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Sparks Team AMSOIL Training Call for Monday February 16th, 2015
This weeks Sparks Team AMSOIL Dealer training call we cover Home Business taxes and how to maximize your tax benefits and deductions.
Cindy Cleaver is the owner of C.M.C., CPA, PC an Accounting and Tax Service located in Clarksville Tennessee.
You can contact Cindy via the website or call her office at 931-266-0706.
Some of the questions answered on this weeks call are:
- How important is it for a home business owner to take advantage of current IRS tax code?
- For someone who is a new home business owner what should they start with right away to maximize their tax savings?
- How would someone learn more about the tax advantages of starting and operating a home business?
- Should you start a home business for the tax advantages alone?
- Should I choose CPA or an H&R Block type of business for tax preparation?
- How to determine if your business is a Hobby or Legitimate business
- Should I be afraid of the home office deduction?
- and more.
Michael,
Just wanted to let you know that I found this call to be extremely helpful. I didn’t know that your start-up and business exploratory costs could be a deduction and this was good to know as I plan to use this to get some product to pass out for some trials here this summer. I had a question or two if anyone out there may know. On the call it was said that a loss reported for 3 years would get your home business classified as a hobby. Would it be better not to report a loss one or two years so this doesn’t happen?
Second question slightly unrelated. Its great to hear how well people are doing and what they are getting into but was wondering if anyone could share their approach or initial sales “pitch” so to speak when they first approach someone? I have only talked to a few people so far one was pretty receptive the other was not. Anyone know certain things they find the work and things they find to avoid?
Thanks,
Jared
Jared,
I am glad to hear you got a lot of useful information from our call. I would like to follow up on your question about a business being classified as a hobby. With our limited time on the call I was not able to go into all the specifics of a business activity being classified as a hobby, so let me expand on that for you. If a business has a loss in three of the last five years the IRS may select it to make a determination on the activity’s profit motivation. If the motivation of the activity is not to make a profit then it would be classified as a hobby and therefore subject to a hobby’s expense deduction limitations. However, a profit or loss in the last five years is only one of nine factors that the IRS will evaluate to make the determination. The nine factors are:
1. The manner in which the taxpayer carries on the activity
2. The expertise of the taxpayer or his or her advisers
3. The time and effort the taxpayer spent in carrying on the activity
4. The expectation that assets used in the activity may appreciate in value
5. The success of the taxpayer in carrying on other similar or dissimilar activities
6. The taxpayer’s history of income or losses with respect to the activity
7. The amount of occasional profits, if any, that are earned
8. The financial status of the taxpayer (i.e., dependence on income from the activity)
9. Elements of personal pleasure or recreation
A loss in three of the last five years does not guarantee that your business will be classified as a hobby, it is just the first factor that the IRS can rely on. Do you have a solid business plan? Are you devoting time to the business to make it successful? Are seeking advice from successful advisers to improve the business? Are your losses getting progressively lower? Meaning you are slowly progressing to a profitable year. If yes, you could argue that your business activity has a profit motivation, even if it has had a loss for three to five years. There are ways to do tax and business planning to avoid the hobby classification. While we do need to keep it in mind to avoid the classification, please do not let that be the only determining factor on taking deductions that you qualify for.
If you have further questions, I would be happy to answer them.
Cindy Cleaver
Certified Public Accountant
931-647-2486
cindy.cleaver@brownbrownandassociates.com
Jared,
I see that Cindy answered your question on the taxes. I will try to help with the other question on approaching prospects.
I like the idea of approaching people and just letting them know that I’ve started a new business. Asking them if they wouldn’t mind taking a look at what you are offering. Then be prepared to briefly talk about what you can offer your customer. Don’t get into too much detail, you want just enough to gauge interest. If they are interested offer follow up information to them. If they are not interested, offer them your card and tell them if they ever change their mind to give you a call.
This is where followup becomes extremely important. Followup is a 3 fold thing, one is to be able to educate your prospect on the products and how they can help them. Two is that is takes 5-7 exposures in general to make a sale. Follow-up provides those exposures. Thirdly it give you a chance to build a long term relationship with your prospect and move them up the loyalty ladder. See my article on that. http://www.michaelsparks.us/2013/05/loyal-customers-become-advocates/.
Tom Hopkins, the worlds foremost sales trainer has a lot of great information on initial contact in sales. Tom Hopkins Making Initial Contact
The main thing to think about when telling others about your new business (I used the new business thing for at least 2 years when I got started) is
– be positive and outgoing
– don’t be pushy
– try to get their contact information for followup
– work on long term relationship instead of one time connections/sales
– don’t be hard on yourself, you won’t land every sale. Statistics are about 2 out of 10 will buy from you. Even the pro’s can only bat .300 and they can make millions of dollars.