Tax reduction strategies for a home based office!

Sandy Botkin CPA. Esq.
Copyright 2001, all rights reserved

Beginning in 1999, Congress liberalized the home office rules to such an extent that many home based businesses and especially network marketing businesses can legally, morally and ethically claim the benefits of the deduction. In fact, when I analyzed the numbers, the benefit of claiming this deduction can result in thousands in your pocket every year. Thus, if you have an accountant that states that this deduction isn’t worth it, they don’t understand its immense benefit

Requirements of a Health Home Office: To be eligible for the home office deduction for your home-based business, you must meet several requirements:

1. Use your home as your principal office,
2. Use your home regularly for business, and
3. Use an exclusive portion of your home for business

Principal Office requirement: Recently, Congress liberalized this in order to allow most home based businesses and network marketing businesses this deduction.  To constitute a principal office, you must render significant management or administration for your business out of your home AND not have another office where you render significant services. Significant management or administration means doing the paperwork for the business in a set spot of your home.

Example: Kara runs a network marketing business out of her home. She reviews all applications for her business in her home and inputs all her business expenses into Quicken in her home. Her home qualifies as per principal place of business for her networking business.

Caution: If Kara has another office that is used for her networking business, she may not be qualified for the home office deduction unless she does NOT render any significant services from the other office.

What is regular use? You must also work your business regularly out of your home. Although there is no hard and fast rule as to what this is, case law generally requires 45 minutes a day, four to five days a week out of your home. Thus, if you only work one hour a week, this may not be enough.

What constitutes exclusive use? You must use a portion of your home exclusively for business. This does not mean that a whole room must be used for business. In fact, you can use part of a room. However, the part used for business must be used exclusively for business. Thus, if there are fiction or cookbooks in the home office book shelf, get them out. If you have a computer in your home office, don’t play games on the computer, etc.

One big question that I get at most seminars is, “whether IRS will visit my home and see if I am playing games on the home office computer or have non-business books in the home office bookshelf?” The answer is:  Yes, they can.

Having a home office allows what type of deductions? The home office deduction applies to the real estate and not the furniture. Thus, if you qualify for the deduction, you may deduct part of your utilities, depreciate part of your home, deduct part of any cleaning service, part of any home owner’s fees, part of any burglar alarm monitoring fees etc. No, you may not deduct any part of your guard dog!

However, even if you don’t qualify for the deduction, it does not apply to any furniture that you use for business. Thus, the desk that you use, the chair , the bookshelf and file cabinet all can be depreciated to the extent that you use these items for business. They have nothing to do with the home office deduction. In fact, you may not be eligible to claim a home office deduction and still deduct your furniture and equipment to the extent used for business.

Cautionary Limits: The home office deduction, unlike any other type of business deduction, is limited to the net income from your business.

Example: Keith has a net income from his home based business of $600 per year not including any deduction attributable to a home office. If the home office deduction is $5000, he may only deduct $600, which is limited to his net income from his business.

Tip: Take the home office deduction anyway even if your net income from your business doesn’t justify it. You may carryover any excess to future years forever!

There are more issues involved in dealing with a home office. I invite all readers to check out pages 99-110 in my workbook that accompanies my program, “Wealth Building Tax Strategies For You Home Based Business.”

In short, the home office deduction can be worth thousands each year in your pocket. It is one of many reasons why everyone should have a home-based business. With the right knowledge, you can make tax day- payday!

Sandy Botkin is a CPA, attorney and former trainer of IRS attorneys nationwide. He lectures all over the nation on tax planning for self-employed and corporate taxpayers and can be seen in the big events with Donald Trump, Anthony Robbins and many others. He has been written up in Newsweek and in many other magazines. He is also a syndicated writer and noted author of this famed tape series “Tax Strategies for Business Professionals” and “Tax and Financial Strategies for Residential Real Estate.” To find out more about Sandy and his products, check out his terrific small business web site at: www.taxreductioninstitute.com For a 10% discount on any of his products enter the discount code “boomer.”

FREE BLOG TRAINING-set one up right now if you don’t already have one!

This link is 50 minutes of FREE video training from Renegade University to get you up and blogging! Yes, you can experience just one of the many lessons in Renegade University yourself! It’s kinda like the guys on TV who offers a FREE computer training DVD with the confidence that you will like it so much you will come back for more. Go to this link, turn up your speakers and click the video to start your first lesson to set your own blogging site up. What a deal!  http://richkania.marketersmanifesto.com/beginnersblogging/

Some items just seemed to be sentimental and I have a high degree of reluctance to “let go.” However, this year was different. I have hoarded a collection of “Old School” Network Marketing “stuff” around the house that has accumulated over the last ten years. My wife Addie reminded me that I still had boxes full in the attic while most of this antiquated marketing materials remained in the basement. I found remainders, all over the house from the top to the bottom. It was stuffed everywhere. 

