook which tracks the amount of business miles used on the vehicle during the year. The information your tax preparer or the tax preparation software will request if the actual miles method is utilized includes the date the vehicle was placed in service for business purposes, the number of business and personal miles and whether you have evidence (your log book) of the actual number of miles.

Although personal miles are requested on the tax return, you don’t have to keep a log book of miles other than business miles. Simply record your automobile’s odometer reading at the start of the year and again at the end of the year. If you keep a record of business miles, you can subtract your business miles from the total miles driven during the year to arrive at your total personal miles. Keep a log book in your car’s console and record mileage when your auto is used for business purposes.

Illustration: The following example illustrates a timely, accurate log book that should satisfy an IRS auditor if your log book is requested:

scentsy consultant tax

In the first year you will be reporting vehicle expenses, you may decide to retain all required receipts of actual expenses as well as a logbook demonstrating miles driven to see which method gives you a higher deduction and which is easiest to continue in future years. Most tax software preparation packages, such as TurboTax, have great modules for inputting this data when you’re ready to prepare your return and the software will determine which method provides the greatest deduction for you.

If I put a Scentsy vinyl on my car for advertising purposes, can I claim all my miles as business miles since I am attempting to advertise as I drive?

No, this is a common fallacy. You can deduct the cost of the vinyl and the cost of the labor associated with putting it on the car as an advertising expense but the miles driven are not automatically classified as business miles simply because of the existence of a decal.

When I take orders to work with me for delivery to customers that are coworkers, can I use those miles as a deduction?

It depends on the primary purpose of miles used on your vehicle. If the primary purpose of the trip is to make the Scentsy delivery, then those miles can be used in the deduction. If the primary purpose of the trip was to go to work, then those miles shouldn’t be used in calculating the deduction for vehicle expenses. This logic should be followed for trips that involve both personal and business purposes.

I’ve heard that if you lose money for four years in a row, your business isn’t considered a business by the IRS and will be reclassified as a hobby, disallowing any expenses. Are you able to verify whether this is true?

The IRS is looking for the motive of the existence of the business. The number of recent profitable years is one of various tests applied by the IRS in determining motive. If your business generates a profit in three out of five consecutive years, the IRS will likely not question the profit motive of your business. If your business does not pass this test then the IRS may choose to ask additional questions such as the following:

  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Has the taxpayer changed methods of operation to improve profitability?
  • Does the taxpayer depend upon income from the activity?

If your answers to these questions indicate that you have a profit motive then it is unlikely a reclassification from a business to a hobby will occur, regardless of the number of years of unprofitability (see Internal Revenue Code §183).

Do I have to include in my business income products I receive for half off or free but keep for my personal use? What if I resell the products?

Regardless of whether you keep free products or resell them, you should track them and include them in income. With regards to including in income free products a Consultant receives as a Host, IRS Publication 525 reads as follow: “If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. You must report this item as income at its fair market value.” IRS Publication 911 reinforces this requirement as it states, “If you receive prizes, awards, or ‘gifts’ in your role as a direct seller, report their full value as business income. Examples of items that must be included in income (are) free merchandise…”

Similarly, if you resell free product the amount received should be included in income. Consultants using the 1099-MISC as their sole basis for preparing their income tax return should track and add free products retained or sold during the year. Ensure that if you have already included in income the FMV of free product received, that the proceeds from selling the product are not also included in income or duplication of tax will occur.

Additionally, the difference between the amount paid for half-price items and the price for which they were resold should also be included in income. Presently, the IRS has not issued guidance on the treatment of half-price items retained for personal use. If an audit arises and the items are questioned, Consultants retaining half-price items for personal use can likely demonstrate that the items were sale priced items without inclusion in income of the discounted portion of the product.

I had some personal expenses from an incentive trip that I wouldn’t have incurred if it wasn’t for my Scentsy business and the networking I did because of the trip. Can I deduct those?

Many trips are actually a hybrid of business and personal. IRS Publication 911 addresses these situations in the Travel section with the following:

“If you temporarily travel away from your home on business, you can deduct your ordinary and necessary travel expenses. You cannot deduct those (expenses) for personal and vacation purposes. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a nonbusiness side trip, or had other nonbusiness activities, deduct only your business related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business related expenses at your business destination.”

Unfortunately, you will have to determine which items during your trip were businesses related and which were personal in nature and deduct only the business related expenses. However, as long as the primary purpose of the trip is business and more than half of the days were business rather than personal or vacation days, you can deduct 100 percent of your transportation (e.g., airfare, gas for travel, etc.) costs (IRC §1.162-2(b)(2)).

I have heard there is a deduction available for the portion of my home I use for my Scentsy business. Is this a worthwhile deduction?

It can be, but before you decide to deduct expenses for business use of your home you might want to consider that in order to qualify for the deduction you must meet certain tests. The part of the home used for business must be used regularly and exclusively for business. It can be a room or a portion of a room and should be separately identifiable to be exclusive. Occasional or incidental use of the room is not regular use.

