A manager of H&R Block in northern Utah, told me that during his 25 years of doing over 12,000 tax returns a year between he and his group, they could not remember a single client who had reported a significant profit over any appreciable period of time in MLM! (One reported a sizable profit one year – but went bankrupt the next.)
Another accountant told me of a seminar company that trains tax preparers across the country. The topic of MLM’s often comes up in connection with "hobby losses," and the concensus is that it is extremely rare to see profits from MLM participation. And a tax software
developer, who dealt with thousands of tax preparers across the country, said he had asked about 100 of them if they had ever seen a profit reported from MLM participation. None had. This was out of a total of over a million tax returns.
To confirm this, I performed a telephone survey7 of the people who should know if profits actually occur from MLM participation—the persons who prepare taxes for the most concentrated population of MLM participants – Utahns. What I found confirmed what we have suspected for many years, but for which we had little objective proof— except in the case of a half dozen programs, like Nu Skin, Amway, and Melaleuca, for which we already had good data. A few TOPP’s are getting rich at the expense of a multitude of downline recruits, who invest in products to participate in the MLM program on the basis of misrepresentations regarding income potential. (See Table 1—and other reports cited in END NOTES.)
It was tricky to get tax preparers to give out the information I sought. Since it is considered unethical for tax professionals to divulge confidential tax information of their clients, I had to approach this survey very delicately. I began by sharing that I had learned from other tax professionals. I reassured them that I was not asking them to disclose information from specific clients, but simply wanted to know if their experience corresponded with what I had learned from others. Most of them had already observed the same thing – that almost no one was reporting profits on their taxes from participating in MLM. They could not recall anyone ever reporting a significant income from MLM (with the exception of Utah County, which will be explained later). Using this approach, only one Utah County tax accountant refused to cooperate.
Bookmarks