In retrospect, the reluctance to not categorizing this stuff as junk is an admission that the ideas and expense and the dreams of instant wealth that went along with them was a waste of time and money.  

 These MLM/Network marketing materials worked for me in 1970, but in the last decade, I must now confess, they were a dismal failure.

 Don’t get me wrong, they provided us with a very nice part time income  

Screwed by MLM before?

that enabled Addie and I to buy a second home when we married ten years ago.  However in this “New World” of ” Attraction Network Marketing,” these advertising/marketing materials and techniques did not help create the level of financial independence that we all are capable of achieving and that we all deserve. They simply didn’t apply anymore! They lost their MoJo! The unlimited power of the Internet combined with Social Media with the ability to reach thousands of potential business partners every day made “Old School  marketing”  techniques regress back into the world of the horse and buggy. 

Wistfully, I sorted out hundreds of audio cassettes, offered my high speed cassette duplicator to a ministry that still recoded their sermons on tape, tossed a pile of marketing CDs and sorted out printed posters, mailers, “drop cards,” brochures, windshield flyers, door hangers, company literatures for the paper recycling bin. 

I must admit my best business card “drop card” is a facsimile of a $50 bill. I t is so realistic I still have a few left that I use as a business card. I really haven’t gotten a response or sponsored anyone with them, but they are absolutely fun to see people’s reaction when you “drop” them on the ground and watch people’s reaction. Click here for lots of fun and maybe a few new business associates too: http://www.MagicDropCard.com 

In retrospect I now realize that my 1970’s success in Amway just plain “luck.”

Is the Lottery your retirement plan?

Despite the fact that I really was “working hard,” admittedly it was due to these antiquated “Old School” marketing techniques were “hardly working.”. One night I had a Divine Inspirational “brainstorm.” In 1970, it was perfectly acceptable to advertise an MLM business in the “help wanted” classified ad section. Yes this, is admittedly misleading, but an accepted practice in those days.

This one newspaper ad was my key to success and I understand many other groups across the country later picked it up. “Local Business owner retiring early. Seeking to train an honest and ambitious individual to take over the successful product sales and distribution business. No investment can start part-time. Call 1-555-123-1234.” The phone rang off the hook. Some people were unhappy when they showed up at my house to find a room full of ambitious and excited people with me at the blackboard drawing circles. However,I sponsored people left and right from that one ad. My group was growing exponentially in the beginning. However, duplication like they tell you really wasn’t really happening. People were supposed to bring two who brought two didn’t, never happened. 

So anyone considering becoming a distributor in a Network Marketing company must really understand that there is a whole new way of doing business.

Attraction Marketing taught “step by step” by online video lessons Renegade University even with a personal mentor in case you get stuck, offers an affordable, rejection proof and exciting new way to “Cash in” on the exploding profession of Internet/Social Media Entrepreneurship. You will get my personal attention to help mentor you to insure your success!

To your Success and Happiness,

Rich Kania

P.S.

If you haven’t already, check out these free resources:

http://richkania.therenegadenetworkmarketer.com/ 

http://richkania.attractionmarketersmanifesto.com

P.P.S. Controversial new ebook reveals exactly why no one seems to care
about your business opportunity… why “word of mouth” advertising is a
myth… and why no matter how hard you push yourself or how “motivated”
you become, you still find yourself no further than you were one year ago.
Click here to learn more =>
http://richkania.the7greatliesofnetworkmarketing.com

  ]]> http://richkania.com/%e2%80%9cold-school%e2%80%9d-mlmnetwork-marketing-techniques-from-1970-simply-don%e2%80%99t-work-anymore-anyone-who-tells-you-this-is-either-misinformed-or-%e2%80%9cdrinking-the-mlm-kool-aid/feed 0 http://richkania.com/mlm-network-marketing-in-1970-remembered-would-you-do-this-now http://richkania.com/mlm-network-marketing-in-1970-remembered-would-you-do-this-now#comments Fri, 08 Jan 2010 03:31:04 +0000 rich http://richkania.com/?p=119  

With so many Baby Boomers now  looking for extra money, retirement income, a second career, or an online income opportunity, many business opportunity recruiters are surprised at the negative response from prospects who had some exposure to MLM (Network marketing) in that pre-Internet era.

As I had indicated, I joined Amway in 1970.

 This is now a multi-billion dollar success story in the MLM field. You might be surprised to learn they were the first “Green” business that promoted their cleaning products that were not only bio-degradable, but phosphate free. Federal guidelines came later to ban phosphates from detergents because they were promoting the growth of plant life that were chocking and destroying rivers and streams.

