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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