Mary Kay Opinion 298

This is actually a decision from a case that a Mary Kay distributor took to Tax Court in 2004. Quite frankly, she had tried to take some abusive deductions, and those deductions were denied. See Mary Kay Distributor Tax Deduction Denied

The purpose of this post is not to tell Mary Kay distributors that they won't be able to claim tax deductions, but to alert you to the fact that, especially if you're taking deductions in excess of your Mary Kay profits, the IRS is going to take a closer look. Reading the judge's decision in the case, you can get an idea of the kinds of things you need to do to have your deductions upheld.

While the judge mentioned having a business checking account and maintaining appropriate business records, I think some other things were more important:

Before becoming involved in Mary Kay, consult someone who can provide an objective opinion on the advantages and disadvantages of conducting a Mary Kay distributorship.
Show that making a profit is your primary objective.
Maintain the business records needed to assess the profitability of your Mary Kay business.
If you are not achieving profitability, determine what you could do to change that.
Avoid incurring expenses that are might be interpreted as more likely to provides you with personal pleasure or recreation than with increasing the profitability of your business.

The fundamental thing the IRS is looking for (aside from your actually making a profit) is some exercise of business sense and business acumen. That means, at the very least, that you make decisions based on what's best for your business, not what's best for your director's business. You can't expect your director to provide you with objective advice on what to do, any more than you can expect any salesperson to tell you that they aren't offering exactly what you need.

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