Friday, February 4, 2011
The Taxman’s Gonna Catch Some IBO’s!
Our upline gave us shitty advice about everything under the sun but perhaps the worst advice that could have had severe repercussions is that everything in Amway is a tax deduction. I figured out pretty quick that the upline meant the only way an IBO can survive in Amway is to deduct their Amway expenses from the income they earn in their real J.O.B. Our upline told us we’d get a big tax refund deducting all our Amway expenses - legitimate or not.
I’ve sat in enough Amway meetings where the Platinum or someone else in the room is claiming that things couldn’t be better, their business is growing, and then in the next sentence these same IBO’s claim they’re getting a large refund after filing their income taxes.
My Ambot was transfixed. He had no idea the secret to getting a tax refund - according to our upline - was by becoming an Amway IBO. Free money from the government! All these years our accountant balances our income and expenses to a point where hopefully we don’t owe money or as little money as possible to the government. Refund? Ha, that’s a laugh when your business is doing good.
Ambot’s not good with money (which is why we’ve had an accountant for many years) so I put it simply so he could grasp the concept.
If our business makes too much money (income) and we don’t have enough deductions (expenses) we owe money at tax time.
If we do not make much money and our expenses outweigh the income then we get a refund.
In other words it is pretty much impossible for an IBO to claim business is going great and they’re making lots of money and then tell us they’re also getting a tax refund. Uh, that would tell me business ain’t going as great as they claim. Or they’re cheating on the taxes.
They’re lying about one or the other. But then that’s what IBO’s are trained to do by their upline: LIE!
In our legitimate business we have legitimate expenses that can be used as deductions. In the pretend Amway business we better not even dare claim anything Amway related or we could end up in big shit in an audit.
When we were in Amway we were told if nothing else Amway is a good tax shelter. The taxman might disagree. I found some interesting reading here:
The couple described in the article had employment income as well as being Amway IBO’s. They had lots of Amway expenses.
! However Uncle Sam got suspicious after giving these Amway IBO’s yearly refunds. What kind of business are they running where they’re not turning a profit after all this time? Time to look into this a little futher. Oops. Caught. Time to pay back the taxman for all those refunds while “building your business”. Deduction City
In this article the couple were unable to explain why they kept going to Amway functions year after year when clearly they weren’t learning how to recruit more IBO’s and sell more Amway products. The couple did not seek out a third party to ask for advice on how to increase their business. They probably just “counselled with upline” on that one! The IRS determined Amway was more like a social club for them than a legitimate business.
Its probably a good guess that other countries have similar tax laws. You can’t keep showing losses on your business and getting tax refunds. That turns the Amway social club from owning a pretend business into “how to earn money off the government” by getting tax refunds claiming Amway “business expenses”. Probably what screwed up this couple was that they also had employment income outside Amway and used their Amway purchases as deductions to offset their employment income.
Of course many people have a J.O.B. in order to fund their expensive Amway social club. Not too many people quit their J.O.B. to do Amway exclusively because they can’t afford to. Ah tax shelter. Here we come!
Yeah keep doing that. You’ll be paying that tab eventually. The Internet has stories of IBO’s getting cracked down by the taxman for submitting Amway deductions to lower their real employment income. I realize that not too many IBO’s think about getting an accountant and professional advice when it comes to filing their taxes because they trust what their upline tells them. Bad idea! Ambot and I never used any Amway expenses on our tax return. Our accountant said no because we weren’t earning money in Amway and she didn’t want to expose us to an audit.
Here’s a little hint. Unless you’re operating a restaurant business you can not use groceries as a tax deduction. Read into that Perfect Water, XS Energy drinks, Nutrilite Vitamins, food bars, etc. If you put it in your mouth and consume it that makes it a grocery item. Not deductible! Not even if you try to claim it as samples to hand out to prospective customers. You can’t hand out (or more likely self-consume) hundreds of dollars of “samples” every month and not make any sales.
Here’s my best advice at tax time. Don’t “counsel with upline” when it comes to taxes because their advice runs something along the lines of if you don’t make a profit on Amway sales you’ll make that profit in a tax refund. Unless you like getting audited, see a professional accountant for advice on what you can legitimately claim as deductions.