Question about a required expenditure

ClearAmphibian · ‎February 8, 2020

My wife is a doTERRA consultant. The program requires their members to spend a minimum of $100/month in order to earn ANY commission. Is that $1200/year deductible? I've heard other of their consultants say no, but I'm not understanding why if it's a requirement for earnings. Any insight?

KathrynG3 · ‎February 8, 2020

It depends how you classify the expense. If you consider it to be "dues and subscriptions," that is commonly deducted for self-employed businesses but implies a set monthly fee, such as if doTerra charged her for a direct consultant link to their storefront/website.

However, you write that it "is a minimum of $100", which implies that she is basically purchasing inventory she may or may not re-sell.

The IRS does not allow a business that has goods for sale to deduct the expenses that are purchased for personal use.

When you enter the expenses for the business, under the inventory category, that is usually carried at cost, follow these steps:

Click Yes to Do you have inventory to report and click Continue
Answer Did you use the cost method to value inventory yes/no
Include everything at the beginning of 2019 and end of 2019 and click Continue
For Let's get the costs of your goods, this is where you would remove the purchases for personal use. Enter in the details and continue through the interview.

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KathrynG3 · ‎February 8, 2020

It depends how you classify the expense. If you consider it to be "dues and subscriptions," that is commonly deducted for self-employed businesses but implies a set monthly fee, such as if doTerra charged her for a direct consultant link to their storefront/website.

However, you write that it "is a minimum of $100", which implies that she is basically purchasing inventory she may or may not re-sell.

The IRS does not allow a business that has goods for sale to deduct the expenses that are purchased for personal use.

When you enter the expenses for the business, under the inventory category, that is usually carried at cost, follow these steps:

Click Yes to Do you have inventory to report and click Continue
Answer Did you use the cost method to value inventory yes/no
Include everything at the beginning of 2019 and end of 2019 and click Continue
For Let's get the costs of your goods, this is where you would remove the purchases for personal use. Enter in the details and continue through the interview.