If you are an independent direct selling consultant and have been paid at least $600 during the year, the company has to file a Form 1099-MISC with the Internal Revenue Service to report payments for services performed in your business. The company will also send you a copy of this 1099-MISC to report how much the company paid you that year.
While filing your regular individual tax return (typically a Form 1040) you will have to complete a Schedule C “Profit or Loss from Business” where you will enter all income and expenses from your direct selling business.
A home office deduction is available for direct sellers using their homes for business.
Self-employed individuals can also claim a health insurance deduction for medical, dental or long-term care insurance premiums that self-employed people pay for themselves.
The Earned Income Tax Credit (EITC) is a credit for people who earn low-to-moderate incomes. Earned income includes all taxable wages you get from working for someone who pays you or from working in a business on your own.
DSA worked closely with the Internal Revenue Service (IRS) to prepare an Audit Technique Guide (ATG). The ATG will be used by IRS examiners and auditors when reviewing direct selling returns. The ATG can be found here.
Direct sellers can view brochures from the IRS for additional information.
Publication 4591: Small Business Tax Responsibilities
Publication 3995: Avoiding Illegal Tax Avoidance Schemes
IR-2018-197: IRS to highlight tax reform changes affecting small businesses; Small business owners, self-employed should plan now for new changes
FS-2018-17: The Highlights of Tax Reform for Businesses
For any other questions, visit the IRS Small Business and Self Employed Tax Center.
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