Direct Selling and Tax Deductions

Direct Sales and Network Marketing

Direct sales and network marketing is one of the best income tax reduction strategies there is in the 21st century. Direct selling businesses open the door for income tax deductions. Did you ever notice that all rich people have a business? It is not because they are rich that they got a business, it is the other way around. They developed a business so that they could take advantage of certain tax benefits and that assisted them in gaining wealth. The home business is a legitimate income tax reduction program that the IRS has put into place. Anyone who owns a business has a legal income tax reduction package to utilize to their advantage. If you are an individual or family struggling financially, the quickest way to increase your cash flow without too much time commitment is to start a direct sales or network marketing business. The income generated from your new business will, of course, be helpful and the immediate income tax reduction will increase your cash flow substantially! (I am not a lawyer or accountant, and I am not giving you tax advice.)

For example. in a home business many of the things you are now spending money on will become an income tax deduction.

• Cell phones: even shared family plans
• Magazines subscriptions or cable TV, depending on your company, can be considered as market research
• Mileage to and from general errands that you are doing for your family can be deductions provided you intersperse business errands and lead-collecting in with the daily activities. Imagine deducting 60-80% of all your miles traveled, at 39 cents a mile…. That will really add up quickly!
• Meals and entertainment out can also be deducted provided you talk business and ask for referrals from your friends.
• Are you taking vitamins? When you are in a vitamin network marketing company, the vitamins may be deductible.
• Do you buy groceries? In a food-related company, a good part of your grocery bill may be deductible for market research, even if your family is eating the food.
• Are you giving the kids an allowance? Are your kids ages 7-17? How would you like to pay them for errands around the house, or helpful things they do, then take those payments as an income tax reduction? You can take it a step further and put the money in the bank for them and use it to pay for their living needs, like clothes or sports equipment, etc.

(I am not an accountant nor am I giving you tax advice)

Are you starting to see why all rich people have a business? These are things you will always spend money on. When you have a network marketing business now they become income tax deductions. That alone will increase your cash flow, even if your business does not make money immediately.

(See the post called The Cash Flow Generator in the business category)

Income Tax Deduction – Home Office

Another income tax reduction strategy available to direct sales consultants is the home office deduction. It never ceases to amaze me how many people do not take advantage of this strategy. Even relatively large successful individuals say, “I do not want to send up a red flag.” Or “My accountant won’t let me because it is a red flag.” (I am not a lawyer or accountant, and I am not giving you tax advice.) The government does not create laws just to “catch” people and get them in trouble when someone uses the law as it is written. There are no flagpoles down at the IRS that employees run up red flags on when someone utilizes a rule or tax law correctly. Think about this. When you open a store at the mall or in a shopping center, you will buy toilet paper, floor cleaners, light bulbs, maybe put up a sign, and even wash the windows, take out the trash, pay rent or cut the grass. As a business owner you can deduct all of those from your taxes. This will not put up a red flag because these are business expenses. Everyone can understand that. In your home business, you still have all those expenses affiliated with your business. Only now they are a percentage of your home expenses. The home office deduction recognizes that as a home business owner, you can deduct a percentage of your electric, your gas, your garbage, your telephone, toilet paper, cleaning supplies, etc. This is the home office deduction.

There are steps you must take to be compliant with the IRS, which are not in the scope of this article. Most people think that they are required to show a profit periodically when in fact that is not so. (I am not a lawyer or accountant, and I am not giving you tax advice.) In order to be compliant with the IRS regulations you must:

• Have a business plan
• Generate activity
• Have documentation

The interesting part of those requirements is that they create a circle of success. When you have a plan, you generate activity and, when documented, the process creates income and deductions, which in turn gives you motivation to continue and creates cash flow. The business plan is updated yearly based on your successes and the cycle or circle of success continues.

This article, along with the previously posted article on Generating Cash Flow, could make an awesome opportunity tool. A little education goes a long way when you are focusing on growing a team. The past Generating Cash Flow article focused on network marketing as a business model, coupled with this one to generate immediate changes in a person’s tax requirements, becomes an terrific tool to share with potentials.

The Power-UP For Professional Results home study program includes a IRS-compliant business plan designed by a direct sales expert accountant. The business plan, along with the information on the CD, will set your business up with the necessary income tax reduction strategies. This business plan will give an unlimited supply of direct sales business bookings and the momentum to take the deductions you deserve. You will create the success circle of planning, activity and documentation that the IRS is looking for. (I am not a lawyer or accountant, and I am not giving you tax advice.)

All accountants are not direct sales-specific, and therefore may be discouraging you from maximum tax reduction strategies. If you are looking for a new direct sales specific accountant, just call me or drop me an email.

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