Re: end of year stock deduction calculations

[Guest guest]

Okay.

Here I am thinking waaaay ahead as I've only begun to plan my organ

and organizational tools, but I'd really like to have an idea (now)

as

to whether this prospect of selling blends will get too tedious.

The last time I looked into the tax and inventory-keeping side of

this

interest of mine, it seemed to me (without heavy research into it)

that selling blends could get rather tricky. Basically, (if I recall

correctly) two different tax rates apply to the stock on-hand at the

end of the year: one rate for items you plan to sell and another for

items you plan to use as samples (and I imagine that anything used

to

create test blends could be applied to this category). But

then...what happens if you create test blends that you've not

formulated into something saleable by year's end (or fiscal year's

end)?...and your taxes paid are based upon that present reality

(equaling a lower tax rate, if I recall correctly) and then...next

year you decide to use that accord in a blend that becomes saleable?

Eek. Then you've paid an inaccurate tax amount, I'd guess. But maybe

not. Maybe the next year one would just pay the to-be-sold tax rate

for that bottle and the number of drops of oil it contains. I don't

even want to begin to think of all the permutations involved here.

Anybody know how to find a tax pro with tax experience in a field

like

perfumery? I suppose the safe bet would be to assume that all oils

in

one's inventory would be sold eventually...and pay inventory taxes

(I

think that's what they were called) on anything I haven't sold that

year. So that 20-year-old sandalwood (if I had some) would get more

expensive with each year that passes.... I'm guessing that's one

good reason to not buy oils that wouldn't be gone within a year or

two.

~

Hi ,

What part of the world are you in? i.e., what country? In the U.S., there

is no tax on inventory, only on sales or financial activity (business

income, i.e., consulting fees, workshop fees, etc.). Inventory is carried

over from year to year as an asset of your business and only taxed when you

receive income from the sale of it. The idea of an inventory tax is

alarming. Please explain further.

Marcia Elston, Samara Botane http://www.wingedseed.com

" When the power of love becomes stronger than the love of power, we will

have peace. "

Jimi Hendrix

[Guest guest]

> Okay.

>

> Here I am thinking waaaay ahead as I've only begun to plan my organ

> and organizational tools, but I'd really like to have an idea (now) as

> to whether this prospect of selling blends will get too tedious.

>

> The last time I looked into the tax and inventory-keeping side of this

> interest of mine, it seemed to me (without heavy research into it)

> that selling blends could get rather tricky. Basically, (if I recall

> correctly) two different tax rates apply to the stock on-hand at the

> end of the year: one rate for items you plan to sell and another for

> items you plan to use as samples (and I imagine that anything used to

> create test blends could be applied to this category). But

> then...what happens if you create test blends that you've not

> formulated into something saleable by year's end (or fiscal year's

> end)?...and your taxes paid are based upon that present reality

> (equaling a lower tax rate, if I recall correctly) and then...next

> year you decide to use that accord in a blend that becomes saleable?

> Eek. Then you've paid an inaccurate tax amount, I'd guess. But maybe

> not. Maybe the next year one would just pay the to-be-sold tax rate

> for that bottle and the number of drops of oil it contains. I don't

> even want to begin to think of all the permutations involved here.

> Anybody know how to find a tax pro with tax experience in a field like

> perfumery? I suppose the safe bet would be to assume that all oils in

> one's inventory would be sold eventually...and pay inventory taxes (I

> think that's what they were called) on anything I haven't sold that

> year. So that 20-year-old sandalwood (if I had some) would get more

> expensive with each year that passes.... I'm guessing that's one

> good reason to not buy oils that wouldn't be gone within a year or two.

>

> ~

>

Dear ,

This will all have to do with what type of business you have and your

accountant will help you depending on how your business is set up. You

need to know how much each product you have costs including container

labeling...research and experimentation is considered loss and is a

deduction.. with a corporation the loss is carried to the following years

deduction as well as the inventory. You pay tax on your profit..and you

pay sales tax quarterly...all of this will vary slightly state to

state....and it is best to find an accountant that will help you get

organized and explain how to keep records on a weekly basis...once again

some taxes are quarterly and then some are fiscal... with Apothecary

Keeper sells software that itemizes the cost of product he's in the group

check him out. My accountant helped me immensely when I started my

business and still does immensely...it's nice to have someone to ask

questions on going as your business grows...my 2 greatest allies my lawyer

and accountant..

hope this helps a little,

LF

[Guest guest]

Hi, Marcia.

Good stuff here.

