workburnout
Recycles dryer sheets
Please no lectures or opinions on whether I should pay back the draw or criticism of how my pay system is done. It would take to long to get into the how's and why's of the entire situation.
I only want to know will this affect my taxes.
I do have a CPA who I can ask next time I go in there - I don't like to email him with too many questions as he gets very busy.
So was curious - before asking my CPA - if anyone knew the answer to this.
Background info:
I have been employed as a commission based sales rep for 10 years by my company.
I recently scaled back the amount of work I do (I have an extra side job now), so I earn less commission than I did.
I probably earn $5000 a month commission instead of $9000 a month I was earning on average (not counting the side job).
Basically, we have two choices of how we are paid:
1. We can choose to be paid commission the 15th of every month, based on what we sold the previous month
2. We can choose to get a "draw" on the 15th and 30th of each month, then it is "settled" on the 15th of the following month based on how much we sold.
For choice number 2, which is the one I have always had up until now -
If we earn more in commission than our draw we get the "overage" commission.
or -
If we earn less than our draw, we have an "in the hole" figure which usually is caught up in the next month or two.
This system has worked well for me through the 10 years - except now my "in the hole" figure is way up.
I plan to spend more time with my side job, while keeping this main job - going forward I expect I will be earning $3500-4000 a month commission with the main job.
I will still get all the benefits (free health insurance, etc etc) by scaling back my hours at my main job.
My side job does not offer good health insurance (they do but it costs a lot) so it's to my advantage to keep working my main job - for that and other benefits/reasons too long to get into.
So I agreed to send my company a check for $7000 - to cover the amount I'm in the hole - and go to commission only (option 1) from now on out.
Basically I got a "free loan" from the company because the past several months I did not earn enough to cover my "draw" I was getting twice monthly. It slowly went up the past 6-8 months - to that $7000 amount.
The situation is also due in part to a new reimbursement system they have in place for our expenses - but to keep this simple I won't get into all that here.
The bottom line is I am sending them a check for $7000 because they overpaid me the past 5-6 months - because I did not sell my typical amount I have the past 9-10 yrs.
Since I've always had a variable income (some months make $15,000, other months make $3000), my company did not worry about my being "in the hole" until recently when they figured out the pattern of income over all these months - where I'm not doing as much as before in sales.
I'm a W2 employee, and was wondering do I need to worry about the $7000 I'm paying them back affecting anything as far as taxes?
Because, it looks like to the IRS I earned $7000 more than I did.
On my pay statements (the ones breaking down all orders/commission sales - not given to the IRS) for work it says I'm 7000 "in the hole".
This is accurate.
Once my employer credits me with the $7000, I will no longer be "in the hole" but the fact I paid them $7000 for the "free loan" (where they kept overpaying my draw) will not be reported to the IRS.
So the IRS will have that I made 7000 more - but no record me paying back the "free loan".
I'm probably overthinking this. But wondered if it's going to mean I pay taxes on the $7000 I "earned" which I really shouldn't have based on commission.
From now on, I told them just to put me on straight commission, which they are doing - so this will not be an issue going forward. I did not get into the reasons as if they knew I had a side job they'd quit sending me sales lead orders (which are basically a way for me to earn easy money). Best that I just go to straight commission and not tell them I'm purposely scaling back with how much work I do. Even though I'm an employee, I telecommute and rarely go into the office - so they do not monitor my activities (how many hours I put in).
I only want to know will this affect my taxes.
I do have a CPA who I can ask next time I go in there - I don't like to email him with too many questions as he gets very busy.
So was curious - before asking my CPA - if anyone knew the answer to this.
Background info:
I have been employed as a commission based sales rep for 10 years by my company.
I recently scaled back the amount of work I do (I have an extra side job now), so I earn less commission than I did.
I probably earn $5000 a month commission instead of $9000 a month I was earning on average (not counting the side job).
Basically, we have two choices of how we are paid:
1. We can choose to be paid commission the 15th of every month, based on what we sold the previous month
2. We can choose to get a "draw" on the 15th and 30th of each month, then it is "settled" on the 15th of the following month based on how much we sold.
For choice number 2, which is the one I have always had up until now -
If we earn more in commission than our draw we get the "overage" commission.
or -
If we earn less than our draw, we have an "in the hole" figure which usually is caught up in the next month or two.
This system has worked well for me through the 10 years - except now my "in the hole" figure is way up.
I plan to spend more time with my side job, while keeping this main job - going forward I expect I will be earning $3500-4000 a month commission with the main job.
I will still get all the benefits (free health insurance, etc etc) by scaling back my hours at my main job.
My side job does not offer good health insurance (they do but it costs a lot) so it's to my advantage to keep working my main job - for that and other benefits/reasons too long to get into.
So I agreed to send my company a check for $7000 - to cover the amount I'm in the hole - and go to commission only (option 1) from now on out.
Basically I got a "free loan" from the company because the past several months I did not earn enough to cover my "draw" I was getting twice monthly. It slowly went up the past 6-8 months - to that $7000 amount.
The situation is also due in part to a new reimbursement system they have in place for our expenses - but to keep this simple I won't get into all that here.
The bottom line is I am sending them a check for $7000 because they overpaid me the past 5-6 months - because I did not sell my typical amount I have the past 9-10 yrs.
Since I've always had a variable income (some months make $15,000, other months make $3000), my company did not worry about my being "in the hole" until recently when they figured out the pattern of income over all these months - where I'm not doing as much as before in sales.
I'm a W2 employee, and was wondering do I need to worry about the $7000 I'm paying them back affecting anything as far as taxes?
Because, it looks like to the IRS I earned $7000 more than I did.
On my pay statements (the ones breaking down all orders/commission sales - not given to the IRS) for work it says I'm 7000 "in the hole".
This is accurate.
Once my employer credits me with the $7000, I will no longer be "in the hole" but the fact I paid them $7000 for the "free loan" (where they kept overpaying my draw) will not be reported to the IRS.
So the IRS will have that I made 7000 more - but no record me paying back the "free loan".
I'm probably overthinking this. But wondered if it's going to mean I pay taxes on the $7000 I "earned" which I really shouldn't have based on commission.
From now on, I told them just to put me on straight commission, which they are doing - so this will not be an issue going forward. I did not get into the reasons as if they knew I had a side job they'd quit sending me sales lead orders (which are basically a way for me to earn easy money). Best that I just go to straight commission and not tell them I'm purposely scaling back with how much work I do. Even though I'm an employee, I telecommute and rarely go into the office - so they do not monitor my activities (how many hours I put in).