Tax Tips: How to Be Treated as a Business by the IRS

One more asset in your IBOAI portfolio: “More Tax Tips for IBOs” by Joe DePetris, Jr., Tax Consultant to the IBOAI Board. This month, learn the seven important steps that you must take to show the IRS your business is definitely a business. Read about it on our main website, then tell us what you think.

Comments

[Bridgett]

I have a question that no one I've aksed seems to be able to answer authoratitively. Perhaps Mr. DePetris can. And it's a question which affects all IBOs who receive Performance Bonus money.

Here the question:

Is an IBO obligated to pay income tax on the performance bonus money that they receive on personal use volume?

As an example, if I am in the 25% bracket, and purchase say $500 a month of products for personal use. (and for simplicity, let's say that the BV is also $500) I receive roughly $1,500 a year in bonus money on that personal use volume. Am I obligated to pay income taxes on that $1,500?

Thanks.

[Moderator: Here's how Joe DePetris, Jr, CPA, a tax consultant to the IBOAI Board, answered your great question:

"No, bonus received on personal use is treated like a rebate or discount.

"The personal use bonus is included in your 1099 from Amway, therefore, you should report the 1099 income on your schedule C and then take a deduction for 'rebates'."]

[Bridgett]

Thanks so much! Really appreciate it.

[Moderator: Glad we could get you an answer. It was a great question.]