Tax Deduction Tips for Commission Sales

Mike Parker for Demand Media/AZ Central writes: When it comes to commission sales, one is reminded of the adage that it takes money to make money. Fortunately the Internal Revenue Service lets you write off some of your costs for generating commissions. Which costs you can write off depends on whether they are employee business expenses or expenses you incurred as a small-business owner.

Record Keeping

Don't rely on your memory to keep track of your expenses, especially if you pay some bills with cash. Even small amounts add up over time. Develop a record-keeping system that works for your situation, and update it regularly. In most cases the IRS doesn't care what kind of record-keeping system you use, as long it clearly shows your income and expenses. Keep receipts in a dedicated folder to substantiate your deductions. If the IRS questions a deduction, the burden of proof resides with you.

Mileage Log

With the price of gasoline continually rising, you can't afford to not deduct your car expenses. If you use your car to visit job sites or clients, you can claim a deduction of 55.5 cents per mile for the 2012 tax year, but you must keep a written record of your mileage. You have the option of claiming your actual expenses, such as fuel, oil, maintenance, repairs and licenses, instead of using the standard mileage rate. If you use the actual expenses method, you'll need to keep records and receipts documenting your expenses. You can't deduct any car expenses for which you were reimbursed. You also can't deduct mileage for commuting to and from your regular place of business.

Gifts to Clients

The Jackson Hewitt tax service website identifies client gifts as one of its top 50 most overlooked tax deductions. You can deduct up to $25 per person for gifts that you give to the company that are intended for the eventual use or benefit of an individual or group of individuals. For example, you can deduct the cost of a $25 fruit basket that you gave to a client for his personal use. If you provided four $25 fruit baskets to the company that were taken home by four different employees, you could deduct $100 -- $25 for each individual gift.

Employee Business Expenses

If you incur business expenses while generating commission sales as a business owner, all of your allowable expenses are deductible on Form 1040, Schedule C, regardless of whether you itemize your deductions or claim the standard deduction. If you incur the same expenses as an employee, you can deduct a portion of your allowable expenses as an employee business expense, provided you itemize your deductions on Form 1040, Schedule A. As an employee you can only deduct the amount of your business and other miscellaneous expenses that exceed 2 percent of your adjusted gross income.