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Commissioned Emloyees May Be Paying Too Much Income Tax

BY: mathew jazenko | Category: Finance | Submitted: 2011-08-03 10:41:27
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Article Summary: "Commissioned employees who sell goods or negotiate contracts on behalf of an employer have a range of tax deductions available to them if the expenses are necessary for the carrying out their duties. However, the commissioned employee must meet several conditions in order to qualify for the deductions. Deductions must be reasona.."


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Commissioned based selling or negotiating contracts is an honourable profession that requires a good deal of product knowledge, people skills, budgeting and business skills. For all their hard work they are rewarded a commission plus some extra ways to save money on their income tax. Unlike salaried employees who can write off the odd item or two, commission based employees can take advantage of all expenses related to earning their income I know what your thinking 'where do I sign up?' However, there are some qualifications that must be addressed first before the deductions can be made.

The employee's employment contract must state that the employee is responsible for all their own expenses.
Employee normally is required to work away from employer's place of business
Employee is paid in whole or part commission
Employee didn't receive any taxable allowance or reimbursement for the expenses
Employee has a completed form T2200 from their employer indicating this.

Deduction of Sales Expenses

Advertising and promotion: Items like flyers, business cards, newspaper, advertising especially online and gifts.

Meals and entertainment: not only can you deduct meals but also entertainment expenses. Such as meals, entrance tickets, trips, sports events, and private box at sport facilities.

Licenses, bonding and liability insurance
: commission employees can deduct annual license fees if they must have a license to perform their work. i.e. insurance salespeople can deduct the cost of their annual licenses.

Training costs: The cost of a training course if required to maintain, update or upgrade existing skills or qualifications that relate to employment. i.e. sales training seminars, etc.
Home office expenses: Salespeople may deduct the cost relating to home office including house insurance and property taxes, office equipment such as computers, fax machines.
Automobile expenses such as fuel, repairs and maintenance, oil changes, insurance, leasing costs to name just a few.

With all the above mentioned deductions, there is a limit. The amount of the expenses that can be claimed is limited to the amount of commission earned. Keep all receipts including coffee runs for your fellow sales people. Dinner with your wife or significant other doesn't count as a deduction for business. As is renting a clown for your child's birthday party. The tax authorities can and have conducted audits before to determine if the expenses are reasonable.

Some of the clients I represent, before they buy anything their always thinking 'can I deduct this?','can the 'business' use this'. In other words let the business pay for your computers, or cell phones or other 'toys' that you need with that all important before tax income.

About Author / Additional Info:
Mathew Jazenko is CEO of MRJ Financial Solutions and is dedicated to improving your bottom line. Questions/comments: mjazenko@yahoo.ca or visit us at http://www.mrjfinancialsolutions.com

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