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income taxes and mlm sales

If you’re one of the thousands of people that are trying your hand at selling an MLM product like Arbonne, doTerra, LuLaRoe, or Young Living, you probably are doing so in the hopes of making money to improve your life. You might be just looking for extra spending money, or to help pay the bills while your home with the kids, or even to eventually make enough to quit your day job.

You’re spending a bunch of time having parties, posting on Facebook, figuring out how to market and sell your product and get other sellers to work with you. The last thing on your mind is how this will impact your taxes when tax season rolls around.

But taxes ARE an important part of any business. And a basic understanding of taxes can save you tons of money and help you avoid any audits and penalties.

On that note, here are some tax basics you need to know about your MLM and taxes so you can save money and avoid an audit.

You need to report ALL of your income on your tax returns.

This generally means the commission you earned, not the actual sales dollars of the products you sold. Even if you do not get a 1099 form from your MLM, you still need to. There are 2 main points that confuse some people on this topic, so I will try to clear those up.

  1. While your MLM only needs to give you a 1099 if they paid you at least $600, that DOES NOT mean that YOU have a $600 minimum to tell the IRS. This $600 threshold is only a requirement for the MLM, not you.
  2. The IRS and most states have a set amount of money you can earn without having to file taxes. BUT, this amount is the TOTAL from ALL income sources.

You can deduct all business related expenses you spent on your MLM,

which will reduce the amount of income you will need to pay taxes on. Some of the more obvious business expenses might be things like office supplies, product samples you bought, and postage for shipping products. You may also be able to deduct things like mileage for driving to and from your hosting parties, the costs of running a website, or a portion of your home internet expense. You may even be able to make deductions for a home office.

You don’t have to have a “company” (i.e. LLC, Corporation, Partnership) to have a business.

You can just run your business under your own name as a sole proprietorship. You can create a company if you choose, but it is not required. You run your business the same either way.

Some years you might actually lose money on your MLM, which is especially common in the first year.

You may spend start-up money on buying an inventory of product samples before you start actually selling them. Since selling an MLM can be considered a business, you can still deduct all of your business expenses. Any losses you end up with can then be used to lower any other income you have from a job, your spouse’s job, or other businesses you may have made a profit from.

However, if you have losses for a number of years, the IRS may say that your business is actually a “hobby”, in which case you can’t have losses.

If you sell multiple MLMs, you can choose to treat each one as a separate business or simply combine all the income and expenses into one single business.

The option of combining them all as one single business is by far the easiest thing to do. Think of it like a grocery store that sells milk, eggs and bread, except your store sells Arbonne, doTerra and LuLaRoe. They are just different products you sell in your one store.

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It is incredibly important to keep track of all your business income and expenses.

Keeping track will not only make tax time easier, but it also helps with record keeping should you get audited by the IRS.

But that doesn’t mean you need an expensive software to do it. You can keep track on paper or on a simple spreadsheet, and save all business related receipts as well as credit card and bank statements. You can get my super simple business budget spreadsheet here for FREE.

Even though your taxes may have gotten a little more complicated, you can still do them yourself and save hundreds of dollars!

Check out my post “7 Reasons to do Your Own Taxes and Not be Afraid” and see why you should do it yourself.

And if you do choose to pay to get your taxes done by someone else, you should NEVER EVER pay for the “Rapid Refund” or same day refund option. You end up paying the equivalent of 100% interest just to get the money 2-3 weeks early. Most people that e-file and choose direct deposit get their refund in 14-21 days.

But even after reading that post,

if you still feel like you’re not the tax type or would rather just leave it to the professionals, check out the tax services I offer  here! I am offering a steep discount on income tax preparation for those with a blog or side hustle through February 28, so don’t miss out! Or if you simply have a question, please feel free to contact me here and I will gladly help!

Don’t forget to also check out my post “Taxes for Bloggers (or and Side Hustle)” for even more tax tips that can be important for your MLM as well and share this post to help all of your side hustling friends!

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Rob
I’m Rob, CPA at Against the Grain Accounting & Finance, co-blogger at Your Healthy Family Coah, father to 4, husband to 1, and down-right exhausted. I believe in putting family first and am on a mission to help every family live better. I want to help all of you save money, make more money and have your money work for you so you can finally attain the financial freedom you have been looking for.