Now picture this 1979 MLM business model: no Internet, websites, no back-office account management, no online ordering for both customers and distributors, no autoship, fax machines, conference calls, 3 way calls and telephone long distance charges were very costly.

You received your weekly order through a distribution chain of your MLM network. Your personally sponsored downline distributors called you with their weekly order. You called it into your sponsor; they went upline until the Direct Distributor ordered direct from the company. When the products arrived, the whole distribution chain went into reverse. Your sponsor picked up the order from their Direct Distributor, you picked it up from your sponsor and your downline, in turn, picked it up from you. At every stage of the distribution process, this weekly product order was paid by cash or check (no credit cards). At the end of the month, the Direct Distributor passed out the commission check to your sponsor, they in turn wrote one to you and you had to write checks for each of your personally sponsored distributors. As you can imagine, the paperwork was a nightmare.

Expanding my organization in 1970 meant taking very long drives.

 I sponsored my college roommate who lived in Cazenovia, NY (6 hours away) and my good high school friend in Burlington, Vt. (4 hours drive). I also had a downline group on Nantucket Island. Fortunately my best friend owned a private plane and it was fun to occasionally “fly in” for an opportunity meeting. When it came to products, I had to make arrangements for these long distance distributors to pick up their weekly from the nearest local Direct Distributors as professional courtesy (at a price I might add). If a Direct was not local for one of my distributors, then we had to mail their orders- 8 pound boxes of soap and other weighty products at our own expense, which obviously made the whole effort very unprofitable. Despite this complicated and cumbersome system, people who hung in there actually made money. Most, understandably didn’t.

So, if you tried recruiting a Baby Boomer who had some exposure to MLM from that era, maybe you will now understand why you might be getting such a negative reaction.

 Baby Boomers are prime business prospects and can be valuable team members for your networking opportunity. If you can present them with NEW information about 21^st Century “Attraction Marketing” and the  “New School” Network Marketing paradigm your success rates will really be enhanced. The best way to do this is to simply offer the FREE “Attraction Marketing” report “The 7 Great Lies of Network Marketing.” This controversial and educational ebook exposes the fallacy of using out dated “Old School” networking techniques in a very concise and intelligent manner. When an open minded “Baby Boomers” are exposed to the details of this new business paradigm and discover that they too can achieve their personal; and financial goals on the Internet, a lot of good things can happen for everyone.

Ann Seig uses the term “Educational Marketing” as a way to describe the information found in this FREE report.

Prospects can then make a decision base in information and not hype! They can actually visit her Renegade University and view EVERY aspect of her training for 7 days for only $1. Even if they decide that this isn’t for them, in that first week, they have enough time to set up several FREE campaigns to promote a business that they already might be involved with.

My next blog will expose the ineffectiveness of “Old School” MLM Marketing techniques vs. the New School of “Attraction Marketing.” Powered by the Social Media and the Internet.

Be Well,

Rich Kania

http://richkania.marketersmanifesto.com/

Danvers State Hospital

Business ownership, minimal financial risk, unlimited income potential, time freedom, financial security and residual income all made sense to me while I was employed from 1968-1971 at Danvers State Hospital. 

Those years were some of the most satisfying and inspiring years of my life. Despite what many have said, Danvers was not a “snake pit” or “hell-hole” insane asylum but a healing hospital staffed by compassionate and dedicated employees. There, I  put my educational background to use in therapeutic dialog and honed my listening and communication skills that have served my well throughout my life.

 Unfortunately, to further my career in the mental health field, it required advanced degrees in a low paying profession, a commitment I was unwilling to make.

My entrepreneurial spirit told me that good people with money to fund charitable endeavors also could make a significant difference. That was the path in life I chose. When one of my fellow employees presented the compensation plan of Amway handwritten on a napkin in the hospital cafeteria, I immediately saw the potential of financial success and the freedom of time and jumped right in. Imagine starting a business that had unlimited potential for only a $15 sales kit? 

Becoming an Independent network marketing distributor revealed some positive challenges.

Without a boss to tell you what to do and when to do it, self-motivation and personal discipline to build a business part-time is important. Many new people think “part-time” actual means “some-time” and that attitude will never get you off the ground. It’s like opening a “brick and mortar” store in the mall and having occasional hours. It simply doesn’t work. 

Another positive challenge of Network Marketing is Personal Development.

To be honest with you, I HATED public speaking. The absolutely WORST experience at Beverly High School was Mr. Cooper’s English class where we were required to make a 10 minute speech. My palms were sweaty as I watched the schoolroom clock tick the moments away hoping the bell would ring so I would have to do it that day. Networking required me to develop my own self-improvement program. Speaking to just a few friends was easy but incrementally as my group got larger it was a gradual progression in my comfort zone of public speaking. 

However, as I began to build my downline in the “Old School” marketing approach, I found it tedious and frustrating.

