Monday, March 17, 2014

Avon, Pampered Chef, Party Lites, Amway, etc. MLM Tax Guide

This is a Tax Guide for all the would be home-based business millionaires.  The time to think about taxes is before you open the business, but, if you already have, the time is now!  This guide will tell you virtually everything you need to know about how taxes should, and do, work for a Multi Level Marketing type business.  The kind of business where someone in the business recruits you to sell the products, and, eventually, recruit others into the business.  This guide works for Amway, Mary Kay, Avon, Pampered Chef, Herbalife, Isagenix, Scentsy and dozens of others you've never heard of.

BTW: If you like the blog, buy my book: Everyday Taxes 2016.
Currently finalizing The Short Cheap Tax Book for MLM (sequel to The Short Cheap Tax Book for Everyone).  Available NOW!  Just click the title.  99 cents for Kindle - which makes all the links functional and easy to use.  If you don't have a Kindle, Amazon has a free cloud reader so you can read it on your laptop or tablet - again, the best way to get the most out of it.
I've set up some office hours to answer questions.  You can arrange a call or email HERE

Most clients I see trying these businesses out have not given a thought to taxes, and, are getting very little help from the businesses they are making money for.  In fact, the first piece of advice I'll give is to ignore virtually everything the company, other associates or friends tell you about how to handle taxes for these businesses.  To go further, I'll tell you to ignore every piece of tax information the company provides, except the 1099MISC they issue you (if you gross >$600) and the invoices for the products you buy and sell.  You can, and should, keep better and more useful records all by yourself.  More on that point later.

First, a couple of terms, some basic advice, and some warnings:

1.  You should be, at this point, a sole proprietor.  This means that you own and run the business by yourself, with no employees.  You will file the business taxes as a part of your personal taxes, usually on a Schedule C.  I strongly encourage you not to have any partners, even your spouse.  Your spouse can help, but should generally not be an employee, and not have any true decision making power, except the power that is normal in a healthy spousal relationship (advice and support, but no "official" role).  The reasons for this are myriad, and anyone who's delved into a partnership can attest to the issues that arise.  For now, just trust me.  Later you may want to form a more complicated business entity, but that will require professional assistance and guidance.

2.  You are going to spend more time doing taxes, and it's going to cost more.  Even if you use software (which I highly discourage if you are running a business) you will pay more for the programs.

3.  You might not actually be a business.  Most of the people starting these businesses will never have a dime of profit, and, after a few years, the IRS will put the kabosh on taking a negative income from your business off of your regular taxable income.  This is called Hobby Income.  It means you do it more for fun than for profit.  You still have to claim the income (on Line 21 - Other Income), but you deduct the losses on your Itemized Deductions (subject to 2% of income limit, maximum deductions equal to income and a bunch of other restrictions that ensure that you pay taxes on the income instead of getting write offs.)  My advice is to go full bore, gung-ho towards making a profit for 3 years.  File the Schedule C's and take the losses on your taxes (improving your refund).  If, after three years, you haven't made a profit, and gross revenues aren't approaching 5 digits ($10,000), take real stock of where you're at.  If revenues are growing and profitability seems close, keep things going.  If revenues are flat, profits are a distant dream, and/or your enthusiasm is waning, bite the bullet and either shut the business down, or tone it back and start filing as a Hobby.

4.  Some good research and reading can both help you make a profit, and can help win the Hobby vs. Business argument with the IRS.  Here are some great books to help you cheaply grow your business:

The Ultimate MLM Boot Camp: How to Succeed in Network Marketing
Guerrilla Marketing, 4th edition: Easy and Inexpensive Strategies for Making Big Profits from Your SmallBusiness
EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches

You can also do some cool, cheap marketing.  I assume you have business cards, right?  You can make magnets out of them here:

Business Card Magnets

5.  The IRS doesn't like your business model.  They tend to believe most MLM businesses are actually hobbies.  They will scrutinize the line between business and personal expenses.  They think pretty much every seminar you attend is a personal expenses.  Be very careful to document what you deduct and be prepared to explain how it will actually benefit your business and is not a personal expense.

Moving along.  Here's the advice you need to make things work...

