Key Highlights

  • Real estate agents have more hoops to jump through as independent contractors than employees who file W-2 forms
  • Justin Holliday, Oklahoma City-based attorney and tax wizard, talked with InmanNews about filing accurate tax returns
  • ALSO know that the IRS plans to postpone this year’s filing deadline due to the coronavirus.  No date had been specified as of posting this piece.
  • Know this post is NOT tax advice…see your own accountant, CPA, tax attorney and/or tax expert to ensure you file accurate tax forms

What tax forms do real estate agents file?

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  • Real estate agents are usually independent contractors and file Schedule C on 1040 personal returns.

What is a Schedule C?

  • The Schedule C form attaches to the 1040 form
  • Schedule C documents the profits (income)/loss (expenses) from the business
  • If the business name is different from one’s personal name, list the business name, business address, business code, etc.

What expenses require recordkeeping?

  • The short answer – ALL expenses
  • Travel expenses – auto/mileage expenses when showing/viewing properties, when meeting potential buyers/sellers, when flying/attending business meetings/conferences
  • Marketing expenses – business cards, advertising, photography, content creation, website development, equipment (phones, computers, software packages, website development, etc.
  • Holliday recommends separate business accounts and/or business credit cards to make recordkeeping more organized, efficient and less time consuming.

Is there a difference between personal and business deductions?

  • Personal deductions require Schedule A form to report property taxes, state taxes withheld, paid mortgage interest, medical expenses, charitable donations – permissible to take “standard deduction” on Schedule A form
  • Itemized business expenses require Schedule C form

How to calculate and save for quarterly estimated tax payments?

  • Because agents often have roller- coaster months in terms of income, Holliday advises agents to “…plan on holding back at least 15-20% on every check.”
  • Holliday also advises agents to make quarterly estimated tax payments to ease having to pay one giant end-of-year single payment
  • Quarterly tax estimates are based upon estimates – what he/she thinks she/he might earn at year’s end
  • One pays that estimate in quarterly increments prior to filing a return

Any tax code changes from 2018 to 2019?

  • No major changes – the big one was reflected in the Tax Cuts and Jobs Act of 2018

What to do now if an agent is behind in filing taxes?

  • Just because someone/anyone including a real estate agent hates doing their taxes, NO ONE is exempt from filing returns.  EVERYONE is required by law to file tax returns and payments every year.
  • Gather together and organize every piece/slip of paper that relates to tax filing and payment and take it all to a professional to file current and unpaid back tax returns.

If not prepared to file returns/payments prior to deadline, file an extension along with estimated tax payment.

  • Even if estimated tax payment is not accurate, Holliday suggests that agents file for an extension now and then subsequently file a correct/accurate return later.
  • Inaccurate returns (due to poor record keeping and/or hurrying to finish the return) may translate into paying more than necessary or getting smaller refunds than one might be entitled to receive back from the IRS
  • Inaccurate returns can also translate into having less leverage with the IRS if the IRS audits one’s returns.

Thanks to Inman’s Marian McPherson and Justin Holliday for source data.

Also read: Podcast: Warning: Coronavirus Fears Leading To Global Recession, Zillow Now Gathering Brokerage Licenses “…But It’s Not What You Think”, Podcast: Warning: CoronaVirus Fears Causing Housing Crash? | Your 9 Step Action Plan