Tax Tips

Many of you have heard me say on stage that the “IRS looks harder at home based businesses because certain personal items, such as homes, autos, cell phones, and computers can become deductible.”

Because of this, if you get audited by the IRS they will apply certain tests to determine if your business is really a trade or business, or maybe it’s just a hobby.

To be treated as a business, you must prove that your intended purpose for operating your business is to make a profit. The following are very important steps that you must take to help prove your intent:

1. Keep all documentation for your expenses.
2. Do your bookkeeping on a monthly basis.
3. Prepare a written business plan that projects the length of time it will take you to get profitable. A sample

business plan will be available for you shortly in IBO Bookkeeping 101.

4. Compare your business plan to your actual progress from time to time to determine if you are on track to

meet the goals you set up for yourself when you did your business plan originally.

5. Document any changes you make to the operation of your business to get it profitable.
6. Keep good mileage records.
7. Open a separate bank account for your business.

When you perform the steps above, you show strong indications that you are truly operating a trade or business, but there is more.

I strongly urge all of you to read “IBO Bookkeeping 101” and the “IRS Direct Seller Audit Technique Guide.” (The Direct Seller Audit Technique Guide is a document used as a guideline by IRS auditors when auditing direct sellers.) Both of the documents are posted here on the IBOAI Board’s website free for you.

You should also encourage all of your downline and upline to access these documents on the Board’s website.

Joe

Learn more about Joe DePetris, Jr., and IBO tax return preparation and tax issues at IBO Bookkeeping 101.

Find more Tax Tips for IBOs from Joe DePetris, Jr., CPA.

This article is provided as an educational resource for your guidance, and is strictly informational. It does not constitute legal, accounting, or other professional counsel. Nothing included herein implies a recommendation by the author, the IBOA International, or Amway Global, of any course or method of regulatory compliance. Readers and users who intend to take, or refrain from taking, any action based on information contained herein should first consult with their qualified tax advisor, preferably a C.P.A., or appropriate regulatory authorities.