Jen wrote:

> pay inventory taxes (I

> think that's what they were called) on anything I haven't sold that

> year. So that 20-year-old sandalwood (if I had some) would get more

> expensive with each year that passes.

Marcia wrote:

> What part of the world are you in? i.e., what country? In the

U.S., there

> is no tax on inventory, only on sales or financial activity (business

> income, i.e., consulting fees, workshop fees, etc.). Inventory is

carried

> over from year to year as an asset of your business and only taxed

when you

> receive income from the sale of it. The idea of an inventory tax is

> alarming. Please explain further.

U.S. (TX) Only tax on sales and financial activity. Ahhh, that sounds

like relief.

Unfortunately, I don't recall where I read/heard this thing about

inventory tax or even the specifics about it. Maybe I found it

online? I remember feeling rather alarmed, too. Panicky maybe and

very disappointed.

It is something I'll look into more, but it sure is nice to hear

someone (you) say that this is news to you. Maybe my fear will get to

be discarded soon.

~Jen

[Guest guest]

lesle@... wrote:

> This will all have to do with what type of business you have and your

> accountant will help you depending on how your business is set up. You

> need to know how much each product you have costs including

container labeling...research and experimentation is considered loss

and is a

> deduction.. with a corporation the loss is carried to the following

years

> deduction as well as the inventory. You pay tax on your profit..and you

> pay sales tax quarterly...all of this will vary slightly state to

> state....and it is best to find an accountant that will help you get

> organized and explain how to keep records on a weekly basis.

That all sounds simple enough. Maybe what I heard about inventory tax

(whatever that was--the specifics left me long ago) was bogus. Thank

you for your input!! You all are making my life so much easier. Mmmm.

with Apothecary

> Keeper sells software that itemizes the cost of product he's in the

group

> check him out.

I saw his link online and wasn't sure how well this product would fit

my needs, but I like your tip to check him out. Maybe I'll write to him.

~

[Guest guest]

> Anybody know how to find a tax pro with tax experience in a field like

> perfumery? I suppose the safe bet would be to assume that all oils in

> one's inventory would be sold eventually...and pay inventory taxes (I

> think that's what they were called) on anything I haven't sold that

> year. So that 20-year-old sandalwood (if I had some) would get more

> expensive with each year that passes.... I'm guessing that's one

> good reason to not buy oils that wouldn't be gone within a year or

two.

, first of all, you will not have to worry about your inventory

and taxes unless you get audited. What you are trying to do is avoid

getting audited. IF you get audited (I was once), you must have proof

of every single deduction and expense, plus of course income. Not as

hard as it sounds.

From having been audited, and at my first audit meeting, show up with

my accountant and mouthing off at the auditor ( " don't you people have

better things to do than torment small business people? " ), I can tell

you what not to do. The result of my big mouth, big guns, and impatient

attitude was 2 complete 'blue pages' of requested documentation (one

different request per 2 lines). It was a humbling experience and I've

managed not to get audited since.

But lets not put the cart before the horse. If you are not in business,

but very seriously thinking about getting into business, get an

accountant first, a local one you can call at will and who you have a

rapor with. No, most accountants know absolutely nothing about the

perfume business. It doesn't matter. You can blame everything on him,

and don't take him with you if audited.

No audit (unless the IRS suspects you of evasion for good reason-and

then it's the FBI, not the IRS coming to your door. At that point, you

call your lawyer, then your accountant, in that order) is going to

consist of coming to your house or place of business to see how much

inventory you have remaining.

I doubt many auditors can tell the difference between old sandalwood

and a brand new bottle you bought last week, or care. But more

important, you won't get selected for auditing til at least the

following year or 2 years later, so even if they looked, they'd have no

way of knowing how old or new your inventory is. Forget that. Your

accountant will ask, and you will guess.

For your business, you will have a Schedule C. That's it. Go download

one if you want, it's pretty basic plain and simple. Doing the math for

it is not. But all these very specific questions won't make a whit of

difference when all they want is the bottom line, that one set of

numbers that goes in the blank. The only thing that matters is that you

have receipts for it all.

Here's where the accountant comes in. Life is much simpler when you

simply throw all your receipts and invoices in a box and let him figure

them out every month. He will not anally worry about what category goes

where, he'll just throw most of them in a pile and write the number

down. You will think he's doing all the sorting and stop worrying.