Record Keeping:  This is where the rubber meets the road.  Good record keeping will save you when it comes to tax time.  Your records don't need to be extensive, but they do need to be accurate and useable.  I hate double entry bookkeeping and would never recommend it as a tool for a home-based business.  I also have found that the various bookkeeping software programs are virtually useless when it comes to taxes.  They may help when it comes to managing the business, but they suck for doing taxes.  The best and easiest record keeping method I've found involves a small notebook, a big notebook and an envelope or box.  The small notebook is for mileage, discussed below.  The big notebook is for every other expense.  You need simple columns set up: date, description, cost and payment received (if you pay something, it goes in the cost column, if you’re paid it goes in the payment received column.).  You can add categories, but don't really need to, if you're unsure something's deductible, write it down and let your tax guy tell you if it's deductible.  The box/envelope is for receipts - just throw them in.  Really?  No sorting, categorizing or organizing?  No.  Simply put, your odds of ever needing them for an audit are slim to none.  Save the box, notebooks and tax returns for 7 years, and then throw it all away.  If you ever do get audited, there's plenty of time to sort through the box and organize it to match the notebooks - but why do it if it's not necessary.  If I'm doing your taxes I'm going to use the notebooks, and remind you that you should have a receipt for everything.  You don't have to prove things to me.  It’s important to understand not to over think things.  For example, if you make a sale involving sales tax, which you know a portion will go to the government, you still write down 100% of what you were paid (including the tax).  Later, when you remit the sales tax to the government, it is entered as a payment (deduction.)  Get it – you get money, it’s entered as income, you pay money, it’s entered as a deduction.

The trick to your kind of business is that sometimes you don't make the sale, it happens through a website and is fulfilled by the company, with the payment going straight to the company, the product going straight to the consumer, and you getting a commission.  Generally the company will only report the commission as income to you, which means you don't need to track any expenses like shipping, sales tax or the wholesale price - just the commission, which you can track when the payment comes to you.  Just make sure your company handles it this way, and you'll be good.  If the product is paid for by you, comes to you, and then you pass it on to the client for a markup, the entire price paid goes into your records as income, and all the costs to you (shipping, wholesale price, sales tax) go into your records as an expense.

Expenses: You can deduct any ordinary and necessary expenses for your business.  I generally describe the requirements like this: If it will make you more money, is required by someone in authority, or makes your business more efficient or your life as a business person easier, it's probably deductible.  Here's a non-exhaustive list:

1.  Pretty much anything the company charges you for.  If they deduct it off your commission check, deduct it off your taxes (you report the gross commission, not the commission after deductions).


2.  Marketing Expenses:  Business cards, website fees, posters, signs, sponsorships, commercials, advertising, pretty much anything you do to get someone to call YOU when they want your product.

3.  Insurance:  I'm not talking about homeowners insurance here.  I'm talking about ‘oops I screwed up and someone is suing me insurance.’  Sometimes this is called Errors and Omissions Insurance, sometimes it’s a liability bond, or a rider on your homeowner’s insurance.  Also, if you pay a rider to your car insurance for business use, the difference between that and regular insurance is deductible.  There is also a self employed health insurance deduction that allows you to deduct your health insurance costs if you have no other insurance source (if you can get insurance through your spouse’s work this is a no-go.)

4.  Entertainment Expenses:  Those party expenses count.  The food, the favors, the entertainment.  It all counts if you expect there's a chance you'll make money.  Eventually you'll be with a client, or potential client, and pick up the tab for lunch, or dinner.  Generally, if you expect the expense to result in a sale that makes you money, either immediately, or in the future (whether it ultimately does or not doesn't matter, as long as you expect it to) it's deductible.  I recommend writing the name of the client on the receipt, as well as a quick description - "referral source", "potential client" or something like that.

5.  Travel Expenses:  These are a toughie.  People love conflating personal and business travel.  If you travel to Maine to visit family and see the lobster festival, and try to sell to some family and friends, the trip is primarily personal.  You can deduct expenses DIRECTLY RELATED to the sales efforts, but little else.  I recommend keeping business and personal separate.  You can visit a friend for dinner on a three day business trip, but don't do business for an hour on a three day personal trip.  Also avoid what I call BS travel.  Flying to Vegas to assess potential markets is transparent vacationing disguised as business travel, especially if you spend 23 out of every 24 hours in the casino!  Be reasonable!  Go on trips that are going to increase your money-making potential.  Stay away from any others.  For legitimate travel, you get airfare, rental car, tips, taxis, laundry, internet and phone, as well as 50% of meals and any other reasonable and necessary expenses.  Travel assumes overnight trips away from your home area.

