The first thing is that industry practice has to be based on an IRS directive, not just what a group of people decided how to treat this. Second, the way I outlined is the more reasonable way to do it. You can direct your clients to stop issuing you the commission and tell them that you are taking it out in advance.
Either way, adopt the method that you choose and just make sure all amounts are accounted for properly. It has to be one way or the other and not a combination of the two.
