Monday, February 14, 2011

Tax Time - IBO Profits Go Up?

One of the things that I have observed is how IBOs are so misguided by their upline, that they think that their business losses, which result in a tax refund is somewhat like a profit, or that they are getting a free pass with the government footing the bill for their standing orders and functions. In the past, IBOs have been audited and had many business deductions disallowed because the tax department ruled that they were not truly running a business, but participating in a hobby called Amway.

I know that most IBOs are deducting the cost of their training materials on their taxes, but the issue at hand is whether the training materials are resulting in increased sales for your business. If you are running a "buy from yourself" business, then there is a strong possibility that your expenses may not be valid deductions come tax time. If you are not selling products to customers for a profit, then there is a chance that your expenses are not valid deductions. It would be sad indeed to be audited at tax time a few years after you have been an Amway business owner, only to find out that your expenses are not valid and that you may owe tens of thousands of dollars in back taxes.

Another apparently common mistake of IBOs is to think that their business expenses are basically free from the government because they may end up with a tax return. Your expenses are deductible from your taxable income. Thus if you had $10,000 in business expenses, your return would depend on your tax bracket. If you are in the 15% tax bracket, then $10,000 in expenses would get your about a $1,500 tax return, depending on other deductions you may have. But IBOs get duped into thinking they made a score and now get back $1,500 when they may not have had a refund in the past. Obviously in this case, the IBO would have been better off saving the $10,000 and never getting involved in Amway. Some IBOs proudly proclaim their refunds as basically a windfall, almost like it is a profit. That is truly scary.

Folks, there is no free ride. If you are spending money on legitimate business expenses with an intent to make a profit, then there is nothing wrong with that. But if you are traveling to conventions hoping to learn the secret of sponsoring more downline, you could be walking on thin ice should the IRS ever decide to audit your business. There have been many cases in the past where not only did IBOs lose their shirts due to the business support materials they purchaed, but they got double whammied later when the IRS disallowed tax deductions, leaving them in financial ruin. I truly hope you aren't on that path.

Check out this link:
http://www.apollowebworks.com/amway/irs.html

"TRAVEL AND ENTERTAINMENT have always been areas of abuse. Sections 162, 262, and 274 are always applicable and sometimes Section 183. Since most of the travel is primarily to attend social gatherings for entertainment and motivational purposes, any real business purpose is suspect. Unless the taxpayer can show that attending seminars, meetings, etc., meets the requirement of Section 162, the travel should be disallowed. Amway people have been unable to show that attending these meetinqs increased their sales. The agendas of these meetings appear to be primarily for entertainment, socializing, and listening to motivational speeches. The meetings have nothing to do with promoting the sale of Amway products to the general public. In fact, Amway distributors are specifically warned aqainst mentioning either Amway or selling when recruitinq potential downline people. Since it is not likely that the taxpayer will increase his sales by attending these functions, then there is not a reasonable business purpose for the trips"

14 comments:

Anonymous said...

So what now buddy? You became a tax expert too? F-n eh, JoeCool is an expert in everything. He knows all about Amway and now he knows all about taxes. Damm, you must be the smartest man on this planet. NOT!

Anonymous said...

anon, how would you like a swift kick in your groin? =)

Joecool said...

One thing I am fairly sure of. An IBO getting a bigger tax refund is more than likely losing money in Amway. You don't get bigger refunds when you're making the dollars.

Anonymous said...

Hey Anon@9:27,
Why do you waste your time posting here when you could drawing circles and tending to your large business? You have nothing worth saying and the fact of the matter is you lack any business sense whatsoever. Read the post again or better yet have a grownup read it to you and explain.
Joe is correct and it does not take a genius to understand that a business making a net profit generally does not get a tax refund.

***Former WWDB Lemming***

rlaurens said...

Wow, Joecool's reference contains the IRS code that everyone can check and some anonymous loser answer to that is simply.... 'NOT'! ?!?

Doesn't take a tax expert to figure out who's the 'smartest man' in this ring.

Anonymous said...

So what? JoeCool thinks he's such an expert but he's a talker and not a doer. He didn't accomplish anything in Amway and now he just sits behind a keyboard bellyaching about the perils of Amway. I bet he's broke and uplifts his ego by putting down IBO's.

Anonymous said...

lol anon, you're hilarious. i see there are some job openings at the improv. might wanna send in your résumé!

Anonymous said...

ooops, i'm sorry, that might limit your chances of actually succeeding. haha...that ugly "J" word slipped out again. ah well, there'a sucker born every minute...

Anonymous said...

Hey Anon@9:27,
I ask once again, why do you waste your time posting here, you only make Amway look bad.
If you talk like you type I doubt you have a single downline but eh, prove me wrong.
Run along little Ambot.

***Former WWDB Lemming***

Anonymous said...

As an actual ibo running a 3000pv monthly biz, 900 of a 1000pv coming from client sales, and another 2000 from 6 businesses that avg 100pv personal use and 200pv in retail sales ALL at retail I should knw just as much as anyone on this blog! First theres the idea that no one can make a profit, not true, second, your idea that all ibo's act like your saying or believing is not backed on all accounts cuz you can't survey everyone and how their taught or how they organize! When you run a biz that increases I'n volume by monthly or quarterly reports, then you can justify that any bsm materials are making your business more profitable, and when you keep great records and shown retail business and passive checks from downline cuz you shown them how to make a real Businss based on products and services that have true tax advantages! Lower tax braket, lower taxes! Sorry everyone here wasn't taught real business, wasn't taught straight logic and feel the need to whine allllllllll the time, people get out there and do something for yourself! The worlds getting worse and you need financial intellegence!

Anonymous said...

Anon@6:23PM

Wow, you should really learn how to spell. I say you are completely full of crap but prove me wrong.
You say (spelling mistakes included) "Businss based on products and services that have true tax advantages! Lower tax braket, lower taxes!"

Let me spell it out for you. If you are in a lower tax bracket your income is low. If you are a business making an net income you are not getting a tax refund unless you write off expenses that far out weigh your net income (an audit waiting to happen).
All this is common sense though, something you and most of the scamway suckers that think they have a business can not comprehend.

***Former WWDB Lemming***

Anonymous said...

*crickets*

sunny said...

bastard its bad that you haven't even achieved 6% level and run keeping your mouth up in air like a swan commenting on a fortune 500 group member business leader company.....
SHUTUP ok

First achieve something and also get your brain scanned and treated with a good medic.
shall i get you one ??

Anonymous said...

^ looks like somebody got up on the wrong side of bed this morning...or was born on the wrong planet...