6.  Cell phones, laptops and tablets:  Do yourself a favor, get a business only laptop, cell phone, tablet and/or computer.  It is simply too difficult to calculate expenses on a part personal and part business electronic device.  Don't share your business number with friends and family (other than wife and kids).  If you keep everything separate, the deductions are easy and legitimate.  If you don't, you have to establish a business use percentage, and worry about listed property rules - which suck!

7.  Vehicle Expenses:  Keep a mileage log.  Let me say it again, unless you have a vehicle that is 100%, no s**t, total business and no personal use, keep a mileage log.  Don't worry about gas, repairs, oil changes, insurance or any other car expenses (except as discussed above under insurance).  There are other ways to track vehicle expenses, but mileage is the best.  Do track annual car taxes and finance charges.  The easiest mileage log is a notebook where you right the date, the trip purpose and the miles driven.  You will also need to know the total miles the vehicle is driven for the year, so write the odometer reading down every January 1st!  Mileage will be one of your biggest expenses, so keep track of it religiously!  10,000 miles of properly tracked vehicle mileage can result in $1500 of tax savings!  Mile IQ is the absolute best way to do this.  It is a mileage tracking app the AUTOMATICALLY tracks every trip, allowing you to very simply identify business vs. personal, and add notes on the purpose.  HIGHLY recommend using this!

8.  Home Office:  Set aside a space in your home that is 100% business use.  Never used for anything else, and regularly used for business.  This is where you keep your business records, your business computer or laptop, make your sales calls from and meet clients.  The tax term is regular and exclusive business use.  If you do this, you deduct a percentage of the household expenses - rent, interest, taxes, utilities, insurance, repairs, etc, based on the square footage of the office ratioed to the home square footage.  Expenses directly related to the office, such as a dedicated phone line; do not have to be ratioed.  You can also take a small depreciation deduction for the home losing value (let your tax guy handle this - it's a b**ch!.  The IRS "simplified" this, allowing you to take $5 for every square foot of Home Office, up to $1500, but it's BS to call it simplifying, because any tax guy worth their salt is going to run the numbers both ways and take the number that makes the most sense.

9.  Depreciation:  Some items that you buy for your business, that have a useful life longer than a year will have to be depreciated over time rather than deducted all at once (examples include computers, digital cameras, machinery, big tools or office furniture).  There are many options for deducting it up front, but be wary of this, there are tripwires that can cost you if you dispose of something before it has passed its useful life.  Talk about these items with your tax advisor.

10.  The stuff you buy to sell:  This can get tricky.  If everything you sell is paid for and shipped through the company, it's easy, as discussed above about commissions.  If you order the stuff, pay for it and either deliver it or ship it to the customer, you have to track the wholesale price, shipping, sales tax and the amount you received.  Even worse, if you order items to keep on hand for later sale directly to customers, you need to track all the purchases you made (at your cost is my recommendation) and track what is sold and what is on hand.  This is the devil called inventory.  You need to know what you have on hand at the beginning and end of the year, what you bought, and what you sold.  The easiest way to do this is with an inventory notebook - now you have three.  If you buy something, write it down with date, description and price paid.  Have columns for date sold, and price sold for, and another column to make a note if it's disposed of without selling it (given away, used by yourself, or expired/lost/stolen.  Track each item as it's disposed of, and then, at the end of the year, total everything left - that's Ending Inventory, everything bought during the year - that's Cost of Goods Sold, and everything sold - that's Gross Receipts.  Ending Inventory this year becomes Beginning Inventory next year.  If you sell some this way and some through the company on commision, you'll have to add commissions to your Gross Receipts, but I think you get the point.  If I ran a business like this I would desperately try to avoid inventory, but that might cost you some sales - so - do what works best for you.  (BIG UPDATE!  After a couple years of comments, and hundreds of emails, I'm waffling on inventory.  A lot of scenarios involving display items, demonstrators and personal items can be handled through inventory.  Also, since most companies accurately report total purchases, all you need is that number, and the cost of items at the end of each year, and inventory is DONE.  Just make sure to use wholesale or retail price for both inventory and purchases.  I recommend wholesale.  While we're on the subject of the HOURS I spend writing this blog, the only compensation I get is if you BUY MY BOOKS.  PLEASE help keep me motivated - here's my author page: amazon.com/author/kirkea)

11.  Taxes:  Mainly sales taxes.  You need to work with your State or County to make sure you collect and remit sales taxes.  Don't blow this off.  Things get bad.  The sales tax you collect and remit is deductible if included in the price you charge, and the income you report.  You also may need to pay business taxes and licensing fees to State/County/City.  These are deductible, but you need to work these out on your own - this is an income tax guide, and these other taxes vary too much by locale to cover here.  Again, don't screw these up.  The local governments can be worse than the IRS if you mess up.

