As a real estate agent, you have great freedom and flexibility to build your own business as you want. But this role does come with some additional responsibilities, particularly when it comes to business finances and your taxes. What are some of these tax-based responsibilities that all real estate agents must follow through on? Here are three of the most vital.

1. Tracking Your Income

When you work for yourself or get income from multiple sources, you cannot rely on others to report your income. It isn't the responsibility of other agents, buyers, or even the bank to track your earnings. You will need to have a clear, manageable, and accurate way of tracking all relevant income—including barters, gifts, other intangibles, and what you take from the company. Most real estate agents should do this with a separate business bank account and accounting software. It takes a little extra effort, but the ability to accurately report what you earn is vital for any business. 

2. Paying Staff and Others Correctly 

Do you work with others in the course of your business? Many agents have some sort of staff, including administrative workers and other agents who work under the main umbrella. These individuals may be classified differently by the IRS rules—some as employees and others as independent contractors. The choice can be financially significant. Do you know how to differentiate between the two categories?

While there is some leeway, the IRS does provide the public with direction on the subject. Understanding who can be paid in what manner keeps you and your business out of trouble with the IRS, state labor boards, and other agencies. 

3. Sending Income Tax Payments

When you don't work as an employee, your income taxes are not withheld from paychecks and remitted to the tax agencies. In addition, self-employed persons are subject to other taxes such as the self-employment tax, and you may have to remit payroll taxes as well. All this means that an agent should be calculating quarterly tax payments and sending them to the right agencies throughout the year. Your accountant can help with these calculations. Failure to do this step not only leads to a big end-of-year tax bill but also could mean extra penalties from those agencies. 

Are you unsure how to fulfill your tax obligations as a new real estate agent or broker? Start by consulting with an accountant in your community—preferably one who specializes in tax preparation for your industry. The more you know, the better you can protect and grow your real estate business. 

Share