Tax Planning for Networkers - Part Two
By Jeffrey Babener, © 2013
If you take your network marketing business seriously, you may qualify for some serious tax advantages that are
available to business owners, and in particular, home-based business owners.
That’s the good news. The bad news is that the tax deductions that you may be able to take are shrouded in
volumes and volumes of IRS codes, regulations, and interpretations that could (and in fact does) keep a small army
of tax lawyers and accountants busy for years.
Even though these deductions are often confusing and unclear, it is better to have an understanding of them and
take advantage of them than to pay more taxes than you need to year after year. Part One of this series focused
on Hobby Losses, Meals and Entertainment, Home Office Deduction and Ordinary Business Expenses. Part Two,
here, will present an additional sampler of some significant tax points to be aware of, and take up with your CPA or
qualified tax advisor.
The Traveling Networker
Do you like to travel? Does your spouse like to travel? Do both you and your spouse promote your network
marketing business? The business travel deduction is a real advantage for networkers.
Of course, you are going to have to make a clear allocation between the business-related purpose of the travel
and the vacation portion. Obviously, there is a gray line, and it will be in your interest to substantiate as much of
the travel as relating to your network marketing business. Inside the U.S., all travel expenses are deductible when
the trip is "primarily" for business. When traveling abroad, you must divide the travel expenses between business
and vacation time.
Do you have friends and family who are also customers and business associates in network marketing? The
probability on this point is high. A network marketer can convert gift-making, which might normally take place, into
business gift-making, which is eligible for a tax deduction. Under IRS rules, you may deduct up to $25 for the cost
of business gifts given directly or indirectly to these people. That should make you popular!
All Those Forms
Almost every network marketing distributor agreement recognizes your independent contractor status, and so does
the IRS. Because the IRS considers you to be self-employed, you are going to have to pay both income tax and
If you have income greater than $500 a year, you will be making estimated quarterly tax payments as a self-
employed individual. You will receive a Form 1099 from the network marketing company if you receive more than
$600 in income or buy more than $5,000 of product or inventory. Your Form 1099 will be attached to your
Schedule C, which in turn will be attached to your tax return. Your Schedule C will summarize your income and
expenses from your network marketing business.
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