Questions asked by Avon Representatives about Taxes
Q. Should I file an income tax return?
A. Since you are self employed, you must file a federal tax return and pay self-employment tax if you had net earnings (that's after your business expenses have been deducted) of $400.00 or more from self-employment during the year. You may also have to file a return for other reasons.
Note: Each individual's circumstances will vary, and you may want to consult your local IRS office or a tax expert. If you plan on consulting a tax expert,be sure to save this page and share it with them.
Q. If I have to file an income tax return, does that mean I have to pay income tax on my Avon earnings?
A. Generally, yes, but not necessarily. Even though you may be required to file an income tax return, you will not be required to pay income tax, unless your income (after all of your business deductions) reaches a certain minimum level.
Q. How can I figure out my business earnings from my Avon business?
A. Your earnings are the amount you sell to your customers, minus the amount you paid Avon for the merchandise, minus all of your business deductions. You must also include the value of prizes and awards you receive from Avon.
Q. What information does Avon provide for tax reporting purposes?
A. For many Representatives, Avon is not required to provide any tax information.
However, for those Representatives who purchase $5,000 or more of merchandise for resale in a single year, Avon is required to supply your name, address and Social Security Number to the IRS.
In fact, Avon informs the IRS only that you have $5,000 or more purchases from Avon and does not supply a specific dollar amount unless requested by the IRS.
Avon also does not report your earnings, as only you can properly determine them. The amount of merchandise purchased for resale does not include demonstration products, sales tools or other items shown on your invoice as "No-Discount Items".
Returned merchandise will not be included in this amount.
In addition, when prizes, awards, recommendations earnings or any other bonuses you receive from Avon total $600 or more annually, Avon, like any other Direst-Selling Company, must by law file an information return form (1099) with the IRS and send a copy to you for your records.
Note: Keep in mind the Avon purchases of $5,000 for resale probably mean Customer sales of $8,500, depending on your earnings level (President’s Club, Rose Circle, etc.)
Because you are an independent contractor, Avon does not withhold taxes from your earnings, and tax reporting is solely your responsibility.
Q. What deductions/credits can I claim?
A. Take a look at the Representative Business Records Chart. It lists the most common campaign-related expenses, which you can deduct.
In addition to all of your campaign-related expenses, you may also be able to deduct the following:
*The amount paid to Avon at the time you became an Avon Representative might be deductible the year in which you were appointed.
*The cost of training courses related to your Avon business.
*The cost of maintaining a part of your home which you use exclusively and regularly for your Avon business might be deductible under some limited conditions. This can include a portion of your utilities.
*The expense of operating your automobile in connection with your Avon business.
*Any other business expenses which you may incur directly in connection with your Avon business.
*You may also be eligible for a child tax credit of up to 35% of the cost of care for children under the age of 13 or for disabled dependents (including a spouse), if you need the care to enable you to work at your Avon business. This is a credit against tax owed, not a deduction, and it reduces your tax dollar-for-dollar by the amount of allowable expenses.
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Ask your local IRS office for Publication #503 if you would like more details.
Remember: Keeping good records is the best thing you can do to ensure that you receive the benefit of every tax deduction you have coming to you.
For more information, there are many free publications available from your local IRS office, which explain general tax information for direct selling.
"It makes no sense at all to cut down sales and earnings because of the fear of taxes. Your Avon earnings will always come out ahead."
-H. Block of H&R Block, Inc. Tax Experts.