Multi-Level Marketing (MLM) Businesses and Taxes

Multi-Level Marketing businesses (MLMs) have exploded across the country; especially among the military spouse community. MLMs allow military spouses to run their own businesses at home and the job can move with their military spouse. I don’t have an accurate count but I’m sure there are nearly a hundred different MLMs out there. I’ve experienced the following MLMs: Pampered Chef, Amway, WUN Life, Isagenix, Pure Romance, Nerium, Origami Owl, Kyani and Scentsy.

A key thing MLM operators need to know is how to file their taxes. Although I haven’t run an MLM; I do have sufficient experience in tax preparation and here are some suggestions I’ve found doing research on this reader requested topic.

·         Create a separate checkings account to run your MLM. This will allow you to quickly differentiate between costs of running the MLM and income you’ve earned which will come in handy when dealing with deductions.

·         Before you even start your MLM find out if they give you a 1099-Misc Income Tax Form which identifies how much the company records as income you’ve made. Talking with MLM owners I found out that Pure Romance, Pampered Chef and Nerium file 1099-Misc forms with the IRS so you can claim that on your taxes as regular income. If an MLM doesn’t provide a 1099-Misc then it is incumbent on MLM operators to figure out how much income they’ve made. This is easier if you have a separate checkings account.

·         Running an MLM is similar to being self-employed and as such you can claim routine expenses as deductions if you itemize your deductions. If you have a separate checkings account it will make it easier to identify the costs. Some common deductions are phone and internet, party hosting expenses and gas/vehicle expenses for those MLMs which require frequent deliveries and travel. Itemizing deductions can help decrease the tax burden but it is important to ensure you’re legally entitled to the deductions.

·         If your tax situation requires you to itemize deductions then I recommend seeing a tax professional; either a tax preparation company or with a Certified Public Accountant (CPA). A professional can ensure you meet the qualifications for itemizing certain expenses and protect you from an audit.

·         For my non-military readers, if your MLM is your family’s sole source of income PLEASE ensure you meet the necessary requirements to comply with the Affordable Healthcare Act (aka Obamacare). The penalties can be steep and are basically equal to the cost of a “bronze” health care plan. So until the law is changed or repealed, it’s a better return on investment to just ge the healthcare. Like I said before, an MLM is similar to being self-employed so you’ll need to ensure you comply with the federal government’s requirements for health care.

If you’ve run an MLM and filed taxes before please leave me a comment or recommendations you have for other MLM owners.

Military Spouses At-Home Business Success Stories

I’ve recently discovered that our military spouses are finding success and wealth with in-home businesses. Being stationed in Germany for four years, where jobs for our spouses are typically hard to come by, I noticed the direct-sell companies like “Pampered Chef” and “Stampin’ Up” were prevalent. Success often brought huge discounts and free products within the company. I’ve also noticed more military spouses are finding success in Multi-Level Marketing businesses too. Even more recently, I’ve noticed military spouses involved in photography, graphic design and craft businesses.

Companies like “Pampered Chef” are considered direct-sell companies. The companies, and the spouses who work for them, focus on selling the products first and foremost. The workers will host cooking shows to showcase the products. As a military husband, I was pleased to be the benefactor for some of these shows with all the leftover food. As a secondary money-making venture, you can invite friends to become Pampered Chef consultants and earn money from recruiting. I personally know a spouse of an E-5 who is now known as an Advanced Director. We haven’t talked about annual income, but according to the Pampered Chef compensation plan, she could be making anywhere between $10K and $80K a year. (http://new.pamperedchef.com/make-money#)

Companies like “*Wake Up Now” are considered Multi-Level Marketing companies. These companies focus on recruiting people to become Independent Business Owners (IBO) first and foremost while a secondary emphasis is placed on their proprietary products. They require monthly subscription costs from each IBO and then your upline makes money, but the company ultimately makes the money on these subscription costs. Now, while they’re literally pyramid schemes, many spouses have done well and are making a lot of money with them. A military spouse I know is making $1K a month passively after recruiting several people under him (military spouses can be males too). (https://hub.wakeupnow.com/resources/cmsHubResources/286.compensation_guide.pdf) 

Small businesses like photography, graphic design and crafting are great. There are usually no start-up costs and the owner is in full control. Facebook, Pinterest and Instagram are great ways to advertise and there are low barriers of entry, unless there are many spouses in your circle operating the same type of business.

The downside to these businesses, and can also be found with any small business, is when you’re starting out you usually depend on your immediate friends and family to support you. As one of my friends eloquently put it, it then becomes a Friend-2-Friend or Family-2-Family business and you’ll quickly notice that no one will want to talk to you anymore. If the business doesn’t start well, you’ll become desperate as the monthly costs go up and you’re not earning the income you’d hoped you would. Most at-home businesses fail because people jump in too quickly and have unreasonable expectations. For every one success story there are three failures with some spouses having hundreds of dollars of unused product they have to ship every PCS, reminding them of their failure.
Regardless, our military careers often uproot our military spouses and sometimes bring them to places where job opportunities are hard to find.

A lot of spouses have found wealth and success in starting at-home businesses. Do you have any success stories from your at-home business? Are you currently an MLM operator or want to use my blog to advertise? E-mail me at bjone6@gmail.com and we can discuss advertising space.

Here are some interesting Military Spouse success stories:
Spouse hosts “Trunk Shows” for artists:
http://www.military.com/spouse/career-advancement/military-spouse-jobs/spouse-owns-successful-home-based-business.html

A Spouse’s Article on Forbes about MLM success:

http://www.forbes.com/sites/chicceo/2012/09/27/is-mlm-a-bad-word/

A Military Spouse’s Success Story about Rodan + Fields:

http://www.militaryspouse.com/articles/money-maker/

*FULL DISCLOSURE: I’ve been researching and contemplating running a Wake Up Now MLM.

Military Spouse: Financial Institutions to Advance Pay If There Is a Government Shutdown

Author:  Bianca Strzalkowski

http://www.militaryspouse.com/articles/financial-institutions-to-advance-pay-if-there-is-a-government-shutdown/

USAA, Navy Federal, and Marine Federal Credit Union emerge to the aid of military members if the government shuts down.

On September 30 at 11:59 p.m. if Congress has not reached an agreement on the continuing resolution, the government will shut down. When that occurs, the military’s October 15^th paycheck may be delayed.  We reached out to financial institutions to see what solutions they may have in place for their military members.