Income Tax and Your Network Marketing Business

Often I see the phrase “tax advantages” in ads for network marketing distributors. This phrase can be a bit misleading.

I always suggest consulting with a tax expert to learn what is and is not acceptable when filing taxes.

More than once I’ve had a potential new distributor come to me confused over taxes. They are worried about having to pay taxes on the money earned.

I do pay estimated quarterly taxes. The best way for me to explain this is to use a very rounded number. If you earn $1000 per year and if your tax bracket is 30%, you absolutely will owe the government $300 dollars. If you have deductions, then this number will go down, but without getting into deductions, right now you owe the government $300.

Please note in the above example, you’ll have $700 in earnings. This is $700 you would not have had without the network marketing business. Yes, you paid $300 but you’ve kept $700.

Self discipline is a must. I know that each year I’ll have to pay taxes on the money earned and so I automatically put away 30% of what I earn. If at the end of the year I’ve overpaid the government or over-saved, then I’ll get a refund check just like others who work for employers and have overpaid.

I save all receipts and all bills associated with my business. I use the internet daily. I save my bill from Cox Cable, my internet provider. I subscribe to a few magazines. I save the bills from those subscriptions. I also save all invoices from the company I represent and I mark what was purchased for me, what was purchased as samples and what was resold to customers.

You can deduct part of your housing costs. However, once again, I suggest you meet with a tax expert as there are long term effects of declaring part of your house as a deduction.

There is quite a bit of information on small business taxes and home business taxes on the IRS website. Invest some time reading through this information.

Above all, remember that in order to owe money, you will have also made money.

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