Deductions For Salespersons

As a salesperson, you are well aware of the need to keep all your costs in control - ESPECIALLY THE TAX ON YOUR HARD EARNED SALES INCOME.

Hopefully this article will help you to find all tax deductions available to you.

Table of Tax Killers

Proof The IRS Requires

If you temporarily travel away from your tax home, you can use deduct travel expenses. Certain expenses are deductible for local transportation, entertainment, and meals, when they pertain to your business.

You are traveling away from home if:

• Your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's work, and

• You need to sleep or rest to meet the demands of your work while away from home.
  
  Travel to Family Home
  If you (and your family) do not live at your tax home (defined later), you cannot deduct the cost of traveling between your tax home and your family home. You also cannot deduct the cost of meals and lodging while at your tax home. See Example 1 that follows.
  
  If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. See Example 2, below.
  
  Example 1.
  
  You are a truck driver and you and your family live in Tucson. You are employed by a trucking firm that has its terminal in Phoenix. At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. This is because Phoenix is your tax home.
  
  Example 2.
  
  Your family home is in Pittsburgh, where you work 12 weeks a year. The rest of the year you work for the same employer in Baltimore. In Baltimore, you eat in restaurants and sleep in a rooming house. Your salary is the same whether you are in Pittsburgh or Baltimore.
  
  Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. You cannot deduct any expenses you have for meals and lodging there. However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. You can deduct the cost of your round trip between Baltimore and Pittsburgh. You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh.
  
  Tax Home
  To determine whether you are traveling away from home, you must first determine the location of your tax home.
  
  Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.
  
  If you have more than one regular place of business, your tax home is your main place of business. See Main place of business or work, later.
  
  If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. See No main place of business or work, later.
  
  If you do not have a regular place of business or post of duty and there is no place where you regularly live, you are considered a transient (an itinerant) and your tax home is wherever you work. As a transient, you cannot claim a travel expense deduction because you are never considered to be traveling away from home.
  
  Travel expenses for another individual. If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses.
  
  Employee. You can deduct the travel expenses of someone who goes with you if that person:
  Is your employee,
  
  Has a bona fide business purpose for the travel, and
  
  Would otherwise be allowed to deduct the travel expenses.
  
  
  Business associate. If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. A business associate is someone with whom you could reasonably expect to actively conduct business. A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor.
  
  Bona fide business purpose. A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible.

Actual Cost
You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, you must keep records of your actual cost.

Standard Meal Allowance
Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel. In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance. If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. See the recordkeeping rules for travel in chapter 5.

Incidental expenses. The term “incidental expenses” means:
Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries,

Transportation between places of lodging or business and places where meals are taken, if suitable meals cannot be obtained at the temporary duty site, and

Mailing costs associated with filing travel vouchers and payment of employer-sponsored charge card billings.

Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, or the costs of telegrams or telephone calls.

The IRS requires you to gather, maintain, and furnish to the IRS evidence gathered from third parties and your own statements that will show -

• From Banking Records

• From Customer Records

• From Signed Documents

• From Paid Bills

• From Your Other Business, or Financial Records

• From Corporation or Organization Records (meetings, etc.)

Prepare for Your Adviser

When we prepare your tax organizer be certain to place those costs in the appropriate section.

Normally, you will not need to furnish copies of receipts or any of the evidentiary matter which you use to prove your tax killers to the IRS.

Entrance Interview

During the entrance interview be prepared to inform the tax professional about the amount and character of your tax deductions (tax killers).

Qualified Expenses

See the table above

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