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.

Marriage and Finance Part 2: Logistics

In Part 1 of my Marriage and Finance series, I discussed some of the common roles I’ve seen. There are many other roles, but they are rarer. They key is to understand the roles you and your spouse play and nurture the strengths and mitigate the weaknesses. In Part 2, I will discuss the logistics of finances in a marriage. Financial planning takes care of the “basic needs” (think Maslow’s Hierarchy of Needs); i.e. food, shelter, telecommunications, etc. If you are having difficulties fulfilling your basic needs it will be difficult to have good communication or fulfill each other’s sexual needs and/or establish mutual happiness. It all starts with finances taking care of basic needs and good communication.

·         Common goals – Have you seen the Wells Fargo commercial with the customer service rep saying, “Now let’s talk about your…” and then man says “new motorcycle” and the woman says “home repair”?  This is an example of having different goals and can cause financial arguments. Some goals can be mundane (cost of interior design) yet still cause significant controversy in the household. I think good communication in the beginning resolves most of these disagreements. I’ve also found visual aids help facilitate discussion and agreement.  Have each person write down his or her goal and then create a plan on how to get there.  Discuss both goals and plans and see if it helps you come to an agreement.

·         Always point the “blame finger” on yourself first – Men will often say, “My wife has a spending problem” and then after a little research, she indeed has a spending problem; however, he also has a spending problem. Women will often say their husband spends too much money on car parts or video games but neglect their shoe and purse addiction. Usually when blame is placed, it puts the other person in defense mode and then creates an argument. Instead of blaming, try saying, “we have a spending problem and I’ll reduce spending money on video games and you can reduce spending on shoes” or whatever the commodity of overspending is. If one person has a valid spending problem, it may be because they are unfamiliar with finance basics and/or there’s something wrong in the relationship and spending is just a symptom.  If it’s financial ignorance, then seek help from a friend or counselor. Someone in an “official” capacity can say the same thing as you, but it now will be “official”. If it’s something deeper, then you may need to protect the finances from being negatively affected until the relationship problem has been identified and corrected.

·         Account management – There is way too much discussion and debate about whether it is more appropriate to have separate or joint accounts. I’ve seen scholarly articles and books written solely on this subject. Most people think what works for them will work for everyone, like parenting advice. But the real issue is trust. Regardless of how your accounts are set up, the situation must establish trust in the relationship. If both people have separate accounts but have 100% trust then it will be successful and vice versa for joint accounts. However, due to the nature of the military and deployments, it is always important to ensure both people have access to all accounts. Whichever you choose, make sure trust is intact. If the relationship does not have trust, then the issue is bigger than account management.

·         Budgeting – A lot of arguments stem from how to budget your money with one paycheck or with two paychecks. The key to this argument is to ensure you establish equality. Spending and saving money should be equally distributed. The focus should remain on the Family and remember all funds belong to the Family, not to the husband or the wife, regardless of who makes the money. There’s debate on how to best deal with this, whether all funds are deposited into the same account and budgeted in totality or if each paycheck should have a percentage taken out. There are pros and cons to each method and each couple will have to make that determination on their own.

BL:  Be very careful taking financial advice in marriages, to include this article. Every relationship is different and implementing advice that is not suitable to your relationship can cause severe trauma to the relationship. Married people should discuss their financial position frequently. Financial insecurity can bleed over into so many other parts of a relationship. Secure the finances and securing the relationship should be easier.