Publication 911: Direct Sellers; Introductory Material

This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Attention: This publication will not be revised for use in preparing 2004 returns. For the next revision, we are considering using a new format that will not require annual updates. Since the tax law this publication covers generally does not significantly change from year to year, you can use this 2003 text as a general guide to prepare 2004 returns. To find changes that may affect 2004 returns, see What's New in your income tax return instructions; Publication 553, Highlights of 2004 Tax Changes; or What's Hot In Tax Forms, Pubs, and Other Tax Products at www.irs.gov/formspubs. To comment on this revision process, see Comments and Suggestions on page 2.

Important Changes for 2003

Standard mileage rate. The standard mileage rate for the cost of operating your car in 2003 is 36 cents a mile for all business miles.

Increased section 179 deduction limit. . The maximum section 179 deduction you can elect for property you placed in service in 2003 is $100,000. For more information, see Chapter 2 in Publication 946.

Addition of 50% special depreciation allowance. For qualified property you acquire after May 5, 2003, and place in service in 2003, you can take a special depreciation allowance that is equal to 50% of the property's depreciable basis. However, you can elect to claim an allowance at the 30% rate for property that qualifies for the 50% rate, or elect to claim no special allowance. For more information, see chapter 3 in Publication 946.

Depreciation limits on business cars. The total section 179 deduction and depreciation (including the 30% or 50% special depreciation allowance) you can take on a car you use in your business and first place in service in 2003 is generally limited. For those limits and additional information, including the maximum depreciation you can deduct in later years, see Passenger automobiles under Listed Property, later.

Important Reminders

Accounting methods. Certain small business taxpayers that are qualifying taxpayers or qualifying small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required to account for inventories. For more information, including the definitions of a qualifying taxpayer and a qualifying small business taxpayer, see Publication 538, Accounting Periods and Methods.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1–800–THE–LOST (1–800–843– 5678) if you recognize a child.

Introduction

This publication explains general tax information of interest to direct sellers. It covers how to treat income, expenses, and other items related to having a direct-sales business. It also illustrates two filled-in tax forms that most direct sellers must file along with Form 1040. They are Schedule C (Form 1040), Profit or Loss From Business, and Schedule SE (Form 1040), Self-Employment Tax.

Who is a direct seller? Some of the characteristics that identify direct sellers are listed below. A more complete discussion is contained under the heading Who Is a Direct Seller, later.

How you sell. You sell consumer products to others on a person-to-person basis, usually working out of your home. Or, you deliver or distribute newspapers or shopping news.
Where you sell. You may sell door-to-door, through the sales party plan, or by appointment in someone else's home.
When you sell. You may sell on a regular basis or only occasionally. You may sell full-time or part-time, such as a sideline to a regular job.

Who is not a direct seller? You are not a direct seller if you are employed in a store, sell through a retail sales outlet, or sell your employer's product away from the employer's place of business.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can email us at *[email protected]. Please put “Publications Comment” on the subject line.

You can write to us at the following address:

Internal Revenue Service
Business Forms and Publications
SE:W:CAR:MP:T:B
1111 Constitution Ave. NW
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

Useful Items - You may want to see:

Publication

1 Your Rights as a Taxpayer
15 Circular E, Employer's Tax Guide
15–A Employer's Supplemental Tax Guide
15–B Employer's Tax Guide to Fringe Benefits
334 Tax Guide for Small Business
463 Travel, Entertainment, Gift, and Car Expenses
505 Tax Withholding and Estimated Tax
525 Taxable and Nontaxable Income
533 Self-Employment Tax
535 Business Expenses
538 Accounting Periods and Methods
583 Starting a Business and Keeping Records
587 Business Use of Your Home
946 How To Depreciate Property

Form (and Instructions)

SS–4
Application for Employer Identification Number
Sch A (Form 1040)
Itemized Deductions
Sch C (Form 1040)
Profit or Loss From Business
Sch C–EZ (Form 1040)
Net Profit From Business
Sch SE (Form 1040)
Self-Employment Tax
1040
U.S. Individual Income Tax Return
1040–ES
Estimated Tax for Individuals
1099–MISC
Miscellaneous Income
2210
Underpayment of Estimated Tax by Individuals, Estates, and Trusts
4562
Depreciation and Amortization
8829
Expenses for Business Use of Your Home

See How To Get Tax Help near the end of this publication for information about getting publications and forms.

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