When you become an Amway Independent Business Owner, you will be required to make quarterly tax payments through the Amway system. There are several methods that can be used to make these tax payments using the official Amway Business Portal. The Amway Tax Calculations and Payment system has been updated to work with all countries in which the Amway Group operates.
For the Amvox dealers who are residents of the United States, where you fill in the 1099-MISC form depends on whether you are a participant or an independent distributor. The term “independent distributor” encompasses both a direct distributor and also a business development consultant (BDC).
Amway is a global company that offers a wide range of products and services. If you have been an Amway distributor, then you may have questions about how to file taxes for Amway.
According to TurboTax, there are several ways to file your taxes as an Amway distributor:
- You can file as an individual or sole proprietor if you are self-employed. This means that all of your income is considered self-employment income and will be reported on Schedule C. You may also choose to use Form 1040 or Form 1040EZ if you do not have any other sources of income besides Amway.
- If you are married with children under 18 years old, then you may choose to file jointly with your spouse so that they can claim the child tax credit and other credits that may be available based on their income level. You can also file separately if one spouse has significantly more income than the other spouse; this allows them to claim more deductions and credits than would otherwise be possible because they have higher taxable income levels than their partner does (TurboTax).
Tips on Completing Your Schedule C: The Important Details
When it comes to reporting your business activity to the I.R.S., the secret’s in the details. Accurate and detailed reporting begins with a general understanding of the various tax provisions affecting your business. I will outline some of the important points below, but please consider seeking professional assistance. Tax return preparation fees may be deducted, if incurred primarily for the purpose of completing your return.
If you are a sole proprietor not conducting business as a corporation or some other form of legal entity, your business activity will be reported using Schedule C with your individual Form 1040. If your spouse is your partner in the business, be sure you put both names on your Schedule C.
If your spouse is your partner and you put both names on the Schedule C, be sure and allocate one-half of the Income (Loss) to each spouse when calculating social security and Medicare tax for each person.
Also, be sure your spouse is included on your Amway registration and annual registration renewals.
Explain your “sales” and “cost of goods sold.” When reporting income, be sure to report as “sales” all receipts for sales of products to retail customers and to IBOs, as well as sales of business support materials to other IBOs. Then report as “cost of goods sold” your cost for all such products and materials. Explaining these items on your Schedule C, rather than just reporting the end result (i.e., net income), helps demonstrate the level of activity in your business.
Exclude Personal use and promotional items from your “sales” and “cost of goods sold.” Treating products taken out of inventory for your own personal use as a “sale” to yourself, while including their value in computing cost of goods sold, has a tendency to create a negative gross profit, which is an audit flag. Alternatively, you might remove personal use items from the cost of goods purchased during the year before you determine your cost of goods sold. Similarly, products and business support materials given to others to interest them in the product or encourage them to build a business should be deducted as an “advertising” expense (see Schedule C, Part II, Line 8), and, thus, also excluded when computing cost of goods sold.
Automobile Expenses
The nature of your business may result in a significant amount of automobile travel. This is an expense that requires very detailed documentation and substantiation in order to obtain the deductions that you are allowed.
There are two methods for determining the amount of auto expense you report for the year: standard mileage rate or actual expense. In either case, when you use your vehicle for both business and personal use, you must apportion your expenses between such personal use and business use. Remember that you cannot deduct the portion of your auto expenses resulting from personal use or commuting to and from work. You should begin then by regularly recording the miles you drive on daily business trips. The simplest and most logical place for you to do this, once again, is in your daily planner.
Enter each business trip in your daily planner and record the number of miles you drive per trip. Next to each mileage entry, note the 4 Ws: who, where, when and why. The “why” will always include the business purpose of your trip. For simplicity, you might use codes or symbols for the most common purposes. Examples could include “STP” for showing the Plan, ”S” for seminars, conventions or conferences, “B” for trips to the bank, “D” for retail customer Amway product deliveries, and so on. The “who” would be the name and address of whomever you’re calling on. If you are going to an open opportunity business meeting, record the name and address of the person hosting the meeting, the name of the speaker, and the name(s) of any people you take with you who are interested in joining the Business. Record the names of all the retail customers to whom you sell products, and all the people to whom you show the Plan, even if they do not end up coming into the Business. It’s also a very good idea to record your method for contacting people you attempt to sponsor and those to whom you attempt to make retail product sales. Finally, keep copies of your upline newsletters to substantiate any open meetings, seminars, conventions, conferences, training sessions, and other business functions for which you’ve traveled to attend.
