As a doTERRA Blue Diamond leader and former CPA tax specialist, I often get asked about, well, finance! Here are some of the most commonly asked questions I get by those with a doTERRA business.
1. What are the top 3 most effective tax reduction strategies for a family where one works with doTerra and the other does not?
The benefit of having a business is the availability to write off expenses that would otherwise just be costs to your family. Two examples are: 1) you can write off a portion of your home through a home office expense deduction, and 2) you can write off a portion of your vehicle costs. To be eligible for these write-offs, you will have to make sure that you meet the relevant conditions and you will need to keep detailed accounts of your expenses and business travel. Consult with a tax practitioner to understand what the conditions are and what you can write off. If your spouse works the business with you and your business generates a loss (common in the beginning stages of your business), his portion of the loss can be used to reduce his employment income.
2. When you are on E.I. and you go to school part-time (not with government funding), do you still get use the T2202 towards your tax or does it get exempted because you are on EI?
Your tuition tax credit can be used to reduce the taxes you pay on income of any type. However, you should do a careful calculation to see if you actually need to use your tuition credits or whether you should carry them forward to use in a future year.
3. Do you have any templates or guidance on how to start tracking money coming in from doTerra and money spent on shipments and supplies?
This is a common issue. Business owners are busy building their business and accounting is often the furthest thing from their minds. If you use a program like Mint.com, you can collect information from your credit cards and the program will automatically place the credit card transactions in certain categories. For example, if it recognizes the name of a gas station or restaurant, it will place it as a fuel expense or meals expense automatically. This can be handy since it will capture and summarize the transactions from your credit card quickly. For transactions that it does not recognize, you can “teach” it where to place those expenses. Once all transactions are summarized in Mint, you can export the transactions into a file which can be opened as a spreadsheet. From there, it is easy to create a transaction summary journal which will total the various types of expenses/income. I use Quick Books because it has a great portable app where you can capture cash transactions on the go and have them recorded immediately. You can also classify your transactions via computer or through your mobile device, making it easy to stay on top of things. Hope that helps!
4. I just got married and we are trying to combine finances/accounts. We are totally ok with having signing authority on everything of each others, but wondering whether it might be good to keep some accounts separate for easy of budgeting/accounting. Also wondering about sharing credit cards as secondary users etc. I have two visas with good limits, and my husband also has two, but with low credit score. I’ve been told to hang onto my cards as they have good limits and “those are hard to get”, but I am wondering about letting one go so we can put more through my husband’s cards to build up his credit rating??
Congratulations! I’m not an expert at credit ratings. It would be good for you to speak with a financial advisor to understand the credit rating process better. A friend of mine is a great financial advisor. Let me know if you need his contact information.
I am also looking at signing up for Sageone ($8/month) as I know it from work, though I don’t love some of its limitations of it. Thoughts on good/cheap accounting software for home use?
Refer to the post I mentioned above re: keeping track of expenses.
5. Last year it seemed I heard that there is a percentage of our order costs that can be deducted as demo expenses? If so what would that be?
The only income tax provision covering this scenario is the general provision in paragraph 18(1)(a) of the Income Tax Act:
18 (1) In computing the income of a taxpayer from a business or property no deduction shall be made in respect of
(a) an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;
To that end, if you want to make a deduction, you need to have a defensible position that the expense was made or incurred for the purpose of producing income from doTERRA. Many would argue that the 100PV order required to earn income with doTERRA would be fully deductible. Beyond that, you would have to determine for yourself what part of your order is related to your business. Some items, such as product guides and sample packs, would be fully deductible, whereas other items, like oils, may be partially deductible based on whether they are used for sampling, promotions, etc.
6. I have received 3 small U.S. Cheques from DoTerra. I put them in our US account. When should I start putting money aside to pay the taxes? Or when should I start being concerned About it?
It is very likely that you will have expenses to offset any small amounts of income you earn with doTERRA at the beginning. You should start setting aside money for taxes once your income will exceed all your expenses by a significant amount.
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