If you are already in Network Marketing/Direct Sales, or getting ready to launch your business, the expenses you will incur to start on your own can make your head spin.
However, I invite you to look at the brighter side, and you will soon discover a very long list of expenses you can deduct when filing your income taxes with the IRS.gov.
1) Startup Costs
As entrepreneurs we are often faced with a number of expenses and packages to start our business in Network Marketing. Websites, product inventory, sales tools, signs, banners, clothing, hosting a launch party, etc. are all needed to properly build the foundation of a new business.
Fortunately, new business owners are able to claim tax deductions on some of these expenditures.Our friend, the IRS, refers to this as a company’s startup costs.The IRS states that you can deduct up to $5,000 of the startup costs you incur, which may include the items listed above, and also business registration fees, equipment and tools, and marketing expenses to throw a launch party. (If you are a big spender and love to throw big parties, anything over $5,000 can be deducted over time! So go for it!)
2) Vehicle Expenses
As a Network Marketer, you will find yourself on the road traveling to meetings, appointments, and events, and maybe even delivering product to some of your customers, so you can take advantage of the business vehicle deduction.
I personally prefer to use TAXBOT for my Vehicle Expenses and Mileage: http://bit.ly/TaxBot4TaxSeason (Promo Code “TAXSEASON” for a special 30-day Premium Offer). It tracks all of my mileage, and all of my expenses, and then neatly creates the required IRS Mileage Log for audit purposes. At the end of the year, I click a button for a Tax Expense Report and send that to my CPA. I have nothing else to do or figure out.
For vehicles, you have two options, and you have to choose one or the other: 1) You may deduct the mileage you drive, or 2) your actual vehicles expenses.
For 2016, the standard mileage rate was $.54 cents per mile, and for 2017, the IRS announced the rate to be $.535 cents per mile. Actual expenses include gas, oil, vehicle maintenance, and insurance.Watch this informative TaxBot Tax Tip Video on Deducting Vehicles:
3) Travel Costs
For some business trips, you may find yourself traveling by plane, train, bus, taxi, Uber, Lyft, or get lucky enough to be on a cruise.So long as these transportation activities are directly related to doing some type of business, such as sharing your product, or signing someone up, then they are fully deductible.
4) Operating Expenses
The IRS will allow you to claim your operating expenses as deductions on your tax return. This is where we will get into depreciation of more expensive purchases like vehicles, computers, etc.
Operating expenses may include the utilities of a brick-and-mortar store, the cost to purchase inventory, advertising, buying leads, flyers, commission fees, replicated website fees, home office deduction, interest on your credit card strictly used to build your business, legal and professional services, supplies, communication, cell phone, insurance, etc. Consult with your CPA to understand the percentages of the deductions that you are able to take for each category.
5) Home Office Expenses
As a Network Marketing Affiliate, you will run your business entirely out of your home, so you will be eligible to take tax deductions on them.
You must first document all relevant expenses. I would recommend using TaxBot again because it keeps everything online and backed-up. Now, you can either deduct a percentage of your homes expenses for business purposes, or you can take a flat rate write-off of $5 per square foot for a maximum deduction of $1,500 for up to 300 square feet of home office space.
6. Health Insurance
If you are a full time Networker, then chances are that you pay your own health insurance premiums for you and your family’s medical care.
If you have a business and how a net profit for a particular year, you may qualify to claim the self-employed health insurance deduction. This is typically categorized as an adjustment to your income for health insurance premiums that you pay, and check with your CPA for details and possible changes.
(NOTE: I have mentioned a CPA several times, and my personal opinion is that you should use one if you are making more than a couple thousand dollars a year as an entrepreneur. Why? Because they will likely save you more than their fee will cost (do not pay more than $800 a year). If you need a referral, I am happy to share with you some of the ones that I trust for Network Marketing knowledge and savvy.)
7. Meals and Entertainment
This one can get tricky at times and it is actually easier than you think to abide by the guidelines.
For meals, if you discuss business during it, you can deduct 50% of the bill. Always save receipts and store them in your TaxBot program. TaxBot will keep your receipts nice and organized for the end of the year, and keep track of the mileage on your way there and back to your home office.
Entertainment is different and you do not have to discuss business while attending let’s say a concert, but you must discuss it within the 24 hours period in which the event occurs. Watch this video for a better understanding:
8. Contract Labor
This category is for any independent contractor that you hire to help you with your business. For example, maybe you want to hire someone to write a blog for you, create a book cover, perform some SEO for your business, or put together an advertising campaign. This is the category that work would fall in. If you pay them more than $600 a year, then you must provide them with a 1099-MISC for reporting purposes.
If you have any questions concerning exceptions, please consult with your CPA because they will have a better understanding per state regulations.
If you are not following any of these categories, then you are leaving a great deal of money on the table. The easiest way to conquer your taxes is get organized and not let it build up over the year, and then try to manage under the stress of deadlines. If you take on your taxes each day/week, with TaxBot, you will breeze through and maximize your taxes for a potential refund.
– Calvenn Starre