Are you looking for some MLM tax tips? Did you know that network marketers have many of the same tax advantages that traditional business owners have? When you have your own network marketing business, you can legally deduct your expenses, which offsets your taxable income. As long as you treat your business like a business, and not like a hobby AND you have the INTENT to make a profit you are safe.
Although I am not a licensed accountant or bookkeeper, I’ve done my own taxes for years (11 years now). This includes taxes for my network marketing business. And I want to share my four favorite MLM tax tips with you. These tips will simplify your day-to-day accounting efforts and will make life much easier at tax time. Best of all, you will be organized and will be able to monitor your business’ cash flow on a monthly basis. Let’s get started:
1. Educate Yourself: If you have never owned a business before, you need to educate yourself about small business tax. The best way to do this is to order a few books on small business accounting. Although you don’t need to be a guru, you need to have a basic understanding about what you can legally deduct and what you should track. There are hundreds of good “small business taxes” books on Amazon that you can order. Or, you can visit your local library.
2. Keep Every Receipt: When I first started my own business, I had a hard time keeping every receipt. I just wasn’t used to saving receipts. Within a short few months I formed new habits. Once you know what expenses you can legally deduct, you will know what receipts to keep. Whenever you get a receipt, write on the receipt the category it belongs in, what the business purpose of the expense was, and any other critical information you can think of. Just remember that every receipt you save, saves you money on your taxes! Think of your receipts as FOUND money!
3. Develop a Filing System: You need your own filing system. It doesn’t have to be complex either. It just has to work for you. Personally, I use my desk drawer and folders. I throw all my receipts into my desk drawer throughout the month. On the first day on the following month, I sort the receipts by category and stick them in folders.
4. Create a Monthly Profit and Loss Statement: You MUST keep a monthly profit and loss statement for your business. Don’t wait until the end of the year to do it. This allows you to keep a pulse on your business and monitor your monthly cash flow. Don’t make the common mistake of not knowing where your business stands financially until you do your taxes. Minimum once each month, you need to input your numbers into your accounting software and print out a profit and loss statement. I keep it simple and use a Microsoft Excel Sheet.
In conclusion, these are my four favorite MLM tax tips. I’ve found that the most successful network marketers realize the importance of knowing their numbers. They always keep a finger on the pulse of their business and know where their business stands financially each month. They do this by educating themselves about taxes, by getting organized, keeping their receipts in one place, developing a filing system and maintaining a monthly profit and loss statement. If you are serious about your business, you should follow these recommended MLM tax tips. It’s time well spent!