There's more that's deductible, but I think you get the idea.

Keep the record keeping up to date.  It's a nightmare to back fill.  Work your ass off to generate business and make money.  Research best practices and talk to the people making money doing this.  The idea is to MAKE money, and then be pissed off that you are paying taxes on it.  Getting a big tax deduction from your unprofitable business is only good at tax time.  Paying taxes is a sign of success!


58 comments:

  1. Great article for me. I've saved it as a reference.

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  2. I have been unable to locate direct, simple-to-understand tax information for those who do Direct Sales businesses anywhere on the internet until now! Thank you!! I appreciate your sense of humor too....record keeping and taxes aren't funny.

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  3. Thank you, this is an awesome blog!

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  4. This is great information thank you for sharing it. What is the difference between MLM and a business that is required to have a DBA? I guess I am a little confused as to why most people have to have a DBA and others do not.

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    1. Dba is not a tax thing but a general business issue. MLM stands for multi level marketing, a specific type of business structure, but not a government designated one. MLM has no specific tax or government regulation.

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  5. This has been very helpful. Could you also give detailed instructions on how to correctly account for items taken out if inventory for personal household use? I create an invoice for the products my family uses. I count it as a sale, but charge wholesale + tax on retail value. I transfer $ from household account to business account. (Yes, we actually buy them from the business.) Then I take the products off my shelf or order them. Then I declare the personal use product as a tax deduction, as this is money spent on the business (advertising!). Just want to make sure I'm doing this correctly. Thank you.

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  6. Other than taking a deduction for advertising you are getting the end result right. Normally you would simply designate the items as withdrawn for personal use on your inventory. I'm away from a computer so can't give you a perfect answer but there's a place in the cost of goods sold top about for items used for personal use.

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  13. Thanks I just started working as an Avon independent sales Representative and I needed this post thanks

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  15. I have deleted the comments on personal use items because the questions and answers are confusing the issue and making it difficult to follow, so I'm including an overall explanation here:
    The bottom line is that there is no special deduction for buying personal items for use since they are "advertising", "required" etc. What actually happens is that if you buy an item, if the company includes the money you paid on your 1099MISC as income, then you need to eliminate it (since it's personal and you used your personal money to buy it - this has nothing to do with the business). If they don't (which many do not) then you don't need to eliminate it.
    If you need to eliminate it, and you use inventory, this will handle itself when you account for beginning and ending inventory and cost of purchases less items removed for personal use.
    If you don't use inventory, you simply deduct the exact cost paid as a supply.
    Note again, that this assumes your company includes personal purchases in income on the 1099MISC - you need to know how your particular company handles it.

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  16. Thank you for this blog - I am glad to see it coming from a legitimately certified professional and not another MLM representative. Here's a situation that I have yet to find addressed:

    My wife has purchased jewelry product directly from the company she represents for the sole purpose of displaying to potential customers.

    She does not sell from or maintain inventory to sell - all sales are made with and shipped from the parent company to the customer; She only has these as display examples.

    I don't see claiming them as depreciable property as they don't "wear out". Are these then considered supplies for doing business or counted as advertising & promotional cost? If the company stops offering a product and it is no longer needed for display, (essentially making it obsolete) what then happens to its value?

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    1. If they included the purchase price as income (which they probably did), it is a slam dunk deduction no questions asked. If they did not, you can probably still deduct it, but it's not as solid. Deduct as a supply or advertising. I would tend not depreciate it. All that said, if we're talking really high dollar amounts compared to what she's selling, you could be opening yourself up to a lot of questions.

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  17. Great info here. If you have to purchase in order to get paid then is any of that cost deductable? The items purchased are for personal use, but if I didn't buy $100/month I wouldn't get a pay check (which is more than that)

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    1. That's a shady business practice and is probably illegal. Please see the April 1st comment on personal use items - they probably included it as income and thus it would be deductible.
      If you have to make personal purchases in order to generate enough income to get paid - you are probably more hobby than business, as discussed in the post.

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  18. Your basic business financial advice is so helpful for me. Wonder if you have a downloadable income-expense sheet with formulas? Thank you for your advice.

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    1. I don't have any special spreadsheets or formulas for MLM

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  19. During 2015 I went to seminars, paid for my monthly training system, paid my auto-ship, etc. However, I made zero sales. I have filed in previous years, where I've made less than $100 in sales. Do I need to file this year?

