Thursday, September 2, 2010

Amway - IBOs Cheat On Taxes?

One of the telltale signs that some IBOs expose about their business is a big lie about making profits from Amway and all the while getting a huge tax refund, thus making their tool purchases "free". First of all, IBOs do not get a dollar for dollar write off on business expenses. They get to subtract expenses from their taxable income. Usually that taxable income is an IBO's job income, because most IBOs earn very little from Amway. If you receive a nice tax refund because of Amway related expenses, it is likely that your Amway business suffered a nice loss, thus you are simply getting a refund on the income tax that was withheld from your job income.

IBOs also seem misunderstand what a legitimate tax writeoff is. For example, a standing order of a diamond rally might not be an IRS allowed tax deduction if it teaches you nothing about selling Amway products or increasing business volume. A function where it is mostly socializing and hearing motivational speeches may not be a legitimate tax writeoff for the same reason. In fact, if you belong to a group that teaches the "buy from yourself" philosophy, you may not have any legitimate tax deductions, just as you wouldn't be able to write off your expenses for taking a trip to Costco. Tax deductions are allowed for business owners who have legitimate business exepnses to increase their sales. For example, a function where you are taugh how to display and sell products would likely be an allowable deductions. But one where you are taught to buy from youself and to never quit, might not be allowable.

I do not believe IBOs are purposely cheating on taxes, but I believe they are misled about what legitimate deductions are. I would advise an IBO to check with the IRS or to consult a CPS or tax specialist. In the past, I have read about IBOs who were denied tax deductions on Amway business related expenses because their Amway business was run like a hobby or like a social club. Expenses are allowed when you are able to increase sales as a result of your expenditure. Imagine how devastating it would be to get audited by the IRS and to have your deductions disallowed? Seems cruel but it has happened to IBOs.

As I said, I don't think IBOs do this purposely, but as an IBO, my upline basically told us that as business owners, all of our expenses were deductible, period. There was no mention of the intent to profit and increase sales. I suppose it is possible that millions or billions of deductions were allowed or unnoticed by the IRS over the years and taxpayers also footed the bill for materials that some uplines profited from. I only decided to write this article so that current IBOs and information seekers can seek guidance and advice from credible sources who know the tax laws and can give an IBO sound advice before they can get into hot water with the IRS.


Sageyk3 said...

Hey, I did Amway. I failed at it. But I didn't blame their structure or my lack of success on them. You are blaming them for your weaknesses, both in character and ability.

You really just painted it as a scheme as well. Poor validity and no rebuttal.
Really, I hope you see this and realize you need to get over yourself. :-) good luck

Anonymous said...

^ suck it!

**proud Amway hater**

Pető Szabolcs said...

Hello AMWAY!:)

Russell DeJager said...

As a CPA living in the area of Amway Global Headquarters, I get a fair number of Amway IBO tax returns to prepare. All the returns I prepare have reported 1099 income from Amway. The returns I prepare have very valid income and expenses, since the IBO's I prepare returns for are activly involved in both selling products and expanding their networks. If an Amway distributor is building their busy, as a business, then there should be no issues with how the file their income tax return, even if they show a loss for the first few years, and occasionally in years that follow, just like any other business.

Anonymous said...

You have to understand that along with getting paid millions, you have to also be prepared to bear the tax rate of your income. It has always been there like that. It will continue to be.

Joecool said...

And in the case of most IBOs, that income is a net loss.