Outside sales representatives hit by a tax increase January 2018

If you are an employee with large unreimbursed business expenses then you either need to ask for a raise immediately of prepare for a potentially large tax increase. One of the most common types of occupations affected is outside sales representative however any employee in any occupation with work-related expenses would be affected the same way. Effective January 1, 2018 the following expenses are no longer deductible by employees:

• Auto expenses or mileage allowance.
• Business liability insurance premiums.
• Damages paid to a former employer for breach of an employment contract.
• Depreciation on a computer your employer requires you to use in your work.
• Dues to a chamber of commerce if membership helps you do your job.
• Dues to professional societies.
• Educator expenses.
• Home office or part of your home used regularly and exclusively in your work.
• Job search expenses in your present occupation.
• Laboratory breakage fees.
• Legal fees related to your job.
• Licenses and regulatory fees.
• Malpractice insurance premiums.
• Medical examinations required by an employer.
• Occupational taxes.
• Passport for a business trip.
• Repayment of an income aid payment received under an employer’s plan.
• Research expenses of a college professor.
• Rural mail carriers’ vehicle expenses.
• Subscriptions to professional journals and trade magazines related to your work.
• Tools and supplies used in your work.
• Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.
• Union dues and expenses.
• Work clothes and uniforms if required and not suitable for everyday use.
• Work-related education.

The tax law change means that a typical outside sales person loses a tax deduction of about $3,500 per year. In other words a typical tax increase for this occupation is $3,500. It would take a raise of about $300 per month to make up for the tax increase. Of course, it could be larger or smaller. depending on the unique situation.

If a pay raise cannot be negotiated then it might make sense to consider becoming a subcontractor and not an employee.

Another option is to establish an accountable expense plan and reimburse these expenses through the employer.

I am available to discuss the details under any of these options.

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