Fiona is about to graduate college with a management degree. She has been offered a job as a sales representative for a pharmaceutical company. The job will require significant travel and entertainment expenses for which she will be given a salary supplement. What tax issues should Fiona consider in her decision?
What will be an ideal response?
Will she be considered an independent contractor or employee? If she is an employee, she will not be able to deduct any of the travel and entertainment expenses.
Does the employer have an accountable plan for reimbursing expenses? If she receives a salary supplement, it will be added to her gross income. From a tax standpoint, she would prefer having her employer reimburse her actual expenses to an increase in income (assuming the reimbursement is equal to the salary supplement).
Is the salary supplement greater than the amount of anticipated expenses to help Fiona pay her increased taxes?
If she is an independent contractor, she will be subject to self-employment tax.
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