Mileage incurred commuting to and from work generally is not deductible, while mileage incurred in pursuit of your business is deductible. I.R.S. rules also provide generally that for auto expenses to be deductible, you must embark from your primary place of business, which is the home for most IBOs. Now, this presents some interesting scenarios if you’re like many successful IBOs who periodically conduct business at lunchtime or when traveling to and from work.
What if you drive to work in the morning (nondeductible commuting mileage), then you drive to meet a person with whom you share the Plan at lunch? The mileage from your work to your lunch meeting and back is deductible, since it was solely for business reasons. What if you meet with downline IBOs on your way home from work? Your mileage from your work to your after-work meeting is deductible. But your mileage from your after-work meeting to your home is not; that’s considered part of your commute. The next morning, on the way to work, what if you stop to counsel with upline IBOs about your business? The miles from your home to your first stop are deductible since you left your primary place of business to go on a business trip. Yet the mileage from the business stop to your work again is part of your commute. Sound detailed? Yes, but every legitimate, deductible mile counts, so it’s a worthwhile task.
To make a proper automobile expense deduction, you will first separate your personal and commuting mileage from your documented business miles. Take the odometer readings from your vehicle at the beginning and end of the year to determine total annual miles driven. Total miles driven per year, less the number of documented business miles, should leave you with your total personal and commuting mileage. Next, to separate your commuting and personal mileage, determine the round trip miles to and from your work and multiply that by the estimated number of days you worked during the year.
Business Miles
+ Commuting Miles
+ Personal Miles
=====================
= Total Miles for Year
Business, commuting, and personal mileage totals are all required to be listed on the back of the Schedule C. Failure to include any of the three totals may raise an audit flag that you are not keeping adequate mileage records, or that you might be trying to deduct nondeductible mileage. Also, be sure to fully answer the questions on Part IV of the Schedule C, acknowledging that you have evidence to support your deduction and that your evidence is in writing.
Once you have verified your business mileage, then you must choose your method for deducting your auto expenses. If you choose the standard mileage go to www.irs.gov and search “standard mileage rate”. This rate varies from year to year as the cost of operating a vehicle changes, or you may deduct a percentage of your total automobile expenses for the year equal to the percentage of business use as determined by your mileage calculations (actual expense deduction). Actual automobile expenses include gas, oil changes, repairs, insurance, depreciation, personal property taxes (license plate fees), interest expenses, etc. Note that parking and tolls incurred on business trips are a separately deductible business expense, and should not be included with your automobile expenses.
If you are working hard at building your business and, as a result, driving a lot of miles, then the standard mileage rate generally yields a higher deduction for your automobile use. If you elect to use the standard mileage rate to deduct your auto expenses, then you cannot deduct any other auto expenses, except perhaps the interest paid on your auto loan. You may take the standard mileage rate deduction in addition to the interest expense on your auto loan in an amount proportionate to your business use. For instance, if your calculations reveal that 40% of your auto use was for business, then, under the standard mileage rate deduction, you may additionally deduct 40% of your auto loan interest for that car. The standard mileage rate changes frequently, so check with your accountant or consult the applicable I.R.S. guidelines for current rates.
If you elect the actual expense method, you should seek assistance with calculating depreciation expense. The depreciation allowance is limited, complicated, and changes on an annual basis. Note that you cannot recover the standard mileage rate and depreciation at the same time. Once you select either the actual expense method or the standard mileage rate method to report automobile expense deductions, you must continue with that method until you change vehicles. At that time you may again select which method you wish to use.
It’s generally a good idea to keep all gas and repair receipts for the year no matter which expense method you choose for your automobile. Under either method, you must be able to substantiate that you actually drove the miles claimed. Receipts for gas, oil changes, and repairs are generally the best evidence.
Recording automobile expenses is tedious work, but don’t you get tired of using that daily planner! Believe me, it will be well worth every minute of time spent properly documenting your automobile’s use. Besides, it’s just good business practice to do so. Records well kept, especially pertaining to automobile and travel expenses, could save you hundreds or even thousands of dollars in the event of an audit. So use your tools to keep track of your expenses just as eagerly as if someone were standing beside you now, offering you that money to record the information.