Wednesday, June 16, 2010
Amway can save you tax money!
You will hear this statement from your upline often: "You now run a business, so you can take tax deductions." While it is true that you can take all the business expenses as tax deduction (not tax credit), realize that you first need to spend the money for the business. You also need to have the proof that you indeed spent it for the business, and not for personal use or pleasure.
If you spent $10,000 for your business in one year because of meetings, travel, hotel stay, etc., then you can claim that as a tax deduction from your overall gross income. Typically you will get a third of that money you spent in Amway as tax refund. If you are in that fortunate 0.01% of the people who made some money with Amway, then this helps. But you cannot keep taking these deductions for more than 3 years if your Amway income sucks! (i.e. if you are in the majority 99.99%.)
Majority of the people (99.99%) can take these deductions only for the first 3 years. After that, your CPA will tell the IRS is not going to be happy with your deductions for $10,000 when your 1099-MISC shows an income of $700. IRS can actually declare that you are running a hobby, not a business, if you take so much deduction for the pathetic income you are making through Amway. At this time all the uplines "recommend" that you go with what your CPA says!
But they do not tell you this when you sign up! All you are told is only that you have tax breaks and if you are as gullible as me, then you think it is a great benefit!