Should you get audited, you show up with clean but unimpressive

clothes, remove all jewelry and makeup, do NOT bring your accountant,

and be very very very humble. Ok maam. Thank you maam. They may be paid

$10 an hour, but they have the power of god. If you are somewhat

pathetic, they may take mercy on you and only ask to see a few lines of

questionable stuff on the blue paper and not pages.

The fact that someone else signs your return shows how ignorant you

are. This is a good thing in an audit, especially when you have huge

boxes of receipts and invoices for them to organize (would you want to

sort someone else's year's worth of papers?), and you don't know how.

At the audit itself, I showed up alone (having learned my lesson from

the first meeting), with 4 gigantic boxes of files, prepared to bore

her to tears for the 3 months of work it cost me to assemble them for

her (here's the other tip... throw NOTHING away. Not gas receipts, not

electric bills, NOTHING. I kept all my receipts for clothes and shoes

and makeup and 7-11. They want to audit you, they shouldn't mind

sorting it. Toss it all into boxes and give to your accountant (minus

the personal receipts, save these to toss in box at end of year). You

get them all back, but you will have a formal record of everything you

reported).

When she started in on the papers and realized what she had done, she

asked me to read out the numbers for her from my check register, after

looking inside a single box for 5 seconds. This taught me a valuable

lesson. You must have the boxes, but they really only care about your

books. You or your accountant make the books. Take that as you will. If

she looks in the boxes, she will see the daunting task ahead of her,

and odds are good she won't want to, especially if your filing system

is a mess.

By the time my actual audit was done (note all the proper humility

above), I was sent home with the promise of a refund (the most

expensive $240 I have ever made in my entire life), and she 'scheduled'

the next 2 years of audits she was planning to spring on me at the

audit. For the IRS, 'scheduling' means they toss it and you don't get

audited again (dunno for how long, but it's been 15 years with no

audits). She told me that they do not audit farther back than 7 years,

so you can toss records older than 7 years. This saves you a bit of

storage.

Now I did NOT cheat on my records and duly gave my accountant all

business receipts. But if they find you are off by a few dollars, you

have not only penalties but interest... so if you owe $1000, it could

easily be $2500 or more. This is why you keep ALL receipts, since a

pair of shoes can just as easily be a lb of scents, and they don't know

it's a pair of shoes. But if anyone has a few numbers off, you could

really be in for a world of hurt if you get hit with penalties, not to

mention that every year thereafter, you will be sitting in that office

again. Keep the shoes receipts just in case some numbers are off.

DO NOT TAKE YOUR ACCOUNTANT to the audit at all! Big mistake... now the

auditor thinks she's auditing a drug lord and not a small business and

you get the pages of blue paper requests. You as dumb taxpayer are not

expected to know much, the gloves come off when the accountant is

there. Life was good when I didn't take him the 2nd time.

What does this have to do with your question? 1. get an accountant so

you can spend your time on more productive activity. 2. keep all

records for that YEAR no matter how small in messy files. 3. forget the

laws, that's your accountant's problem. 4. if you get audited, play

dumb, blame it all on the accountant, and do as told with no backtalk.

You can most likely get a good local accountant for $100/month retainer

if you only own 1 small business (this depends on where you live too).

He does your sales tax and everything else you have to file, you just

bring him the mess every month. Obviously, if you want an accountant

from Waterhouse Price or Arthur , you'll pay $1000 an hour plus

expenses, but a local small business accountant won't charge close to

that.

[Guest guest]

snipped to save BW

You can most likely get a good local accountant for $100/month retainer

if you only own 1 small business (this depends on where you live too).

He does your sales tax and everything else you have to file, you just

bring him the mess every month. Obviously, if you want an accountant

from Waterhouse Price or Arthur , you'll pay $1000 an hour plus

expenses, but a local small business accountant won't charge close to

that.

Hello All.

Bloody Hell!!!!

And I thought Britain was bad!!! I Would have had a nervious breakdown If

That had happened to me.

While we are on the subject of Audit Which is part of a tax investagation.

The Fedaration of Small Buisness,s. Do a insurance policy that covers you

aginst tax investagation even if you do not use a accountant,That means that

apart from no Solicitors fee's the tax office have to deal through them they

are not allowed to contact you direct.

In point of fact lots of British insurance companys also offer this servis

Their is on called Qudos (though I am not sure of the way they spell it.) my

friend uses. I have put in the URL for the fsb below.

www.fsb.co.uk

The Main Telephone Number for their Blackpool office is: 01253 336000 If you

call that they will give you your regional phone number.

HTH

Hells Bells & Cockle shells Helen How did you survive it!!!!

