Amway Business Math?

[psionl0]

Icerat -- can't speak to Canadian tax issues but in the US you have to carefully 'ringfence' business assets versus personal use assets to deduct them from your taxes. Thus, while my husband sometimes works as a contractor, we cannot deduct his computer or our ISP expenses because they are not purely or primarily for business purposes. Trying to do so is a good way to get audited and fined.

That sucks! Do you need to install a separate meter for the electricity if you have a business office at home?

 

[icerat]

Icerat -- can't speak to Canadian tax issues but in the US you have to carefully 'ringfence' business assets versus personal use assets to deduct them from your taxes. Thus, while my husband sometimes works as a contractor, we cannot deduct his computer or our ISP expenses because they are not purely or primarily for business purposes. Trying to do so is a good way to get audited and fined.

Here in Sweden, and back in Australia, you can do a percentage though you have to able to justify it.

 

[Giordano]

Here in Sweden, and back in Australia, you can do a percentage though you have to able to justify it.

In the USA, if I remember correctly, you can do a percentage, but you have to document it thoroughly. So you can deduct a percentage of a computer, if you used a percentage of the computer for business, but you have to keep rigorous logs to document this when a skeptical IRS audits you. Most people just find it easier to have a separate computer, room, etc. It helps if you only keep business-related software and files on that dedicated computer.

But I think in most countries you can only deduct expenses that directly arise from running a business and you have to be able to completely document that if the tax authorities ask. Deducting any expense that you would have had otherwise is fraud. Also, "businesses" that have no prospect of ever likely becoming profitable are not considered true businesses that can be deducted.

 

[marplots]

(some snipped)
Also, "businesses" that have no prospect of ever likely becoming profitable are not considered true businesses that can be deducted.

True. Every year I've run my little home business I've declared some profit - even when I could have written more off.

 

[blutoski]

Got a ref? That sounds an interesting read

I came across most of the content through commerce/management textbooks, but there's nonfiction material out there as well. Kahneman's Thinking Fast and Slow, and Barbara Ehrenrich's Bright-Sided: How Positive Thinking Is Undermining America.

Ehrenrich was interviewed on Point of Inquiry podcast about 6 weeks ago, although she doesn't really discuss that book.

 

[marplots]

I came across most of the content through commerce/management textbooks, but there's nonfiction material out there as well. Kahneman's Thinking Fast and Slow, and Barbara Ehrenrich's Bright-Sided: How Positive Thinking Is Undermining America.

Ehrenrich was interviewed on Point of Inquiry podcast about 6 weeks ago, although she doesn't really discuss that book.

I've been meaning to thank you. I just started Kahneman's book - you'd mentioned it before. Good read so far.

 

[blutoski]

I've been meaning to thank you. I just started Kahneman's book - you'd mentioned it before. Good read so far.

Took me forever to read. My version was almost 900 pages.

I forgot to mention a non-fiction book that got me more involved in the psychology dimension of skepticism way, way back in the day: I'm Dysfunctional, You're Dysfunctional, by Wendy Kaminer. I'm not sure if it's still in print, but she's one of the earlier critics of the power of positive thinking. Kaminer's writings were a big influence that brought me into skepticism in the 1980s, even though she was not particularly associated with organized skepticism.

 

[icerat]

I came across most of the content through commerce/management textbooks, but there's nonfiction material out there as well. Kahneman's Thinking Fast and Slow, and Barbara Ehrenrich's Bright-Sided: How Positive Thinking Is Undermining America.

Ehrenrich was interviewed on Point of Inquiry podcast about 6 weeks ago, although she doesn't really discuss that book.

Just started Kahneman's book recently. I read Ehrenrich's a couple of years back. I can't remember why now, but I was unimpressed. If I recall correctly she mostly attacks a straw man caricature of so-called "positive thinking", focusing on silliness like "The Secret" but spending little time (if any?) on quite a large body of research on "attitude". I do recall thinking she desperately needed a dose of a more positive attitude herself!

