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. Deduction City! 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”.

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.


  1. So true, Anna!

    When you try to pin down actual expenses for any MLM, it's amazing how all of a sudden you're 'negative.' After all, the facts don't matter, right?

    Um, a fact is a non-entity, therefore it cannot be possitive or negative.

    We, too, own a business, and I can promise you every expense we create had better fit into an expense catagory.

    All MLMs have to embezzle from their IBO's dreaded jobs to stay afloat. Amazing how when the economy tanked, so did MLMs.

    Let's see: no job = no cash = no money to buy MLM tapes, books, and functions. Rinse & repeat. Bummer

    Amazing how those dreaded jobs are looking less dreadful.

    I also read on some anti-amway blog some blowhard acting like we were nuts for thinking we could reire with residual income. All of a sudden they're saying it makes a great side income. Side income? I never heard those words from any amway/wwdb stage. Now, they wanna play nicey-nice with the jobs.

    All I heard was, "We're gonna be rich and walk the beaches of the world."

    Paradigm shift, perhaps?

  2. I went to a local meeting tonight and boy it was boring but I was mostly there to have fun with these people. My best friend recently got pulled in and they brainwashed him really hard at the big conference they had in Dallas. I think it's too late to save my friend because he is ready to dump $300 which he dosen't have.

    Anyway at the meeting I went in with a fake persona. I was an arms dealer dealing with the indian government. It was pretty fun being someone else.

    The meeting was basically useless. Nothing substancial was said. Just product demo and lots of pats on the backs for reaching incentive levels. They had a diamond on the phone and he talked endlessly.

    I noticed that they like to have couples come up and make speeches. Like playing off of each other and showing how happy they are. Even the diamond on the phone too.

  3. Anonymous I found all the meetings boring and useless. They spend a lot of time saying nothing useful in running your own business. Did you have any fun with these people other than the arms dealer thing like ask them to show their profit and loss statement. That must have got them talking after you left!

    Your friend will throw away much more than $300 before he realizes this is a lousy business opportunity. He will likely drop off your radar within the next few weeks because the next step in brainwashing is to separate the IBO from people not involved in Amway.

  4. Good post Anna. IBOs who claim they got a bigger tax refund because of their Amway business is most likely LYING if they say they made a nice income from Amway. If you made money, you would have more money from the business but the taxman would stake his claim come tax time. These IBOs are just fooling themselves thinking they are successful.

  5. Thanks Joe. Those IBO's are only successful at ripping off the government when they filed their taxes because they got a refund. They'll get caught eventually, usually by some pissed off downline like myself reporting them to the tax cheaters hotline. Amquix has some more cases here but some of his links are dead.

  6. Hey, I see you decided to put your blog to work?

    I bet you will earn more today than 99% of IBOs. LOL

  7. I think Anna just found out how to do something that 99.9% of IBOs cannot do: make money from Amway :)

    (I just click on the Amway ad link)

  8. Joecool your buddies are still going to think we're one and the same for monetizing the blogs!

  9. Thanks rlaurens. I already had an adsense account making a little money so we'll see if it makes a little more now. It'll be more than most IBO's make that's for sure!

  10. Anna, do me a favor. Leave a comment on Rocket's blog. He can confirm that we are not the same person. I don't care about IBOFB etal.

  11. I'm pretty sure I've left a comment on Rocket's blog before. What difference does it make? Aren't you Rocket too? They'll just think we're all in some weird conspiracy.

    Speaking of weird, about a week ago someone from Sweden was doing a google search for "David Steadson idiot" and ended up at one of my posts. I've never written anything about him so it must have been one of the comments left to a post. I just thought it was funny that he's doing a google search for that criteria! And getting hits!

  12. Anna;

    If you are traveling, you have to put the food items into 'Travel & Entertainment (and it had better be while out procuring more ways to do more business!)

    At the end of each month as we are adding up our expenses for each category for our real business, I always get a bit queasy at the 'Travel & Entertainment' total. We are very careful not to abuse it.

    We build custome homes and do scads of remodeling. Most expenses are 'Job Materials' for each job.

    Of course, then you have 'Off. Exp., Building Supplies, Auto Exp., Insurances of every kind,' etc.

