I started mary kay

[rgrantpolson]

So I started Mary Kay in October, but I didn't make more than $500. I bought almost $1,500 in inventory on a credit card and sold about $300. I have the exact numbers filed away at the moment but want to make sure I know what to do before I start working on my taxes. Do I need to file it as a business? What do I do about this?

[Carl]

Yes, you still need to report this as a business on your personal tax return with a SCH C. The fact that you actually operated at a loss really doesn't matter. What happens is that, since your expenses for 2015 exceed your profit, you will only be "allowed" to deduct your expenses to reduce your taxable business income to zero. After that, whatever expenses are left over will be carried over to next year. Then next year you can deduct those prior year expenses, provided you have the profit to deduct them from.

But if you don't "claim" those expenses on your 2015 return, then you can not carry them over to your 2016 return next year.

[rgrantpolson]

So even if I don't plan on continuing Mary Kay? The losses being claimed doesn't matter to me, I'll be returning the product.

[Carl]

I myself wouldn't worry about losses either, using your numbers. But if you're returning the product in 2016, then it's still "sold". The fact that you sold it back to the supplier for the same price you paid for it, doesn't affect things. What I would suggest (and it's just a suggestion) is that if Mary Kay will not be sending you a 1099-MISC, I wouldn't bother reporting it. Not exactly "legal" per-se. but if the IRS were to audit you, I serious doubt you're going to jail for a loss. You could be fined for not reporting/filing it though. But again, looking at your numbers, I believe the IRS has bigger fish to fry.