2 FREE AudiosDirect Selling and Tax Deductions
Posted by Deb BixlerDirect Selling Creates Income With Tax Deductions
Direct selling and network marketing is one of the best income tax reduction strategies there is in the 21st century.
Operating a direct selling business from home opens the door for income tax deductions.
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Did you ever notice that all rich people have a business?
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Chances are they developed a business so that they could take advantage of certain tax benefits and that in turn assisted them in gaining more wealth.
The home business is a legitimate income tax reduction program that the IRS/CRA/ATO (or whatever the tax agency is called where you live) has put into place. Anyone who owns a business has a legal income tax reduction package to utilize to their advantage.
This is an AWESOME recruiting incentive!!
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.)
Save With Direct Selling Tax Deductions
For example in a direct selling 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?
(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 direct selling business they become income tax deductions. That alone will increase your cash flow, even if your business does not make money immediately.
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.”
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 tax office!
| 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 tax bureau: Most people think that they are required to show a profit periodically when in fact that is not so.
In order to be compliant with the tax regulations you must:
- Show an intent to profit: This can be done with a business plan
- Generate activity: Activity is what makes a business profit!
- Have documentation of that activity: It is easy to document your business activity with a calendar, checkbook, mileage log, etc.
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 could make an awesome opportunity tool. A little education goes a long way when you are focusing on growing a team.
Finding Business For Direct Selling
The Power-UP For Professional Results is a program for direct selling consultants. It teaches YOU multiple ways of FINDING BUSINESS!
It also includes a IRS-compliant business plan designed by direct sales expert Steve Spangenburg. 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. (Game players: Check your score card for a coupon code discount!)
(I am not a lawyer or accountant, and I am not giving you tax advice.)
Dear Deb,
You’re great! I’m searching some information about direct selling and tax deduction. Then I found out your article.
You’re appreciated. It helps me get clearer than before.
I have another question, would you please help me?
My husband is a distribor of Nu Skin Eterprise, a direct selling businessman. Can we put our health insurance in the tax deduction lists just like the other items you metioned in the article?
Thank you so much.
Janet
Thank you Janet for your great comment. I am not a tax accountant and really do not advise people on their taxes. It is my understanding that health insurance is never an income tax deduction. A good home business specific accountant would be of great help to you. If you need a recommendation, let me know. Deb
Hi Deb,
Could you please refer me to a direct sales specific accountant?
Thanks
Stuart.
I will send the contact info of the tax accountant that I use direct to your email. If anyone else wants a referral, just send me an email direct. Deb@DebBixler.com
I really like how you hit every area that we all should have knowledge in in the home party plan business !
It’s amazing to me how many of my colleagues do not know how much of what they do everyday in their business lives are a tax deduction. Thanks for sharing.
Another great reminder. As a tax preparer and party plan seller, I always look for business expenses. My husband had his own business for over 30 years, and that is how I got into doing taxes, because even tax preparers don’t always realize the deductions available. IRS actually has lists of allowable expenses and situations. Check it out, and don’t feel guilty about taking deductions, like Deb says ..IRS doesn’t have flag poles….just guidelines.
Thank you for the information. In my previous sales position I was a salaried company employee, so the company got the tax benefits of my office, transportation and activities. Great timing as I start out in my business.
This information is very true. I found this out last year when I took on a new tax accountant and he is good. I did not know that I could get all of those different deductions, but I’m in the know now.
This is a great article; it drives home the point of being organized so you can have a better tax deduction with your home business. I have a shoe box that I have been putting my receipts in and will go through once a month and categorize into right spots.
Thank you so much Deb!!! Our team will be discussing this topic at the next meeting and you just made it MUCH easier for me!! =)
These are all great ideas Deb. I have been in direct sales for 8 years and have owned my horse breeding, showing, training operation for over 30 years! I have always had to do taxes for owner type businesses and can only add that no matter what deductions you take, back it up with paper work! Over the years, I’ve been audited and came through it successfully due to great paper trails which back up the deductions I claimed. So save ALL your receipts. If you are not sure save the receipt anyway and ask the accountant. Better to have it and not need it than to need it and not have it. Taxes are right around the corner so we will all be needing this advice soon.
My final idea (which I can honestly say I did not do until a couple years ago) is to keep up with your files, receipts, and records at least monthly. I do it now each week. I’ll be ready to hit submit on my tax return as soon as my 1099 comes through. In years past, it took hours each day for a LONG time to get both our businesses ready to submit. Not any more and it’s a huge relief!
Make sure to keep records of EVERYTHING! Keep your receipts, keep your calendar up to date, and keep track of your mileage. It will be a huge savings for you at the end of the year!
These are good reminders to help get organized for the new year! I find that a planner specifically for my direct sales business helps – that way everything is in one place
As a newbie to selling, this is awesome information! THANKS!
As a former tax preparer I make sure every new recruit has the info when they sign up with me to use their home business to their greatest tax advantage. Many have told me their tax preparer won’t let them do some of my suggestions and I tell them to get a new preparer or I tell them where to look in the irs tax code so their preparer can learn. As all preparers don’t have to know this info only that specialize in home based businesses.
I use turbo tax and I do my own taxes. I love it, it prompts me to use the right forms for being in business!
Wow not only helped me but also family members in business
Wow not only helped me but also family members in business Thank you this tip came just I’m time
Thanks for the tax savings insights of owning a home business.
TERRIFIC insights! I know that being a home based business owner transformed our income tax load.
it seems I’ve missed a few deductions in past years!! And honestly never thought to use this as a recruiting tool…I will now!
I havent been using these deductions either! I just wasnt sure exactly how I was able too. This helped but I think that I definitely need to speak to an accountant to get a better understanding of all the deductions but thanks for pointing me in the right direction!
This section is very informative and have learned tricks that I will follow for sure, Deb you should consider being an Accountant, Lawyer or giving us tax advise you would do it well!!!!
This one made me LOL for sure… we are getting so many comments on the blog this week (I wonder why?!) that I can not keep up with them. Even set it to auto accept all comments then I can screen them as they come in for ones that are inappropriate… (none yet) but it is really fun and in this case, funny Rob, to read them as they roll into my inbox.
I think this area (taxes) scares me the most!! Thank you so much for everything you do for Direct Sellers, Deb! We will be more successful because of you!
Boy have I learned alot from this post and all those that have commented on it. Thanks to everyone!
So glad I found this series of articles as we get ready to start the new year. What better time to put into place all of those tax deductions! Thanks Deb!
I am so motivated now to keep my papers more organized and realize that I want to treat my business as a business and not just a hobby- even though it is so much fun! Terry
I do take every deduction possible from A to Z. I do, however, always dread this time of year because I’ll be honest, I am NOT organized with my receipts. BIG SIGH I need to hire someone to do that for me!!!
I need to get started on figuring my part of the house bills I can deduct. And going through all my receipts I have in a box. My resolution this year is to be more organized!
The only drawback we have found with all these legitimate deductions is that you don’t have a provable income to qualify for car loans, etc. But that’s not really a problem, we plan on buying our next car with CASH!!!
Thanks for the tips. Organization and backup are key for maximizing the tax deductions.
This is such an important subject and yet we probably devote the least amount of time to this area. I had to create a new system since I realized earlier this year that sorting through all my receipts (most void of personal notes) at the end of the year is not an income producing activity. Thanks for the reminder, Deb!
This is very informative information, I already have been in the mindset to keep organized and this helps alot.