Love & Light Gill.

[Guest guest]

NOTE : Edited to trim....

> with Apothecary

> > Keeper sells software that itemizes the cost of product he's in the

> group

> > check him out.

>

I have just started to use the Apothecart Keeper, It is Great ( Though

it never crossed my mind it could be used for IRS ( " Please pass the

brain Cell!! " ) But of course it can.

It works fine in Metric also So Europians buy without fear!! I have

only basic computer skills & I was able to work it out.

Essentialy yours Gill.

PS If I can send you feed back or Testamonial please tell me

how & to were.

[Guest guest]

________________________________

From:

[mailto: ] On Behalf Of studentofperfumery

Sent: Wednesday, January 03, 2007 8:39 PM

Subject: Re: end of year stock deduction calculations

U.S. (TX) Only tax on sales and financial activity. Ahhh, that

sounds

like relief.

Unfortunately, I don't recall where I read/heard this thing about

inventory tax or even the specifics about it. Maybe I found it

online? I remember feeling rather alarmed, too. Panicky maybe and

very disappointed.

It is something I'll look into more, but it sure is nice to hear

someone (you) say that this is news to you. Maybe my fear will get

to

be discarded soon.

~Jen

Jen, a very good resource for you is the Small Business Administration . . .

They have classes, provide mentoring and a wealth of information about the

legalities as well as good business practices. Mostly for free. There is

sure to be one near you. A very wise business mentor once told me that

success is only guaranteed when you (the business owner) know as much or

more about the details of your business as anyone you have work for you.

IOW, know accounting practices if you hire an accountant to insure that they

don't cheat you. Not comfortable to say this out loud, but better safe than

sorry. Along the way, you will find instances where contracts will be

required, so make sure you also get legal advice if entering into a lease or

other contractual agreement. These days, (especially when borrowing money)

there is fine and little-understood language that adds penalties you

wouldn't dream existed. The SBA can help you with this, also.

You can also write off (deduct the cost of) lost or damaged product. Some

inventory will be depreciated each year (lessen in value) and some will

appreciate (increase) - ultimately, the final value depends on how much you

sell it for and you are taxed on the net profit (sale price minus purchase

price and other attendant costs/including overhead to make the product).

As Helen has shown, an IRS audit is to be avoided, but remember that

ignorance is no defense if they find you have broken the rules. If you are

asked if you, yourself, prepared your tax return and you answer in the

affirmative when it was prepared by an accountant, woe is you when the truth

comes out. And, it will, they are thorough and know what they are looking

for. And, they can ruin you in a heartbeat. Penalties can be stiff. Best

to have everything up front, properly recorded and reported and above board

in the first place. There are many legal deductions or partial deductions

and capital investments (equipment, computers, etc.) that can help reduce

your taxable income. It is not unlikely that your business will operate at

a loss for the first several years, and that is allowable, in which case you

pay no taxes during that period.

Marcia Elston, Samara Botane http://www.wingedseed.com

" When the power of love becomes stronger than the love of power, we will

have peace. "

Jimi Hendrix

[Guest guest]

> Hi ,

>

> What part of the world are you in? i.e., what country? In the

U.S., there

> is no tax on inventory, only on sales or financial activity (business

> income, i.e., consulting fees, workshop fees, etc.). Inventory is

carried

> over from year to year as an asset of your business and only taxed

when you

> receive income from the sale of it. The idea of an inventory tax is

> alarming. Please explain further.

>

> Marcia Elston, Samara Botane http://www.wingedseed.com

Marcia is right. The only time you will need the information of that

sort is when you write a business plan and detail all your business

assets. Otherwise, it's all about how much you sold that year from

your business, minus how much you paid for materials and packaging. If

you give free samples that is part of your promotion budget. If you

blended but couldn't sell it this is part of your development budget.

You need to count these in when you price your products. But you don't

need to pay taxes besides sales taxes on what you own.

Ayala Sender

www.AyalaMoriel.com

www.SmellyBlog.com

[Guest guest]

> Marcia is right. The only time you will need the information of that

> sort is when you write a business plan and detail all your business

> assets. Otherwise, it's all about how much you sold that year from

> your business, minus how much you paid for materials and packaging. If

> you give free samples that is part of your promotion budget. If you

> blended but couldn't sell it this is part of your development budget.

> You need to count these in when you price your products. But you don't

> need to pay taxes besides sales taxes on what you own.

>

> Ayala Sender

> www.AyalaMoriel.com

> www.SmellyBlog.com

Aaaahhhhh...With all the input I've received, I'm sighing with relief.