    My friends, these are true expense categories. What are your expenses in amway?

    Let's see:
    *personal food consumption? huh?
    *dry cleaning (you'll be doing this a lot as you travel to major functions)
    *travel (airines, car rental, hotels, food, etc.)
    *snacks given at 'bored' plans (oh, yummy)

    Food consumption as a legit expense could put up a red flag w/the IRS. Good luck with that one. Being as desparate for money as the IRS always is, I wouldn't want to give them any reason to give me a second look. Once flagged, always flagged.

    I realize this post is a real page turner, but, Brother, it ain't one to mess with. Every notice how most MLMs have no tax software available? After 2 years of showing a loss, you are flagged by the IRS. You are now considered a hobby owner and nothing else. You cannot deduct for a hobby.

    Gee, I never heard any of this on a CASSETTE TAPE!

  13. Anonymous, we use accounting software for our business too and everything has a category or when all else fails the popular "miscellaneous expenses". I never entered any Amway related receipts into the software when we attended out of town functions, though I did file them with my other monthly expenses just to put them somewhere out of my sight. If I ever get audited the taxman is going to be scratching his head wondering how come I have a few hundred dollars more in receipts that I never entered and claimed!

    One of my friends is a realtor and everytime we go out to eat she pays the bill. She doesn't cook and eats out all the time and wants to pay so she can claim the deduction and we always talk business at some point during the meal. I was at her house and she was totalling her meal receipts for the past 3 months and it was over $12,000! Yikes! She earnes in the mid 6 figures and needs deductions like crazy but wow that's a lot of dining out! Don't know if she's ever been audited on those meals.

  14. "After 2 years of showing a loss, you are flagged by the IRS"

    To be more precise, IRS considers it a 'business' if it shows profit in at least three of the last five years. So, if your business has losses for more than two years in a row, you better have a VERY GOOD reason for that.,,id=169490,00.html

  15. I'd like to see some IBO's lie their way out of that one!

  16. Thanks, rlaurens;

    You are right.

    wow! 12,000 on dining out? Ouch. Puts a whole new spin on 'Travel & Entertainment.'

    We try to keep ours below 200.00 on any given month.

    I try not to us the 'Miscellaneous' category, but sometimes there is just no other place.

    And CASSETTE TAPES would go where???

  17. For all who are interested, here are the IRS guidelines on 'business vs hobby". The 'profit in 3 out of 5 years' is only one of the guidelines. Equally important are carrying your business on in a 'business-like manner" which can include consulting professionals (not your upline!) on improving profitability and having a business plan showing how you intend to achieve profitability/reduce expenses.

    "In determining whether an activity is engaged in for profit, Section 183 (of the IRS code) provides a list of factors for the court to consider: (1) The manner in which the taxpayer carried on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that the assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer’s history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; and (9) elements of personal pleasure or recreation".

    Elements of personal pleasure??? Yes, going to incredibly boring meetings and getting insulted by your upline definitely qualify as personal pleasure. ha ha.

  18. I always enjoy looking up scams and finding people who dedicate themselves to helping others avoid those deathtraps. For that I thank you, and if you are ever looking for accountants, let me know I would love to help you out.


Comments are moderated but we publish just about everything. Even brainwashed ambots who show up here to accuse us of not trying hard enough and that we are lazy, quitters, negative, unchristian dreamstealers. Like we haven’t heard that Amspeak abuse from the assholes in our upline!

If your comment didn’t get published it could be one of these reasons:
1. Is it the weekend? We don’t moderate comments on weekends. Maybe not every day during the week either. Patience.
2. Racist/bigoted comments? Take that shit somewhere else.
3. Naming names? Public figures like politicians and actors and people known in Amway are probably OK – the owners, Diamonds with CDs or who speak at functions, people in Amway’s publicity department who write press releases and blogs. Its humiliating for people to admit their association with Amway so respect their privacy if they’re not out there telling everyone about the love of their life.
4. Gossip that serves no purpose. There are other places to dish about what Diamonds are having affairs or guessing why they’re getting divorced. If you absolutely must share that here – don’t name names. I get too many nosy ambots searching for this. Lets not help them find this shit.
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6. Posting something that serves no purpose other than to cause fighting.
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