How Does Financing And Draws Work?

[logan]

Hello all,


Will be starting a job soon that provides draw/financing and would like to know how this all works.

I understand that a draw is payment for advance sales and if I leave before it is paid back I owe remaining monies not covered by sales.

How does that work for your tax's?

For example-

I earn $20k in draw and $16k of that is off set by commisions earned thus leaving $4000 I owe back.


When I get my 1099 it will show I earned $20,000 yet I really earned $16K is this correct on my part?

Trying to figure out if you get taxed on income that you end up paying back.


Thank you for any and all input.

[Dixie]

No, you did earn all $20,000. regardless of whether you paid it back...The $4,000 had already been paid to you by draw. Earnings are earnings. If you work on salary you pay taxes on it all too. They only thing I caution to you is to look into HOW they pay the additional $16K....more taxes will be taken out of it if it is paid as a "bonus". I've never understood how they can pay it like a "bonus" when no other compensation is being paid...what is it a "bonus" to???? Anywhoo..I hope that helps a little.