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    1. I can't really answer that question via a blog, but I can tell you that I would have serious concerns as to whether you have a hobby or a business, and I suspect the IRS would too.

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  20. Similar to a previous poster my wife has purchased jewelry from a company simply for display purposes. She does not maintain inventory, and all sales are direct shipped to the purchasers.

    Her compensation from the company is commission driven, based on sales and reported on a 1099. In 2015 her display purchases far out weighed her commissions, to the extent her commissions were about 35% of her display purchases. Can these demo / example purchases still be deducted, and is there a threshold of what is reasonable to deduct?

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    1. There is no specific threshold, but those display purchases at that enormous level would bring me to question whether they are business or personal use. If the full purchase price is included in the 1099 income - they are absolutely deductible. If they are not, I would be very leery of deducting them. Without numbers and a specific look at her track record with income, it's impossible to answer on a blog - but it looks real sketchy.

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    2. Thank you for your quick response. My understanding is they are not included in the 1099, as I believe it only captures commissions paid. Consultant do not receive commissions on their own purchases.

      Unfortunately in this particular direct sales model, items are essentially seasonal. As new products are introduced, others are phased out and consultants are expected to purchase the new items.

      This is her second year in the business, and sales have clearly been less than stellar. Which, unfortunately leaves far more expenses than income.

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  21. I was told if I own a SUV and I have my marketing materials on it via big magnets or vinyal I could deduct a part of my vehicle? I go everywhere in it and it is marketing everywhere I go so...how does that work??

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    1. Magnets deductible. Mileage deductible for legitimate work related driving. No extra deduction for "advertising"

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    2. Magnets deductible. Mileage deductible for legitimate work related driving. No extra deduction for "advertising"

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  22. If you sign up to be a MLM consultant just to take advantage of the discounts buying products you already use "at cost" provides do you still need to claim it on your taxes? Ive run into many Mary Kay & Avon consultants that do that to get their make up on discount & never was sure on if that was legit or if they would get in trouble if they were to be audited.

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  23. If you sign up to be a MLM consultant just to take advantage of the discounts buying products you already use "at cost" provides do you still need to claim it on your taxes? Ive run into many Mary Kay & Avon consultants that do that to get their make up on discount & never was sure on if that was legit or if they would get in trouble if they were to be audited.

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    1. Legally you must claim all income. In this case it would be hobby income on line 21.

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  24. Hi just a question if I'm the sole proprietor do I need to apply for a EIN with the IRS or is just my ssn good. I've been trying to figure this out for a few days this is the first time any tax form asked me did I have that number for a direct sales company.

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    1. Ein is not required but does give you a number to provide that is not your son. I always recommend getting one.

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  25. So.. if we are considered hobby.. what then? Looking into selling home fragrance products.. but I KNOW going in, I don't have potential for a huge client base. However.. i would like to try, as I know myself and a couple close friends would purchase.. but I know I won't be making any big numbers... so how in the world would I file?

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    1. You claim all income on Line 21 of the 1040 as Hobby Income.
      Expenses up to income go on Schedule A in the section for miscellaneous deductions subject to 2% income limit (same place job expenses go)

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  27. Question about purchasing products to sell at vendor events, or to customers who want to buy directly from me. In my company, we purchase our products at retail prices listed on the website. We get paid a commission back on those purchases even for our personal use, and those commissions are reported in my 1099. We are not required to keep inventory, and it is actually encouraged that if we choose to do so, to keep a very small amount. We are not allowed to sell our products for greater than the retail price we paid for it. I do not make any extra for selling these products to customers. Even if I take the money they pay and buy more product, the commission paid to replace those products is reported in my 1099 as well since I have to order through my own site. Anything bought or sold by me or my customers from my replicated website pays me my commission and gets reported. So basically, if I have $1000 worth of products on my shelf, it is all paid retail and my commission is reported. And I'm stuck with $1000 on my shelf for personal use if I don't sell it or give it away. It wouldn't be any different than going to my local store, buying a bunch of lotion, for example, and just having it always be available. My guess is that I do not need to keep track of my inventory or the buying/selling of it because there is no real "income" or value in running my business this way. My customers can go to my website and buy the exact same products for the same price online.

    However, I do purchase some products to be used to sample out to customers or as "testers" at vendor events and home parties. They are not for personal use, although we end up using them up after that particular product is no longer available. Are these products allowed to be an "expense"?

