Network marketers often ask “What is deductible and what is not in a multi-level marketing business?”
Running a multi-level marketing business is what I call the “number one tax shelter for the little ones.” Whether you work in the business part-time or are a full-time network worker, once you start your own business, you can take advantage of many deductions available only to business owners. You can deduct a portion of your cell phone, vehicle, home, and other expenses that you might not otherwise write off your tax bill if you weren’t in network marketing.
Federal and state tax codes are full of deductions for businesses, and you have the right to accept them whether you work your business from home or from a fancy outside office. In fact, he is sharing the expenses with Uncle Sam and also with the governor of his state.
Before you begin, it is worth knowing, in general, how businesses are taxed. As for the ‘big picture’, the government taxes a company’s profits or ‘net income’, so the less you end up with subsequent expenses, the less tax you pay. What that means to you is this: You are not taxed on your gross income or on your “top line” income. Your tax liability is based on your ending balance or what is left after expenses are deducted. So the more you can deduct from your primary income, the better!
The tricky part is this: some expenses are deductible this year, but other expenses must be spread over multiple years. For example, you may be able to write off 100% of the cost of new computers and furniture this year (per IRS Code Section 179). But if you don’t have a lot of income, a smart strategy might be to defer some of that deductible expense for future years (‘depreciation’ expense). Start-up costs can also be tricky – you can part this year if it’s the first year of your MLM business, but you’ll have to spread the rest (“write off”) over the next few years.
With that said, here is a partial list of deductible expenses. Many of these are overlooked by network marketing business owners:
Legal and accounting fees
Advertising / Website
Car and truck
Bank charges
Computer expenses
fees and subscriptions
Education and training
Equipment and Furniture
Gifts
Home office expenses
Sure
Inventory
Licenses and permits
Food and entertainment
Shipping and delivery costs
Print
Rent (“pending room”)
Repair
Retirement savings
Start-up costs
Supplies and materials
Taxes
telephone
Travel
Uniform spending
IRS Publication 463 “Travel, Entertainment, Gifts, and Auto Expenses” is a must-read if you are preparing your own tax return. It’s definitely worth knowing the (IRS) code rather than assuming something is deductible when it comes to these areas.
Consider hiring a tax professional to prepare your tax return. Typically, you will save a lot more on taxes than you will spend on your fees. Tax accountants know the rules, prepare hundreds of returns each year, can lower your tax bill, and help you avoid mistakes that could otherwise lead to an IRS audit.
Dedicated to multiplying your income after taxes,
Jim flauaus