Effective Jan. 1, 2013, two methods now exist for determining the amount of the deduction you are eligible to take. The first method can be calculated as follows: If you have a room or area that qualifies as a home office and you have indirect expenses such as utilities, you will take a percentage of the total expenses applicable to the space the home office occupies.

Illustration: For example, if your home office occupies 10 percent of your home, then 10 percent of your electricity bills become tax deductible. Some of the expenses you can deduct for your home office include the business percentage of rent or mortgage, property taxes, utilities, homeowner’s insurance and home maintenance that you pay during the year.

However, the new simplified method announced by the IRS in 2013 requires less administrative hassle or calculations. You are allowed to simply measure the square footage of the area utilized for the home office and multiply that figure by $5 a square foot to determine your home office deduction.

Be prepared to defend your deduction in the event of an audit by having measurements of the area and copies of bills or invoices to substantiate your expenses if you choose the first method. Also, home offices may require physical observations on audit so you’ll also need to demonstrate the exclusivity of the area for business purposes. Follow the instructions on Form 8829 at www.irs.gov for more details.

I did a local fundraiser and donated my commissions to the charitable organization. Does it make a difference in taxes how I classify the donation?

Yes. Depending on the classification (advertising expense on Schedule C vs. charitable contribution on Schedule A) and amount of the commissions donated, some Consultants could lose money on fundraisers after paying applicable taxes.

If an amount is earned and given to charity, self-employment taxes will still be owed on the amount donated if it is classified as a charitable contribution and reported on Schedule A. However, if the amount is classified as an advertising expense, a direct reduction in the amount of business income earned, it will result in no taxes owed on the amount donated. Classifying commissions donated to a fundraising organization as advertising is not a decision that should be made without careful consideration, however. An IRS auditor could reclassify the amounts from advertising to charitable contributions if he does not feel a reasonable relation to the business exists in gaining sales by donating the commissions.

Illustration: Three different fact patterns are explored below that demonstrate the tax consequences of a $5,000 donation on a $5,000 commission to a charitable organization for a fundraiser. The first two examples classify the amounts donated as charitable contributions and the third example shows the tax results when the donated commission is classified as an advertising expense.

Example 1 – The Consultant earns $5,000 and donates the full amount to the fundraising organization. When tax time arrives, the 1099 reflects the $5,000 of earnings and the Consultant reports the amount earned on Schedule C as Business Income and the amount donated on Schedule A as a Charitable Contribution. Self-employment taxes on the $5,000 earned of $765 along with Federal ($1,250) and State ($315) taxes results in $2,330 of total tax. However, the charitable contribution deduction from Schedule A on the amount donated offsets the Consultant’s federal and state taxes by $1,250 and $315, respectively. The end result of additional taxes owed on the amount donated is the amount of self-employment taxes of $765.

scentsy consultant tax

Example 2 – Example 2 is identical to Example 1, other than the Consultant not having sufficient deductions to itemize. Each year, the IRS publishes a stated amount that is allowed as a standard deduction amount. Taxpayers have the choice of itemizing deductions or taking the applicable standard deduction amount, whichever figure will result in a higher deduction. This Consultant does not have sufficient itemized deductions (e.g., mortgage insurance, property taxes, state taxes, charitable contributions, etc.) to cause the consultant to choose to itemize. Therefore, the charitable contribution deduction from Schedule A on the amount donated has no offsetting effect on the Consultant’s federal and state taxes of the $1,250 and $315. Thus, the end result of additional taxes owed on the amount donated is, the sum of self-employment taxes of $765, federal taxes of $1,250, and state taxes of $315, totaling $2,330. This means that not only did the Consultant donate their $5,000 commission, but also paid $2,330 of taxes on the donated commission. Be careful!

scentsy consultant tax

Example 3 – In Example 3, the Consultant chooses to classify the amount donated to the fundraising organization as an advertising expense because of the goodwill developed and new clients attracted through the event. No taxes are owed on the amounts earned, donated and classified to advertising expense as a direct reduction in the amount of business income earned results on Schedule C ($5,000 income – $5,000 expense = 0).

scentsy consultant tax

CONCLUSION

The topics covered in this document were determined by emails received, discussions with Directors at Boot Camps and phone conversations with Consultants. While most questions specific to your personal situation are best answered by a tax professional familiar with your circumstances, the quick reference guide can be expanded to include other topics if sufficient demand exists from a common population. If you have questions you believe are applicable to the general field of Consultants, please submit them to finance@scentsy.com for consideration. We hope this document will be a valuable reference tool in operating your Scentsy business as you encounter commonly faced tax issues. Good luck!

Filed Under: Scentsy Business Tagged With: Consultant training, tax

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Laurie Ayers

Laurie Ayers Scentsy Michigan


I'm Laurie Ayers, known as LA by many, a Superstar Director who started with Scentsy in 2006. Read my Scentsy story HERE.

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