It is March 2021, and you have just finished meeting with Paul, a commission salesperson who lives
Question:
It is March 2021, and you have just finished meeting with Paul, a commission salesperson who lives in Vancouver. Paul requires help in determining whether he should claim his expenses for tax purposes as a salesperson or a non-salesperson. Paul has no other sources of income than the salary and commissions earned in this role.
Paul has been a commission salesperson for several years. For 2020, he earned a base salary of $180,000 plus commissions based on his sales. He travels across the country for work and is very successful. Paul is responsible for paying any entertainment and promotional costs he incurs, as well as air transportation, hotel, and meal costs while he is travelling for business. Paul is not provided with an office by his employer and he used 10% of the family home for an office at home. Other costs are paid for by his employer.
Paul provides you with the following information for 2020:
Salary received during the year $180,000
Commission income received during the year 20,000
Expenses paid personally:
Utilities for house $2,000
Minor repairs to house 1,700
Property taxes for house 3,500
Travel costs (airline tickets and hotel costs) 15,000
Meals while travelling 5,000
Entertainment of clients 6,000
Promotional material (brochures) 200
House insurance 600
Mortgage interest 10,000
New computer and printer purchased this year 2,500
Golf membership for golfing with clients 4,000
a) Calculate the expense deductions for Paul as a salesperson and non-salesperson and explain any deductions excluded from your calculations.
b) Briefly explain whether Paul should claim expenses as a salesperson or nonsalesperson.