 

[icerat]

In the USA, if I remember correctly, you can do a percentage, but you have to document it thoroughly. So you can deduct a percentage of a computer, if you used a percentage of the computer for business, but you have to keep rigorous logs to document this when a skeptical IRS audits you. Most people just find it easier to have a separate computer, room, etc. It helps if you only keep business-related software and files on that dedicated computer.

But I think in most countries you can only deduct expenses that directly arise from running a business and you have to be able to completely document that if the tax authorities ask. Deducting any expense that you would have had otherwise is fraud. Also, "businesses" that have no prospect of ever likely becoming profitable are not considered true businesses that can be deducted.

Yes, it's pretty much the same everywhere then.

The Australian Tax Office had for many years an "Administrative Position" specifically for Amway that was written up in consultation with Amway. Here's an archive.org link to the original.

They apparently stopped with this in 2007, I've not been able to find out why. Both links are interesting in themselves though.

 

[Giordano]

Or in the current thread example. Let's say a part-time Amway distributor takes a friend and potential customer to dinner. At the dinner he fails to close a sale.

The dinner (food) is a business expense. Not only is it a business expense, but if it contributes to a loss in his Amway business, that dinner can contribute to lowering his taxable income from his day job. He can also get refunds of any sales taxes (depends on jurisdiction)

If he'd just taken the friend to dinner he's be paying full taxes and getting no lowering of his taxable income.

How about a highly simplified example and assume tax authorities agree you were legitimately operating a business.

Let's say every Sunday evening I have friends around for tomato soup. I buy $10 worth of tomatoes.

I start a home based business and invite my friends around Sunday evening as usual, but tell them I'd like them to check out a business idea to see if they want to work with me. I buy $10 worth of tomatoes.

Nobody "buys in" to my idea.

Those tomatoes are a business expense. My business makes a loss of $10.

In my day job I earn $X and pay Y% tax on $X.

I can deduct my tomato soup business expense from $X, so now I pay Y% tax on ($X-$10)

(Y% * ($X-10)) < (Y% * $X)

My expenses has not changed, but I'm paying less tax. I'm financially better off.

Just to be clear, in your quote above, you were really stating that you would not have taken these friends to dinner, or had them over, if you were not doing business? And all of dinner happened during your business proposal, and was not related to non-business?

If so, how "My expenses has not changed, but I'm paying less tax?" Seems odd.

Because you seem to agree that it would be fraudulent tax evasion if the situation was otherwise.

Also, as pointed out by others, don t your friends get tired of you using them as potential customers and talking business with them so much of the time? All for a chance at tomato soup. It must be great soup!

 

[blutoski]

Just started Kahneman's book recently. I read Ehrenrich's a couple of years back. I can't remember why now, but I was unimpressed. If I recall correctly she mostly attacks a straw man caricature of so-called "positive thinking", focusing on silliness like "The Secret" but spending little time (if any?) on quite a large body of research on "attitude". I do recall thinking she desperately needed a dose of a more positive attitude herself!

I read it recently, and while I agree there's less direct analysis of the body of evidence, her main point is that the 'silliness' is modern applied positive thinking. The research is irrelevant to the adherents. None of those movements are based on the research anyway, except as cherry-picking exercises to goose up legitimacy.

Where she does address the research, she believes that it's very weak, despite being a 'large body' - she mentions the most referenced experiment (Spiegel - not to be confused with Siegel) was never even completed, and that the next rank of most referenced did not have good inclusion criteria.

I actually circled back to those (I'd read some earlier) and she has a good point... Carver, Lehman, & Antoni for example, and also Schou, Ekeberg, & Ruland's landmark papers all suffer from recruitment depending on participation in group therapies. Unfortunately, group therapies also often reject members who are diagnosed as terminal or are too negative. This biases the survivor / positive attitude correlation toward the positive.

