My tax blog buddy Joe Kristan at the Tax Update blog said the following in a post Thursday under the heading “Can an Amway distributorship ever be taxed as a legitimate business?”:
I avoid multi-level marketing clients because their “profit” so often comes from putting personal expenses on Schedule C. It sure seems that way here.
I have a few clients involved in multi-level marketing. Luckily, none of these clients are aggressive or crazy on what they try to claim for deductions. But sometimes they get some wild ideas that they’ve heard from others in their “network.” Like the time one asked if they could deduct their personal grocery bills.
I am not going to “fire” a client just because they’re involved in MLM. But neither will I tolerate one who wants to play games with deductions.
If the client is trying to make money at their MLM business, and they are okay with ONLY claiming legitimate expenses, then I have no real quarrel with someone being involved in MLM.
But I do get sad when a client says they’ve gotten involved in multi-level marketing.
The reason I get sad has nothing to do with taxes or fears that the client will be over-aggressive with deductions.
The reason I get sad is: so few of them actually make money.
I have never,
N – E – V – E – R
had a client involved in MLM who said it’s worth it. Time and again, people will say it’s not worth the time and effort. Even those who turn a meager profit after their legitimate expenses will say it’s not worth the time involved.
Most are excited the first year, but then lose interest and just stop after another year or two. A few carry on, though they gripe about it.
MLM promoters love to play up the supposed tax miracles of MLM businesses, and the “easy money” aspect.
In the real world, there are no tax miracles, and there is no easy money.
Image courtesy of rakratchada torsap / freedigitalphotos.net