Food for Thought at Tax Time

by Claudia Bruemmer, Guest Blogger

Tax time is coming up, and we can’t overemphasize the importance of companies big and small being able to accurately report income and expenses to the IRS. Sales Commissions are one area where IRS reporting may be overlooked and invite audits of your sales staff as well as your firm.

Just out of curiosity, how many of you reading this have the means to track and pay sales commissions? Perhaps many of you do, and that’s great ammunition to have on hand if it ever comes to a tax audit. Heaven forbid you should ever be audited – but better safe than sorry.

To illustrate the importance of tracking sales commissions, here’s a couple of recent news reports.

• The Idaho Stateman reported on February 9 that Glenn E. Mosell of Eagle, Idaho pleaded guilty in federal court for filing a false tax return. Among a number of discrepancies in his return, Mr. Mosell failed to report commissions from various business entities. Because the IRS caught this error, they conducted an audit of his prior year returns, and guess what? They found additional discrepancies in reporting all sources of income.
• The San Diego Business Journal reported on January 31 that Maxwell Technologies Inc., a San Diego-based energy-power storage company, agreed to pay $14.3 million in penalties for violating federal anti-bribery laws, and one count of violating record keeping related to the bribes. Seems a sales rep was bribing Chinese officials to get sales and these were reported as commissions.

Of course, we’re not saying if these companies used commission tracking software to calculate their sales commissions, they would have avoided the consequences of inaccurate reporting to the IRS. These people made a decision to mislead the government in reporting their income so tracking software wouldn’t have helped.

However, because it’s so important to track commissions, and the IRS seems bent on cracking down when people don’t report income correctly, such software just might be a catalyst to keep everybody honest. With a sales commission calculator in place, one might pause to misreport income – which would help avoid making a bad decision in the first place. Hope this gives you some food for thought.''

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