The key question is not whether there's a relationship between positive attitude and survival rate in these conditions, but whether a person can wilfully 'adopt' a positive attitude on demand. The evidence is not only that this is impossible, but that the attempt to force the issue causes precisely the emotional stress that evidence shows is harmful.

The conclusion based on these lines of research is that the movement is more harmful than beneficial, even if it is true that there could be better health among those with more positive life attitude. It is likely a strong genetic predisposition (there is very strong evidence of this in twin studies of personality) and calling people failures for 'incorrect attitude' is likely not only damaging, but probably unethical.

 

[Arnold Martin]

Spend $2000 playing Amway and you get a $1000 personal tax refund because you can deduct some business expenses.

Bottom line is you have $1000 less than when you started

Plus:
-you have put a pile of miles on your car
-your relatives all avoid you
-your friends stop taking your calls
-your family wonders why you are never home
-your Amway soap cost $9.99 , supermarket soap is $4.99

 

[icerat]

Just to be clear, in your quote above, you were really stating that you would not have taken these friends to dinner, or had them over, if you were not doing business? And all of dinner happened during your business proposal, and was not related to non-business?

If so, how "My expenses has not changed, but I'm paying less tax?" Seems odd.

Because you seem to agree that it would be fraudulent tax evasion if the situation was otherwise.

If you've legitimately changed the purpose of the dinner, then it's not tax evasion. This was just a simplified example to prove the point, so don't get too bogged down in it.

Also, as pointed out by others, don t your friends get tired of you using them as potential customers and talking business with them so much of the time?

At what point did I even imply using your friends "all the time" as potential customers etc? I'm involved in 2 "traditional" startups at the moment and I can assure you that when our companies launch I'm going to let my friends and families know about that and waht the companies are offering. I hope some of them take advantage of what we're offering, but I'm not going to harass them if they're not interested. Same with MLM - good salesmanship isn't about harassing people to "buy" (opportunity or product) it's about finding people who want what you're offering. (Which isn't to say there's not bad salespeople - and bad companies - in MLM, there is, just like any other industry)

The only time I've seen MLM negatively affect relationships (never happened to me) is when the other person starts claiming such and such is a scam and such and such is crap etc etc etc - usually based on BS they've read on the internet - and often they say this to other people. That's actively damaging the persons business. When our 2 new "traditional" startups launch if any of my friends start bad mouthing what we're trying to do to other people I could imagine not considering them friends for much longer.

All for a chance at tomato soup. It must be great soup!

Actually just launched a tomato soup here as part of a weightloss program, and it is great soup! (and I say that as someone who rarely used to eat soup )

 

[icerat]

I read it recently, and while I agree there's less direct analysis of the body of evidence, her main point is that the 'silliness' is modern applied positive thinking.

The research is irrelevant to the adherents. None of those movements are based on the research anyway, except as cherry-picking exercises to goose up legitimacy.

What "movements" are these exactly? I'd call myself an "adherent" to the benefits of positive thinking, and I can assure the research is relevant to me.

Where she does address the research, she believes that it's very weak, despite being a 'large body' - she mentions the most referenced experiment (Spiegel - not to be confused with Siegel) was never even completed, and that the next rank of most referenced did not have good inclusion criteria.

I remember now reading one of her criticisms and thinking it appeared she'd never actually read the book, just some summaries of it. I really need to reread her work to remember why I was unimpressed.

The key question is not whether there's a relationship between positive attitude and survival rate in these conditions, but whether a person can wilfully 'adopt' a positive attitude on demand. The evidence is not only that this is impossible, but that the attempt to force the issue causes precisely the emotional stress that evidence shows is harmful.

The conclusion based on these lines of research is that the movement is more harmful than beneficial, even if it is true that there could be better health among those with more positive life attitude. It is likely a strong genetic predisposition (there is very strong evidence of this in twin studies of personality) and calling people failures for 'incorrect attitude' is likely not only damaging, but probably unethical.