The path ahead is much clearer and simpler than I feared. Thank you ALL!!!

~Jen

[Guest guest]

Best

> to have everything up front, properly recorded and reported and

above board

> in the first place.

Thanks for your words, Marcia Dear.

Humility is important as Helen (if I recall her name correctly...I

should have her e-mail in front of me for reference) talked of; I

doubt that an auditor would stand for someone throwing a finger in

his/her face (not that any of us would do that). Part of humility (to

me) involves having respect for the system which we are a part of. Not

that we can all reasonably be completely humble at all times! It's

just not a part of our nature. And many good things come from not

being humble, if you ask me.

I agree and I'm right there with you...Being above-board is a top

priority of mine. I pay tax on all income and deduct only expenses

that apply to my " business " (as an independent without a business

name, I have no business, per se)! And those deductions at the start

of a venture do add up, don't they?!

So far, my bookkeeping has been simpler than might be necessary for

perfumery. And that experience of several years of self-employment

should provide useful when and if I create a more complex offshoot or

transition entirely. (Retail seems much more complex, tedious, and

regulation-laden to me than consulting, spiritual counseling and

coaching, but maybe I'm mistaken.) I presently use my natural healing

plant materials in my healing work and consultations. The plan is to

practice blending in this context for now. As I create more pleasing

and healing blends, I'll likely begin giving small vials to clients in

the interest of assisting them with meditative homework assignments.

This will also allow me to get feedback on my creations (market-research).

~Jen

[Guest guest]

> You can most likely get a good local accountant for $100/month retainer

> if you only own 1 small business (this depends on where you live too).

> He does your sales tax and everything else you have to file, you just

> bring him the mess every month. Obviously, if you want an accountant

> from Waterhouse Price or Arthur , you'll pay $1000 an hour plus

> expenses, but a local small business accountant won't charge close to

> that.

>

> Hello All.

> Bloody Hell!!!!

> And I thought Britain was bad!!! I Would have had a nervious

breakdown If

> That had happened to me.

> While we are on the subject of Audit Which is part of a tax

investagation

> Hells Bells & Cockle shells Helen How did you survive it!!!!

> Love & Light Gill.

Hi, Helen and Gill!

Yeah, Helen, HOW did you manage to keep your sanity through 3 months

of...that? Ick. It sure did help me to know what it was like for you.

I hope to never experience what you did. And thank you for your input

on how to manage it all. You sure do care about keeping other people

out of Hell, huh. With the time you took to share your experience with

us, I don't doubt that you care.

$1000 buckaroos per hour, Gill???? Well, hell. I want to be rich

enough (only if I'm doing what I love) to gladly pay that!!! and to

not have to worry about a $2500 penalty if my brain (or my

accountant's brain) wasn't working quite right during the calculations.

~Jen

[Guest guest]

> Yeah, Helen, HOW did you manage to keep your sanity through 3 months

> of...that? Ick. It sure did help me to know what it was like for you.

I have no clue what happened to my reply, but I replied to this note at

great length already. After 2 days it's not here.

[Guest guest]

Jen said...

> > Yeah, Helen, HOW did you manage to keep your sanity through 3 months

> > of...that? Ick. It sure did help me to know what it was like for you.

Helen said...

> I have no clue what happened to my reply, but I replied to this note at

> great length already. After 2 days it's not here.

Dear Helenae,

I want to thank you again for talking of your experience (and so

thoroughly) with the audit you underwent. From someone who's not been

through one, it helped to shed some light on the process. My fear of

the IRS has been high enough to inspire me to keep and organize all of

my business receipt, claim all of my income, know what's deductable

and what's not, etc. The only problem would be if I did make an

accidental miscalculation years ago. And then would come the dreaded

hefty fees (with years of interest) and/or a drudging through all

those numbers again. It gets complex, yes it does....whether

prepraring the taxes (and it takes days if I do this on my own, by

hand) or trying to find an unfortunate mistake. I hate it enough when

I catch a mistake of my own and have to go back and redo 2 days of

number-crunching. Would I like the IRS digging for a mistake that

would have made little difference monetarily on that year's return but

that would cost thousands in interest? No, n n nooo, no no. And

being grilled never feels good. So, I'm crossing my fingers and doing

my best to be honest, up-to-date on regulations, organized, and a good

number-cruncher.

