This is my first full year with Mary Kay. I've gone through all the income possibilities and I'm still unsure where to add what I had for income and the tax I paid on it.

[DianeW]

The answers to your questions about your Mary Kay direct sales follow.

1. The income for your Mary Kay direct sales is everything you collected from customers. 
2. Purchases is your total cost of the products for sale that you purchased in 2015.
   
3. The beginning cost of goods/inventory would be your ending inventory last year (products unsold on December 31, 2014). 
4. The ending inventory is everything you have on your shelves, your products, that were not sold on December 31st.  You cannot offset your income by products that have not yet been sold.  This figure will also be your beginning inventory for the 2016 return.  There should never be a difference between ending inventory one year and beginning inventory the next year.
5. Next you would begin to enter your expenses such as sales tax (if included in the sales figure above) car expense, gifts to hostesses, office supplies, etc.

• Here is some information that may be helpful to you: 

• Cost of products for the year - Purchases less inventory on hand/unsold should always be less than your sales unless you are stating you sold your product at a loss.  
• A loss on the product itself before any expenses of the business would not be reasonable.
• This usually indicates either the items withdrawn for personal use have not been removed or the inventory  at the end of the year was not calculated correctly.
• The IRS language states you must be engaged in the activity to produce a profit.  It is reasonable to have a loss on the overall business in the first couple of years while you gain momentum, however not on the product itself. 
• Review your numbers to be sure of the actual cost of products sold. 
  
• The distinction of business or hobby is very important.
  

In TurboTax Deluxe you can begin your entry, when necessary it will alert you if you have to upgrade and move forward.  You do not have to start over.

• In the search box type Schedule C
• Jump to Schedule C
• Follow the prompts to enter your business activity (you may need to upgrade to TurboTax Home & Business because this is a business that tracks inventory)