Kamisha:

Code Section 162, it states that you can deduct any expenses you incur in your business. That is ordinary and necessary.

 

Charlo Greene:

Okay, that’s great. I’m trying to show you guys how doable everything that I’m doing is, to this is the place for you. It’s my money. I’m here for you. Whatever you need. We’ve literally got it.

 

Charlo Greene:

I have a lot of questions about deductions and so right now in this conversation it goes, you’re filing your taxes, everything is good. If they have a question about anything you’re doing, then you get audited and that’s when your finances are basically under an investigation. And then if they find wrongdoing, you end up in jail. So that’s correct?

 

Kamisha:

Something like that. Yes.

 

Charlo Greene:

Okay. Just trying to keep it really general for my audience to understand everything that we’re trying to put out there. So when it comes to the first like read or audit thing, what can we not deduct. Like when it comes to hair, a lot of people want to know, so can I buy a bunch of wigs and wear them myself? Since I’m the owner of the business and I’m the face of the business. Is that something that I can write off on my taxes? Am I going to get all of this money back because it’s being put toward my business? That along with makeup and clothing and trips to Bali to launch the Bali hair collection. Like how does that stuff work?

 

Kamisha:

Okay, so this is very, very broadly right. In the IRS tax code is Code Section 162. not that I ever want you to go read the code because the other better publications out there. But Code Section 162 is, it states that you can deduct any expenses you incur in your business that is ordinary and necessary. And that’s effect as circumstances determination there. So every expense ordinary and necessary is going to be obviously different for every industry.

Kamisha:

So, for example, for the beauty and wellness industry from my tax professional perspective, if you say to me, “Okay, I’m going to go buy this wig, this unit. I’m going to wear this to this networking event, where I want to go mingle and meet vendors of wigs and hair distribution.” Or something like that, right? In my mind, that’s ordinary and necessary because that is enabling you to network more effectively. You’re not saying, “I’m going to go where this wig to the club, tonight. I have to look good.”

Kamisha:

Or let me flip this. Let’s say you do wear it to the club at night. But for purposes of meeting other women to sell that very unit. Right? That’s an ordinary and necessary business business expense enabling you to sell merchandise that you sell.

Kamisha:

Now what I would say is how do you now support that in your business and rather to be sufficient if you’re audited in questioned on it. And I would literally just keep notes of that. Like when you’re a business planning, you’re going to have some notes or memos or plan or somewhere to say, “Hey, going to, I dunno, club XYZ. I’m going to wear this for purposes of networking to women to sale. Let’s call the wig Angela. And you wore Angela that night. You’re going to sell Angela because we’re going to see it and we’re going to like it. That was an ordinary and necessary business expense.

Kamisha:

Versus like me, I’m a CPA. If I go buy Angela I can’t say, “Well I’m going to deduct this on my business expense because I wore it to go network with some other people. You know it was some other people.” They’re going to say, “Well CPA’s don’t ordinarily do that.” But you know, business and wellness professionals like yourself and your audience, you all do do that.

Kamisha:

So I would just make sure you substantiate and note and document those things. And any reasonable agent will say, “Okay, yeah that makes sense.” Like, for instance, I don’t know if you’ve ever been to like the Bronner Brother’s Hair Show in Atlanta. When people go there, the professionals that exhibit, they are wearing their product, their makeup, the hair that they just did or the hair that they’re selling.

Kamisha:

They’re wearing that stuff so that people can approach them and they can demonstrate how beautiful, how well the product is. That’s all ordinary and necessary. So, when you’re thinking about a specific thing, whether it’s hair, makeup, jewelry, whatever is, you know your intent, right? And so I would say just know your intent and adequately document it. Real time. In a plan. Not even nothing fancy. In your planner. And that should be enough.

 

Charlo Greene:

What I extra appreciate about that response is the fact that I know that you’re a part of the wig community because you knew to call her by her name. I just had to throw that out there.

Charlo Greene:

But I love the fact that you brought up the Bronner Brother’s Hair Show. I know that that’s coming up in like a month or two. Would that be a deduction for a hair extensions business owner to go? Would the flight and the hotel, would that be a deduction for them or is that not typical?

 

Kamisha:

I’m going to say it’s typical. But from my experience it’s always been, has it ever been allowed yet. But it’s a harder sale, right? Because I think the key to it is it’s really bifurcating again in your records, what’s business and what’s personal. Right. And we all know that when you go to conferences, there’s going to be a business aspect. There’s going to be a business aspect of it, but also there’s a fair amount of personal as well.