No question calling people "failure" for "incorrect attitude" is likely damaging and unethical, but that's a different issue. Can you change your outlook? Yes, that's pretty much what the entire field of Cognitive Behavioural Therapy is about. Is it harder for some than others based on genetic predisposition? Undoubtedly. Does the fact you can alter your outlook mean you simplisticly ignore potential negative outcomes? Nope. That's just plain dumb.

 

[The Don]

Actually just launched a tomato soup here as part of a weightloss program, and it is great soup! (and I say that as someone who rarely used to eat soup )

If you think the soup is good, you should try the Kool Aid.

 

[Giordano]

If you've legitimately changed the purpose of the dinner, then it's not tax evasion. This was just a simplified example to prove the point, so don't get too bogged down in it.

At what point did I even imply using your friends "all the time" as potential customers etc?

Actually just launched a tomato soup here as part of a weightloss program, and it is great soup! (and I say that as someone who rarely used to eat soup
)

Fine. Again, if you deduct the whole cost, the dinner must be entirely devoted to business. If only part of the dinner was related to business, only that part can be deducted (I believe). I also believe that you would need to document that the business components of the dinner matched the deduction requested very carefully if you previously had dinners like these that were casual (i.e. before you had a business). Especially if, as you indicated, there was no change in the cost to you before and after. Just a warning: in the USA, at least, the IRS is very suspicious of these sort of costs, and it is important to document them in detail. Or you might find yourself charged with tax fraud.

I suspect you have extremely good natured friends; treasure them!

And good luck with your diet soup business. I find that soup rarely satisfies all my hunger, but maybe this is special soup.I hope you remember to deduct all the expenses.

 

[Joecool]

Fine. Again, if you deduct the whole cost, the dinner must be entirely devoted to business. If only part of the dinner was related to business, only that part can be deducted (I believe). I also believe that you would need to document that the business components of the dinner matched the deduction requested very carefully if you previously had dinners like these that were casual (i.e. before you had a business). Especially if, as you indicated, there was no change in the cost to you before and after. Just a warning: in the USA, at least, the IRS is very suspicious of these sort of costs, and it is important to document them in detail. Or you might find yourself charged with tax fraud.

I suspect you have extremely good natured friends; treasure them!

And good luck with your diet soup business. I find that soup rarely satisfies all my hunger, but maybe this is special soup.I hope you remember to deduct all the expenses.

I think it's pretty clear that icerat will advocate for Amway, even at the cost of being dishonest at times. He actually agreed that the Amway IBO in the OP made a profit because of Amway when clearly, it was his losses in Amway that alllowed him a higher tax refund.

It's also clear that AMway IBOs, when audited by the IRS, get taken to the cleaners. They go to conventions, listen to cds and read books. Rarely do these expenses result in higher sales and the IRS confirms it over and over.

Even icerat is stretching the truth with his explanation of how his "business" deductions work for his Amway business.

 

[Giordano]

My (relative by marriage) always won money at the casinos if you asked her. Sometimes it came to hundreds of dollars. Of course she didn't count her losses in this equation. Is that similar business math as to how a "profit" is calculated?

 

[marplots]

My (relative by marriage) always won money at the casinos if you asked her. Sometimes it came to hundreds of dollars. Of course she didn't count her losses in this equation. Is that similar business math as to how a "profit" is calculated?

Probably. There's also the aspect of being able to deduct losses. Your relative would then not only be biased toward the wins, but also see the losses as a benefit.

 

[Giordano]

A small point: in America, you can deduct from your taxes whatever you think appropriate. If later the IRS has a different view than your own, they can make you pay the difference in taxes and charge you an interest penalty on top of that. If the IRS believes that your "deduction" involved intent to defraud (i.e. you knew better than to claim it) then you can be criminally prosecuted.

I personally never claim any deduction that is the least bit questionable. That way I sleep well at night.