lead credits and the IRS

[nfl72]

I got audited for the last two years in a row. My CPA thought it was from a missed 1099 but we don't know for sure. I do have a lot of write offs as one would expect. For the audit I had to verify all my expenses, including miles, phone, cell phone, internet, advertising, leads and miles etc.

I was reading a thread today and the topic of lead credits came up. I know many different companies give lead credits. I am assuming that if they did not give lead credits they would pay a higher commission. If that is in fact the case, can I deduct my "lead credits"? In a sense it is a form of "lost income"?

 

[Thedude]

Uh did your cpa not know.


I would seriously doubt it would be considered lost income lol

 

[Rirwin]

Lol no it’s not lost income, but seriously good try!

 

[rousemark]

I got audited for the last two years in a row. My CPA thought it was from a missed 1099 but we don't know for sure. I do have a lot of write offs as one would expect. For the audit I had to verify all my expenses, including miles, phone, cell phone, internet, advertising, leads and miles etc.

I was reading a thread today and the topic of lead credits came up. I know many different companies give lead credits. I am assuming that if they did not give lead credits they would pay a higher commission. If that is in fact the case, can I deduct my "lead credits"? In a sense it is a form of "lost income"?

Would not think so... It is a "wash".. If the company paid you in cash, it would be reprotable.. if you turn around and spend that amount on leads, it would be deductible.. There is no actual "lost" income... Actually,a better argument could be made that the lead credit is payment in kind and therefore is reportable income.. Better leave well enough alone..

 

[Josh]

That's what I would think. In fact, that lead credit could be what is causing the audit trigger. Wouldn't a company 1099 an agent for the amount of the lead credit?

They could (and possibly should), but I doubt that's how they're doing it.

If you earn a lead credit, but never take advantage of it, then it means nothing.

If you earn a lead credit, and take advantage of it, the value of that credit should be reported as an income, but it would (presumably) be "cancelled out" by the expense. So for example, if you got a $400 lead credit (income), then used it on a $400 mail drop (expense), it has a net impact on your taxes of nothing. So if the IRS did audit you and for some reason did uncover that "additional income", then you need to be able to point to the "additional expense".

On the other hand, if the company issues you a $400 lead credit, which you put in your pocket and then never spend on leads, then that's reportable income.

 

[nfl72]

1st off, I can not take lead credits as cash. it must be used for leads. up to 50% of lead cost.

2ndly It makes sense if a company is paying 115% and giving lead credits for $7500 a year that have to be used exclusively on leads. One might rather get 120% and not be forced to spend their income on leads? Currently I have no option but to use them or lose them. If I am being forced to use part of my income on leads; is it truly disposable income?

I am just thinking out loud, I love the lead program and use them on every order, but it would be even more lucrative if I could write off the total cost of the lead order being paid in my name. It's like taking it on trade. I have a friend who is an electrician and he trades his work for other things all the time. They do it for a tax break. He actually belongs to a group where they agree to do it. He always has free coupons for food because he does work for restaurants in exchange for food. He also does it for advertising. He just had new carpeting put in a rental home that he did not have to pay for. In lieu of cash he did some wiring for them. When he is done he has a receipt for a $1,000 worth of paid for flooring and doesn't have to claim the income for the wiring he did.

Lets face it, in this business we have all kinds of expense that can be written off. I want to use everything I can, and then some! When in doubt isn't it better to use it and make the IRS find it? You never get anything unless you ask for it!



FTR I have never discussed the lead credit topic with by CPA but I intend to.

 

[rousemark]

1st off, I can not take lead credits as cash. it must be used for leads. up to 50% of lead cost.

2ndly It makes sense if a company is paying 115% and giving lead credits for $7500 a year that have to be used exclusively on leads. One might rather get 120% and not be forced to spend their income on leads? Currently I have no option but to use them or lose them. If I am being forced to use part of my income on leads; is it truly disposable income?

I am just thinking out loud, I love the lead program and use them on every order, but it would be even more lucrative if I could write off the total cost of the lead order being paid in my name. It's like taking it on trade. I have a friend who is an electrician and he trades his work for other things all the time. They do it for a tax break. He actually belongs to a group where they agree to do it. He always has free coupons for food because he does work for restaurants in exchange for food. He also does it for advertising. He just had new carpeting put in a rental home that he did not have to pay for. In lieu of cash he did some wiring for them. When he is done he has a receipt for a $1,000 worth of paid for flooring and doesn't have to claim the income for the wiring he did.

Lets face it, in this business we have all kinds of expense that can be written off. I want to use everything I can, and then some! When in doubt isn't it better to use it and make the IRS find it? You never get anything unless you ask for it!



FTR I have never discussed the lead credit topic with by CPA but I intend to.

Goods received in barter for labor is taxable income.

 

[Agentguy5]

I got audited for the last two years in a row. My CPA thought it was from a missed 1099 but we don't know for sure. I do have a lot of write offs as one would expect. For the audit I had to verify all my expenses, including miles, phone, cell phone, internet, advertising, leads and miles etc.

I was reading a thread today and the topic of lead credits came up. I know many different companies give lead credits. I am assuming that if they did not give lead credits they would pay a higher commission. If that is in fact the case, can I deduct my "lead credits"? In a sense it is a form of "lost income"?

Sorry to hear about the audits!
I highly recommend dumping your CPA as yours has already failed you and unfortunately, is most likely the reason for your audits. If you lost a winnable trial, would you use the same attorney again?
Try using a CPA Firm.

 

[TPAAgent]

I'm curious as to how many agents here have actually been audited..

 

[Agentguy5]

I'm curious as to how many agents here have actually been audited..

Never audited as a licensed agent!
In 97-98 I was audited. Back then I did the taxes with H&R Blockheads... Had to learn from that mistake! lol