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Networker Marketing / MLM and the IRS - What You Need to Know

For those who take their network marketing business seriously, there are serious tax advantages to being involved in this home-based business.

The tough part is that these important advantages are so embedded in IRS codes, regulations and interpretations, that you could easily employ a small army of tax lawyers and accountants to unearth them. It is better, however, to have a broad view of this subject area and learn to spot some of the issues.

Here are some great examples of key tax points for Network Marketers to take up with your personal CPA or tax advisor:

•Meals and Entertainment
•No Hobby Losses
•The Traveling Networker
•Home Office Deductions
•Business Gifts
•Computers
•Automobiles
•Capital assets
•Ordinary business expenses

Now don’t forget about the more common, ordinary business expenses:

•Accounting Fees
•Advertising Fees
•License Fees
•Telephone
•Office Supplies
•Answering Machines
•Audio and Video Equipment
•Fax Machines
•Office Furniture
•Office Decor

Recordkeeping is the Name of the Game

Any IRS employee will tell you over and over again that the most important piece of claiming your expenses and deductions is adequate recordkeeping.

According to the IRS, here are the top three suggestions for us MLM’ers:

•Maintain a separate bank account
•Keep a detailed record of all business transactions
•Retain all your records

Recordkeeping and verification is very important when it comes to verifying deductions for
•Travel expenses
•Entertainment expenses
•Gift expenses

And what is the best way to verify recordkeeping in the above categories? Receipts win, hands down.

Almost every MLM distributor agreement states your independent contractor status. The IRS is very well aware of this and recognizes the same. The IRS basically views you as being self-employed which infers that you will pay both income tax and self-employment tax.

If you are income is greater than $500 per year, you will have to make estimated tax payments as a self-employed person.

The easy part to this is that your particular Network Marketing Company will automatically send you Form 1099 if you receive more than $600 in income or if you purchases more than $5,000 of product or inventory.

You then attach Form 1099 to Schedule C, which you will then attach to your tax return. Your Schedule C will summarize your income and expenses from your Network Marketing business.

It really is that simple. But don’t be afraid to hire an accountant or tax preparer if you are unfamiliar with the rules, forms and schedules. It is always well worth the money to hire a professional. Even if you have filed on your own before, the tax laws change every single year and you really need to keep up on everything to take advantage of the expenses and deductions in the IRS code.

The expenses and deductions are there for you to use as long as you don’t abuse them. If you are serious about your business like I am, and utilize these expenses and deductions properly, it can results in thousands and thousands of dollars of after-tax savings which could definitely help you out in your business and in your personal finances. It really is a win-win situation.

Look for more articles that give you a further breakdown of the above mentioned categories for deductions in your Network Marketing / MLM business.