The IRS is continuing to target mufti level marketing (MLM) and private franchise (PFB) businesses. Why you may ask? MLM’s and PFB’s do not have a team of accountants and tax lawyers to stay on top of the tax
laws, nor do they have lobbyist to keep the politicians at bay. For this reason,
my office and countless other tax prep offices have experienced a significant
increase in MLM and PFB clients.
That is good for us, however most of the new MLM and PFB clients are facing audits by the IRS for violation of treasury regulation 1.183-2(B). The links are posted below for
review. To keep it simple the IRS is
disallowing all business write offs by declaring MLM’s and PFB’s as a hobby.
The regulation has existed for years but is now being heavily enforced. This is
due in part to the increase in home based businesses and the ever-increasing
need for tax revenue.
Does this mean that you should not be involved with an MLM or PFB? No, but what it means is that tax education is something that every business should take seriously. To keep it plain and simple, if you
treat your business like a business than the IRS cannot treat it like a hobby. How
do you feel about tax education and do you for see other small based businesses facing the same IRS attack?
Wikipedia
http://en.wikipedia.org/wiki/Treasury_Regulation_1.183-2
IRS: 10th paragraph from the top.
http://www.irs.gov/businesses/small/article/0,,id=208400,00.html#chapter02_01Collapse this postEdit
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