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Employment

Tax deductions for salespeople

If you work as a salesperson or sales representative, and you received a Form W-2 and the "Statutory employee" check box is marked in Box 13, report that income on Schedule C, Profit and Loss from Business. You may deduct your business expenses to reduce your overall taxes.

  • Full-time life insurance sales agents

  • Certain agent or commission drivers

  • Traveling salespersons

  • Certain homeworkers

Payments that you receive as an independent sales representative outside of or in addition to your regular job may be considered income from self-employment and are reportable on Schedule C. For example, self-employed income includes occasional sales commission payments, bonuses or referral fees received from a company other than your regular employer. For such arrangements, you may account for the income amounts yourself or you may receive a Form 1099-MISC, Miscellaneous Income. Self-employed income would also include amounts received as a sole proprietor providing independent sales services to one or more companies. If you are self-employed and your net earnings are $400 or more, you must pay self-employment tax on the income you report on Schedule C. In addition, you may need to make estimated payments to cover the amount of self-employment tax or income tax associated with the income you report on Schedule C.

If you are self-employed, you may be able to reduce your taxes by deducting unreimbursed job-related expenses. These expenses may be claimed as 2% limited miscellaneous itemized deductions if based on self-employment income; they may be deducted on Schedule C. You should keep receipts to substantiate these expenses. Examples of some of the items you may be able to deduct include:

  • Subscriptions to trade journals related to your work

  • Dues for trade associations or professional associations

  • Insurance premiums for protection against liability or wrongful acts

  • Specialized equipment or tools that are replaceable within one year

  • The cost and upkeep of uniforms if they are required for work and not suitable for everyday wear

  • State or local government regulatory fees, licenses, or flat rate occupational taxes, provided these fees are not paid for initial certification or licensing

  • Car and truck expenses when getting from one workplace to another within the general area where your business is located, visiting clients or customers, and going to business meetings away from your regular workplace

  • Travel expenses for traveling away from your business home if you are required to be away from home for longer than an ordinary day's work - examples of deductible travel expenses include transportation by air, bus, or car using the standard mileage rate or actual expenses, tolls and parking fees, lodging, and meals and entertainment (with limitations)

 

You also may be able to deduct work-related unreimbursed education courses or seminars if they meet certain requirements. Qualified education includes refresher courses, courses on current developments, and vocational courses. However, education that qualifies you for a new trade or business or that helps you to meet the minimum education requirements of your present trade or business is not deductible. For example, a soft drink sales representative cannot deduct the expenses for the study of marine biology as work-related education, although the tuition for such courses may qualify for the American Opportunity or Lifetime Learning Credit.

Additional unreimbursed expenses may be deductible if you are a self-employed sales representative filing Schedule C. Examples of some items you may be able to deduct include:

  • Business bad debts
  • Employee salaries or other forms of compensation such as bonuses or commissions you pay
  • Legal and professional fees, such as accounting or legal advice that are directly related to the operation of your business
  • Rental expense for business use property such as equipment rentals or storage facilities
  • Advertising
  • Equipment repairs and maintenance
  • Supplies and incidental materials
  • Excise taxes and personal property taxes imposed on your business

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