Kamisha:

So in your records, let’s say you go and you get, of course the flight, of course the hotel, of course like conference registration fees. Even exhibitor fees. But then we used to adding like meals. Meals will be limited to 50% given that you had a business conversation before, after or during. You cannot deduct entertainment of any sorts anymore. And just any other miscellaneous things you’re incurring, just make sure it relates to what you’re doing as a professional at the conference. Right. So if you do decide to have a massage at the hotel where you’re staying, remember just to carve that expense out of the bill before you record it as a business expense. You see what I’m saying?

 

Charlo Greene:

Definitely. So like the turn up after hours with all the business owners, you might be like, I guess mentioning the name of your brand. But if you’re out there twerking, don’t do that. Because then that’ll raise the red flag. Okay. Yes, That makes-

 

Kamisha:

Yeah, exactly. Yup, exactly.

 

Charlo Greene:

Very clear sense. So the Bronner Brothers Hair Show is typically an expense as long as you make sure that you’re documenting everything. And at the end of the day it comes down to you having a conversation with another human person. And talking about the intent and explaining the thought behind it, in that you weren’t trying to deceive the government.

 

Kamisha:

Right. Right. And so let’s say you’re gonna meet somebody, you’re gonna probably get their car and press on a look up for some meal. What I would do, since you’re face-to-face and not like you’re going to have an email floating around or something. So I would just make a note of, “This is who I met. When, where and what we talked about.”

Kamisha:

But like let’s say you and I are talking right now. We know we’re both going and we send an email saying, “Hey, let’s meet on this day to talk about XYZ.” Save the email. Save that email. That emails going to be key. Saying, yes this was a conversation about the business at the conference. So this meal I can take at 50% [crosstalk 00:09:01].

 

Charlo Greene:

Oh wow. That’s like the power in just keeping records. I didn’t know that that sort of note in your planner would make that much of a difference in case of an audit. Or a look into what you’ve been doing.

 

Kamisha:

Yep. Yep. We don’t care how you keep it. Like, you don’t have to have some fancy format or anything. We just know that you kept it and it’s just super, the most powerful thing is when it’s kept, contemporaneously. So like you get audited two, three years after the fact. So you present them with something that you just created last night when you guys, met. Okay. But if they see that you made this note in a planner or something three years ago, they’re like, “Okay, we don’t have any further questions. We see that you did what you’re supposed to do.”

 

Charlo Greene:

Right. Okay. That makes so, so, so much sense. So I know a big thing in the hair extensions industry, especially when people are just getting started, is paying for like samples of hair bundles. Are all of those samples tax deductible?

 

Kamisha:

Yes.

 

Charlo Greene:

Yes. Hard “Yes” guys. She didn’t say, “If.”

 

Kamisha:

No, yes. We’re going to call it like those are like job supplies. So like it’s no different from when you’re trying to pick out your business card and so you buy samples from Vista Print. Or you buy the Promo Bundle from Vista Print that costs like $25 a month. It’s no different from that. It’s just hair.

 

Charlo Greene:

Perfect. And then, one thing that I really try and push people to do, it’s why we’re live streaming this conversation. And I’m showing people that we’re having the talk on an iPhone and live streaming on another iPhone. And and it’s just like $100. I just try and tell people how easy it is to produce content for their brands because I know that content has a great impact. But along with the content comes like the look. So is the makeup that I’m wearing, are the clothes that I’m wearing as part of this marketing strategy tax deductible? Or is that another thing that might raise a red flag if I try and mark that down as a tax write off?

 

Kamisha:

Well what I’ll say, well first off you’re going to buy all of this. Where you want to back up a bit. So let’s say you are thinking about what do you do day in and day out for your business. And you’re saying, “Okay, what do I need?” And this makeup and whatever else is what you need to do your job, which is producing content, being on video, those are jobs supplies. And jobs supplies are deductible.

 

Charlo Greene:

I am just really freaking thrilled that this conversation went so, so, so well. So if you have suggestions on what you’d like to see in the next conversation, I always say, what makes me a great entrepreneur is that I acknowledge the fact that I do not have all of the answers. Period point blank. But I understand that and I know where to find the people with the answers.

Charlo Greene:

I know it’s still tax season. If you guys want to extend the hour with Kamisha, let me know in the comments section. Happy to do that. Conversation was lit, but yeah, let me know. See you guys later. Cheers.