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BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
Experience:  Owner of a CPA firm
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I resigned (or be let go) from a commission position because

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I resigned (or be let go) from a commission position because I was not finding enough money as a recovery auditor. That was 9-21-09. The company hired me as a consultant doing data entry for 4 more months. I have continued to receive commission checks in 2010 (for the period prior to 9/21/09, and am earning no W2 money (laid off), but the commissions for 2010 amount to 24,340 todate in 2010. Is there anything I can deduct against this money? Pennsylvania Unemployment said my consultant pay in Oct, Nov, Dec of 2009 and January of 2010 was actually an employee wage. I give to charity (10% of income), pay for my own health insurance. Is there anything I can deduct?
Submitted: 6 years ago.
Category: Tax
Expert:  BK-CPA replied 6 years ago.

It sounds like the company should be treating this as a wage.


Your accountant is thinking of having you taxed as an S-Corp to save on self-employment tax, which amounts to 15.3% of your income, but requires you to pay yourself through payroll and start a business taxed as an S-Corporation. The savings can be substantial, but make sure you're paying yourself a reasonable salary and that you're prepared to file corporate and payroll tax returns.


There is the self-employed health insurance deduction, or you can deduct on Schedule A as an employee, health insurance not run through an employer plan already etc. The former is typically the larger deduction given a 7.5% AGI floor for the Schedule A medical expenses to overcome, unless your employer has a plan, in which case you are likely getting the full deduction also.


Charitable contributions would show up on Schedule A as itemized deductions as well. In the absence of enough itemized deductions, you would simply take the standard deduction anyways (currently just under $6,000). The tax treatment of your income typically has no bearing on your ability to deduct charitable contributions, so long as you claim the income (meaning W2, 1099, K-1 ... it doesn't matter for charitable donations which you get).


You may be able to find other business expenses to deduct. Here's a good place to start looking (IRS Publication 535, Business Expenses):


(Mileage, unreimbursed corporate expenses you paid, computer equipment you had to buy for yourself, etc.)


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