    Thank you for your help!

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    1. First rule of MLM taxes is ignore the company's advice. The best way to handle the things you describe is with inventory. It's not as hard as it seems since you will be dealing with small numbers and purchases will be tracked by your company and reported to you. Just add up the cost of anything on hand at the end of each year and that plus your purchases is everything you need for inventory and cost of goods sold. This will handle everything you describe without it looking sleazy.

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    2. Hi. Different poster than the Anonymous above, but to clarify when you say "your purchases" in the last sentence, that refers to items customers bought from you during the tax year, correct? And then "your purchases" would equal the cost of goods sold? Thanks!!

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  28. Second entry, not sure if you got my first. Sorry if you did, could you tell me if/what are the tax implications for returning your product back to a company? I did that mid year 2016, and am hiring a tax accountant to help us this year, but would like to be tax saavy first. Can't find much on internet. thanks

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    1. The best way to handle the things you describe is with inventory. It's not as hard as it seems since you will be dealing with small numbers and purchases will be tracked by your company and reported to you. Just add up the cost of anything on hand at the end of each year and that plus your purchases is everything you need for inventory and cost of goods sold. This will handle everything you describe without it looking sleazy.

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  29. This will be my third year filing a 1099 from my MLM. Based on your article, I will most likely file as a hobby this year instead of a Schedule C. My question is regarding the state returns. I don't do any personal sales from my home and I moved to another state midway through the year while my husband, who is still stationed in the first state, is the primary income earner. We would file in the state that he draws the income, not me. Now that I'm in another state with my hobby income, do I have to file state returns in both states (or at all)?

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    1. There's the right answer, and another answer, one of which I'm not willing to put in writing on the Internet...I think you can guess what it might be...

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  30. I signed on as a consultant for an MLM company in 4th quarter but didn't make any income. Do I still need to file a 1099? Can I still claim deductions even though I didn't make any income?

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  31. Hi I have joined another MLM company. The first one is a candle business and I have to buy every month to be able to stay with them. So I do have an inventory. The one I joined in July is a makeup company and we buy products for us to use and do party or show and also make samples for customers or just let the costumers try them. So yes I have a lot of purchases and few income since I just started this year. I have quite a good amount of products I bought to show and let my customers see them and I also wear it so people can see the results. So that would mean that i can't deduct any of those purchases? Our purchases are not on our 1099 just what is purchased by customers on our website.

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    1. If you use it exclusively for personal use it should be removed from inventory as personal use or not included as an expense if you don't do inventory. This applies even if you are using it on yourself to "advertise" it to customers. Items you use as samples, for demonstration on customers or as gifts would be deductible.

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  32. I have seen you reference companies keeping track of what purchases a consultant would make during the year. In my particular case I only receive an amount for commission for customer orders placed from home shows that I have been to. I have to make purchases during the year to have as samples to show them at these shows. These purchases are at retail plus tax and shipping. to keep I also stock inventory for vendor shows where customers can purchases. These are also at retail plus tax and shipping. So at the end of the year I get that I have commission income which is given to me by my company. but what I am having troubles with is how to record my purchases. They are not purchases that I made my commission income off of - cost of goods sold. How do I claim these as expenses?

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    1. Deduct them as supplies, subject to the caveat discussed previously about personal use by you, vice demonstration/sample use. Personal use by you, even to show off the product is not deductible.

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  33. Thank you! I realize my shortcoming as a business owner is recordkeeping...this helped...ALOT

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  34. When we tally our inventory/items that we use for sampling and customer rewards, do we deduct its full price (what one pays before receiving the commission check) or the post-commission price? Thank you!

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  35. The key to inventory is consistency. If you calculate beginning and ending inventory based on cost before commission, that's how you handle everything in inventory. Generally, you use YOUR actual cost (what you are out of pocket to get the items when all is said and done)

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  36. Do you have an article about charging sales tax? I recently started with a makeup mlm and am confused on this. I order product from the company to have onhand to sell. I am charged for the product, tax and shipping. I then ship the product to my customers after they buy. Should I be charging them their state tax, or the tax I paid? No tax? What happens to the difference? Am I out that on top of the shipping costs I paid to get the inventory to me? I've been reading for days and am more confused now than I was before. I'm in Minnesota if that helps. Thanks!!

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    1. I don't talk about sales tax because I barely keep hip with my state rules (not MN). I would guess that since you already paid sales tax that you are good, but I would ask a local expert.

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