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Did you know that you could be taking home an extra $5,000 each year – with
little or no effort? While it almost sounds too good to be true, it’s not! The
government offers huge tax breaks to those who have home based businesses -
regardless of how well they do.
How is this possible? The tax laws that
allow large corporations to write off thousands of dollars in expenses are also
available to those with home-based businesses such as the GlycoBusiness
opportunity. The only difference between most network marketing businesses and
fortune 500 companies in the eyes of the IRS is their size and the fact that
network marketers can also deduct many home office and living expenses.
Let’s take a look at some of the seemingly “ordinary” things that can be
legally deducted by a network marketing home-based business owner.
Meals and Entertainment
When you discuss business with
co-workers and friends at lunch or dinner, your meal is 50 percent tax
deductible. For that matter, so are other expenses relating to entertainment
focused on building relationships with prospects, retail customers, and downline
or upline distributors. Theater and sporting event tickets are 50 percent tax
deductible, too.
Car and Fuel
Automobile
mileage is deductible between your home-based business office and a meeting
where business is discussed. That includes the meals mentioned above, an
opportunity meeting, or even golf outings with friends who are prospects! Travel
is deductible, whether it’s to an industrial center or an island resort, if the
purpose is to hold an opportunity meeting, to discuss business with other
travelers, or to attend a seminar. Travel is deductible for a wife or husband
whose presence is helpful in closing the sale. You can also deduct wages paid to
your children for help in the business, and if those children have no other
sources of income, all wages under $4,000 per year are tax-free. It’s a great
way to save for college with Uncle Sam’s help!
Computer
and Office Equipment
Home computers, fax machines, telephones, office
supplies, and office furniture are also fully tax deductible. But there’s more.
The IRS’ only requirement is that you legitimately treat your network marketing
business as a business, not a hobby. That means regularly working it. What
counts as “regularly working” your business? Taking the actions you are telling
your downline to take: attending weekly meetings, calling prospects regularly,
using the product and telling people about it, presenting the opportunity, and
teaching others to do the same. If the people you sponsor actively follow your
guidance, they should make money. But even if they don’t, the IRS will recognize
their right to home-based business tax breaks (just as it does yours) if they
properly document their activities and costs. The only catch is that expenses
directly related to your home office (rent, utilities, etc.) cannot be used to
generate a tax loss. They can only count against your business profits for that
year and carry over to negate profits in future years, should your business take
off.
Required Documentation
Documentation is
a simple process. It merely means saving receipts and writing down in your day
planner all business-related activities, business-related expenses and any
revenues you earn. Consistent record keeping will prove to the IRS that you are
truly running a business and not engaged in a hobby, whether or not it makes
money. What do these records look like? They’re simple. Just writing down whom
you spoke with about the business, where you went in pursuit of your business,
and what you spent in the ordinary course of conducting business, will provide
you with the proper documentation and a sea of deductible expenses. For a
maximum investment of five minutes a day, the time spent record keeping is worth
a minimum of $5,000 in tax savings. That’s a little over $231 per hour of tax
savings for the time you spent keeping track of your activities and expenses.
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Which of your ordinary lifestyle expenses are deductible when you are a
network-marketing distributor? If you legitimately work your business in any of
the following ways, you can write it off. Check out the math:
$500:
Lunch with coworkers is deductible. (Hey, they’re
prospects!) Four dollars per day times 250 workdays: $1,000. Multiplied by the 50
percent deductible, that equals $500.
$1,500:
Travel expenses for you and your spouse to vacation
land, if you hold opportunity meetings (the meetings could be with the friends
you are visiting), and if both you and your spouse participate.
$1,800:
Home-office deduction ($150 per month) for use of
the spare room in your house, out of which you operate your home-based business.
Make sure to meet there sometimes with clients or prospects, to document the
meetings, and not to use the office for any other purpose.
$1,500:
Automobile mileage from your home office to your
day job or other places where you actively encounter prospects and actively
discuss the product. At 30 cents per mile, 20 miles round-trip times 250 days
equals $1,500.
$8,000:
Tax-free wages for two
kids without other jobs who help in your home-based business. That’s two
children times $4,000 per year, paid to accounts for college, weddings, etc.
$2,700:
Health insurance for your family.
(This assumes your spouse is an employee of your home-based business who chooses
to include you and the kids on the plan.) Premium of $225 per month multiplied
by 12 months equals $2,700.
Altogether, that’s $16,000 in tax deductible
expenses. If your tax bracket is 35 percent of your income, counting combined
federal and state taxes, your deductions would generate a $5,600 cash refund
from the IRS.
Remember:
To deduct the above
expenses, you must be actively working your business (i.e. meals and trips
mentioned above) and keeping records. Be sure to consult your accountant or tax
advisor to learn more about applying these concepts to your business.
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