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The 1st free, weekly Network Marketing training webinar that's generic & interactive!

What about the Self-Employment Tax in Network Marketing

The U.S. self-employment tax is not exactly a favorite subject of most blogs by those in Network Marketing, but the subject should be written about, as you will see.

You are officially going self-employed with a network marketing business. You work hard for 90-days and make a significant amount of income. Along the way, you’ve hired a few people to help with the success of your business. Since originally you’ve filed a 1040 tax form with your network marketing company, you are faced with the inevitability of the self-employment tax.

Even if you pay someone $20.00 or more a year, you are subject to the self-employment tax.

The self-employment tax is only applicable to network marketers who hire employees to work for them. If you hire someone to build a landing page, design your business cards, or hand out flyers, you must file the self-employment tax form Schedule SE – (for more concrete information on who is considered an employee in network marketing, call 800-TAX-FORM).

Everyone dreads the “T” word. It’s the necessary evil of having a network marketing business. If you make $20.00 or more a year in income from your network marketing business, you’re taxed.

There are three types of federal business taxes that affect network marketing; and filing taxes involves:

  • Schedule A for itemized deductions
  • Schedule C for profit and loss
  • Schedule C -EZ for net profit
  • Schedule SE for self-employment tax

How you deal with these forms will vary between one network marketing company to the next. It is suggested you consult a tax consultant especially if you have a successful network marketing business.

Self-Employment Tax Deductions

Tax deductions must pass two tests of the IRS: Profits must be made three out of five years in the business; you must demonstrate you’re engaged in your business to make a profit?

Benefits of self-employment include deductions for the cost of running your automobile to the cost of business cards. It can include insurance on your house to the electricity you use. Only a tax adviser knows for sure the amounts you can deduct from the self-employment tax.

The number one thing you must do is keep good records. Keep all receipts, pay by debit or credit card so you can easily look up expenses. And make sure all transactions are recorded. Keep a separate bank account for all business transactions.

Here are some items you can deduct from the self-employment tax:

  • The home office deduction
  • Business expenses
  • Insurance
  • Electricity
  • Cell phones and land lines including minutes for texting and sending out media files
  • 1/3 of the appreciated value of your home
  • Traveling expenses
  • Computers
  • Capital assets
  • Automobile expenses
  • Advertising
  • Commissions and fees
  • Contract labor
  • Interest
  • Inventory costs or goods sold
  • Legal and professional services
  • Office expenses
  • Supplies
  • Taxes and licenses

Taking Advantage of Self-Employment Tax Deductions

Should you take advantage of these deductions allowed by the IRS? Sure! If you stay within the IRS guidelines for deductions, you should take advantage of them.

If you are a very successful network marketer, the expenses and deductions will enrich your business and personal lifestyle. It will put hundreds of thousands of dollars in your bank account.

Remember, if you hire anyone to further the success of you network marketing business, you are subject to taxes. Take advantage of the deductions. Prosper from it by enjoying the tax-savings.

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Dale Moreau

Dale began writing his 454 blog posts in 2018, completing that effort in 2021. All of the MLM content he created that is still relevant is here on MLMinar.

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