Tax Deduction Tips for Commission Sales
Commission-based sales reps often spend personal money and use personal resources to as they make sales. Commissions create a competitive environment where personal spending ultimately can result in higher earnings. Keeping accurate records of all expenditures guides your possible deductions during tax season.
Most of the commission-based write-offs are noted on Schedule A for 1099 contractors or Form 2106 Employee Business Expenses for everyone else.
Commission-based sales reps may be able to deduct unreimbursed vehicle expenses, office supplies, marketing expenses, travel and lodging costs and other basic work-related expenses. It will depend upon the current tax regulations.
The IRS sets a standard mileage deduction rate each year. You can deduct every mile driven for business purposes and charitable events related to your business. The standard rate for 2019 is 58 cents per mile driven for business. Miles driven for charitable purposes are 14 cents per mile.
Mileage tracker mobile apps are available to help log miles accurately. Keeping a written record in the vehicle is also a great way to ensure you can claim the maximum amount of miles.
The standard mileage deduction accounts for fuel, wear and tear, vehicle repairs and all vehicle-related expenses. You cannot write off these expenses separately unless you skip the standard deduction and track every vehicle-related purchase.
A per diem allowance for food and lodging is often supplied by the company. If you pay these expenses out-of-pocket as an employee or operate as a commission-based contractor, the per diem rate may be tax deductible.
These rates come in two forms. The standard deduction is the most common option chosen. It includes food, lodging and incidental expenses such as valet fees.
You also have an option to claim per diem rates set on a location-based schedule. They are categorized according to the state and city level. Using the schedule may offer a higher rate when you visit expensive cities. The rates are based on a calculation involving the average cost of lodging and travel in each specific location.
Marketing collateral such as fliers, business cards and other out of pocket expenses are tax deductible. You can also claim a home office if you operate as an independent contractor. If you host networking and sales events, a portion of the expenses is tax deductible. You must log all dates and keep the receipts for these events and items to make an accurate claim during tax season. It is also wise to check with a tax professional.