Hi,

I just hired a sales person and am paying her $300 a week to cover her expenses as well as commission. I will not be requiring her to turn in receipts to show what her actual expenses were. Do I need to withhold social security, medicare and federal income tax from that $300?

Thanks,
Amber

Wow, want kind of area is she covering? I know what your question is, but how can she cover an area, pay gas, maintenance on her vehicle, parking tickets, and all of the other expenses associated with sales and come out on top?? If you are not requiring her to turn in receipts, I am assuming you are paying her under the counter so to speak, or as a contractor. Excuse me for the wrong terminology but I am Canadian and when someone is not having withdrawal items such as income tax, social security, etc. then they are considered a contractor and have to file their income taxes , and pay accordingly.
Tick

Amber - yes, you must withhold taxes and pay FICA on the $300 (which obvioulsy costs you as well as her). The best way to avoid this is to require receipts and reimburse her for actual business expenses. Alternatively you may be able to avoid some of this for those days when she travels overnight away from home - you could call the payment for those days a per diem and it is expected to cover meals, hotel, and incidental expenses. Or if she is out on business calls at least 12 hours in a single day you could pay her a per diem for meals only. But in either case you have to document the days that she quaifies for per diem and adhere to the GSA proscribed rates of per diem pay.