There were only so many people I could talk to in one day. The Internet and “Attraction Marketing” weren’t even around. Many successful distributors in my upline admitted that for the most part they just “got lucky.” However, with patience and determination, in that pioneering time era, MLM worked with limited success. My real “Ah Ha!” was the time I put on a business presentation with the chart and circles and afterwards I was introduced to a group of people who were in my downline that I didn’t even know. WOW, this really can happen! 

Despite the fact that I was half way to becoming a Direct Distributor and making some really nice income part time, the really big money wasn’t there from me.

I used my conversational skills from Danvers and the presentation and recruiting skills from MLM to develop a 26 year career as an executive search agency partner in a multi-million dollar agency that I co-founded and then lost. Donald Trump said “If I had to start over, I would get involved in Network Marketing.” 

With the development of the “New School” of MLM/Network Marketing and “Attraction Marketing” I am now able to offer my mentorship and opportunity to literally thousands of people right from my laptop any where in the world. Even on the beach!

Those future business partners who see my vision will get my undivided attention. I know many other “Baby Boomers” who have lost their jobs, have experienced the financial and personal disaster of divorce, have seen their 401Ks disappear. Attraction Marketing is my path and I invite you to explore the benefits of this option for your own life too!

Be Well,

Rich Kania

-Network marketing is now becoming increasingly attactive. Doing my homework on the Internet to validate my opinion,  I found this important study.

 According to the latest research and statistics of home-based businesses (Oct 2009) from the Robert Smith School of Business at the University of Maryland:

• The common perception is that home-based businesses are merely hobbies or side businesses contributing little to the business owner’s income or overall economy.
• They are the “Rodney Dangerfields of the small business world, rarely regarded as significant players in the U.S. economy.”
• Research indicates that there are about 6.6 million home businesses in the U.S.
• They generate at least 50% of the owner’s household income by selling products and services not just locally, but nationally and, often, around the globe.
• 75% work full-time. 35% of home-based businesses generate more than $125, 000 in revenue; 8% more than $500,000.
• Median household income for home-based entrepreneurs is $75,000 compared to $50,233 for the general population.
• 52% were age 55 and over. Only 6% were less than 35. 

The accelerated growth of home-based business is the result of the following trends and economic shifts according to the business school’s study.

• Lower costs and risks of the start-up. The Internet and low cost technologies make this possible. “With employer benefit packages being cut and the chances of losing a corporate job increasing, many view starting a home-based business as no more risky than traditional employment.”
• Aging Baby Boomers and Women are all seeing home businesses as an increasingly viable income or second career option. “An interest in achieving work/life balance, flexibility, the opportunity to pursue a passion and working for yourself are some of the reasons given for starting a home business
• Lack of corporate jobs. Even if economic recovery is strong, dramatic increase of hiring seems unlikely. Sub-contractors, part-time workers and outsourcing appears to be the trend. “As a result, starting a home-based business will be the best, and in many cases, the only option for corporate refugees. 

I saw Gerald Celente make his uncanny predictions in Trends for 2010 on Fox News the other day. According to him:

• There is an understandable the lack of trust in government, politicians and large corporations.
• Ordinary people are now seeking self-sufficiency  in a “neo-Survivalism” mode.
• They are taking personal responsibility by seeking and creating innovative options to for their own wealth and financial independence. 

The time is right NOW to launch a home-based Internet Business.

• Attraction Marketing is the new world of marketing on the Internet
• Renegade University will step by step teach you the necessary skills you need to succeed!

Be Well,

Rich Kania

 This is the nature of this brief post today. More coming very soon.  As you may have noticed from the date of my first post six months ago, I took a “time-out” from the whole network marketing field. I have re-established myself and upgraded my “Attraction Marketing” Internet skills for a big blast in 2010. I have “sharpened the axe” and am set to go!

Many of friends and family were full of negative discussions during the holidays. Seems small business owners are not planning to expand. Others, whom I really though were secure in their profession, were facing a  new year of employment instability and real concern. Since they know about my involvement with Internet Marketing and have shown no interest, I simply mentioned that big things were about to happen for me and dropped the subject. It is so comfortable to be totally out of the “Old School”-In your face  MLM marketing and to be confident in the “New School” approach of Attraction marketing.

The really great news is that a group of people I have been associated with over the last several years have invited me to be a Founding Distributor of a new company that is scheduled to launch at the end of this month. I have inside information on both the company and their exclusive new product. I am so excited to be able to share both the concept and training of an Attraction Marketing based marketing campaign for the launch of the exciting new organization. I am looking forward to sharing this information with new friends and business partners that I haven’t met yet.

I wish all of us out there a Happy, Health and Prosperous New Year!

Rich Kania

http://RichKania.com