~Jen

[Guest guest]

> I want to thank you again for talking of your experience (and so

> thoroughly) with the audit you underwent. From someone who's not

been

> through one, it helped to shed some light on the process. My fear

of

> the IRS has been high enough to inspire me to keep and organize all

of

> my business receipt, claim all of my income, know what's deductable

> and what's not, etc. The only problem would be if I did make an

> accidental miscalculation years ago.

I know what happened to my note. When I first went to respond, I

accidentally hit 'send' after clipping the note I was responding to.

Then I wrote another one, with a small explanation why the previous

note was blank... well, the mods probably saw that, thinking it was a

duplicate of the note before (blank one) and deleted the note itself.

Then, because the other was blank, deleted the blank.

That vanishing note was my fault, I should have waited a bit to send

the final note. I wish groups let people edit... it would be so

much easier for everyone:).

Anyway, I went on and on and on about the 3 month ordeal, and really,

the bottom line was this:

Keep ALL receipts for the year, even personal ones.

File documents themselves by year, not vendor, customer, bank

records, etc.

This would keep your sanity if you were being audited. I had my

records by 'type' before that. Not anymore. That's what made it more

of a nightmare than it had to be, I couldn't look for the specific

items requested through that year's receipts... I had to look through

ALL my receipts and records, which while well organized, all

contained multiple years.

To find out what customers bought, or what you bought, you can keep

that in a ledger or far more conveniently, on the computer in a

database. But if the hard copy are by year, pulling it together is

sooo much easier! You can find specific items in that one location

because there's no where else it CAN be.

As for my comment on the miscellaneous receipts... you mentioned in

your note that you were worried about a miscalculation. That's why

you need the miscellaneous receipts. IF you added wrong, IF you wrote

the wrong thing down... you may end up owing the IRS money. IF you

owe them money... any amount... it puts you under the umbrella of

suspicion forever. Odds are really really good that you will get

audited the next year... and the year after... for who knows how long

(the IRS agent confirmed this herself).

So while this may sound somewhat unethical, stick your unrelated

receipts in there (NOT for your recordkeeping! For your receipt box

in case of audit), so that in the unlikely event that your figures

are off, you cannot find the correct corresponding receipts because

the dog ate it, someone spilled coffee on it and it got thrown out,

you can find a few semi-suitable receipts to stick in there so the

numbers are not off. It may save your butt in an audit, maybe years

of pain and future suffering even. We are all human, humans can make

a mistake, or humans can lose things. I see no reason to be audited

for years on end because I might owe the IRS $20, because I could not

find a supply receipt I had listed in my ledger book as an expense.

I'll give em a purse receipt.

As for the accountant, he only works with what you give him. The

records, as a business person, are yours. But he signs the bottom of

the return. All mistakes are your problem, even if he made them.

However, I believe, based on my own experience, that the IRS is far

less critical and scrutinizing of an individual who has their returns

prepared for them. You are still responsible for the records, but

they don't fry you over the fire as badly if you don't really know

what's going on... aka dump a huge box of records on their desk and

say, 'there it is'. The assumption is, if you were so incredibly

organized, you wouldn't need an accountant. At this point, the

prospect of hours of helping you file will not appeal to the IRS

auditor, and they will do whatever it takes to shorten the most

tedious parts of the process for themselves. Perhaps by only checking

your books, and not looking through 5,000 pieces of paper for 1

receipt. I hope that makes sense, and you see what I'm talking about.

When you file tax returns, prepare records, organize for taxes... you

are doing so with the idea that you may get audited. If you did not,

every April 15, we'd all be chucking all our extra paperwork in the

trash (because our records of our activities are still on the

computer and backed up. Who needs hard copies of everything?).

Keeping that in mind, all tax related hard copies should be looked at

as something you will have to show a dour-faced mean IRS auditor down

the road. So from a tax perspective... plan accordingly.

One more thing...the IRS looks for 'flags' to help them decide who to

audit. In this, an accountant helps too... what's a flag? Well, it

could be too large a charitable deduction. It could be too much home

office expense. It could be something you never heard of. Most

accountants know what the flags the IRS looks for are, and will at

least warn you and ask you if you want to proceed. You wouldn't know

there was a problem yourself, so you mail off that big red flag to

them in your return.

Finally, the IRS audits a random % of taxpayers every year. There's

absolutely nothing you can do to prepare for that, the computer just

picks a cross section, and sends it to an auditor. It's like winning

the IRS lotto. (ugh)

Btw... I do NOT have a perfume business. Just wanted to clarify that

this pertains to all small businesses, not just perfumes.