Working in Real Estate comes with a lot of challenges and rewards. As a Realtor, you have the burden and pleasure of running your own small business. Marketing, sales, customer service and every other department a normal business has to manage – they all fall on your shoulders. Budgeting for the expenses of managing your business is hard enough, as commissions fluctuate greatly from month to month. Add in dealing with your personal budget, and now and then, hard-working agents run into issues with the IRS.
Marketing, prospecting, listing and selling homes is super challenging and can eat up all your dedicated weekly work hours. Many Realtors find themselves falling behind on their bookkeeping. Weeks of not tracking expenses turn into months, months into quarters, and quarters into years. Catching up on this entire process can be an intimidating and daunting challenge. If you have found yourself in this spot, take that first step today!
What many Realtors, especially new agents, may not understand is the way your income is treated by the Internal Revenue Service (IRS). As an independent contractor, your company or broker does not withhold your taxes. All the freedom you have to manage your own business the way you want also comes with a significant tax burden that typical employees don’t face. As an independent contractor, you receive a 1099 rather than the W2 that employees receive. The differences are stark. As a W2 employee, your employer will withhold and pay taxes for all the different taxes you owe. This includes Federal taxes, State taxes, employment taxes and even local taxes in some cases. All of this information is sent to you on your W2 that you then use to prepare your taxes.
When you receive a 1099, the information given to you is simply a total of the commissions you received from your broker. It is typically net of any office fees or splits they have withheld. There is no other information because your broker didn’t withhold or pay any taxes on your behalf. A question frequently asked by a realtor upon receiving the 1099 is... "Oh no! What do I do now?"
Aside from a few daring individuals with experience in preparing taxes, it is highly recommended that you seek out an experienced CPA or licensed tax preparer who has experience working with Realtors to help you with your taxes. Ideally this is done when you first begin your career in real estate. As a benefit, you might even be able to use this person as a good referral source! The professional you choose should be able to help you build a plan around how to track/record your expenses and how to deal with quarterly and annual filings. You should enter each year knowing how much has to be paid quarterly for your estimated taxes and exactly which expenses can and cannot be used as deductions. As you grow your business, you may seek to move your business into an LLC as well and your tax professional should help you with that decision. Your bookkeeping and taxes should be just another department you are running in your business. With the right advice and help, it can run smoothly.
But what if you didn’t…
Too many agents fail to start with the end in mind. Too many sponsor little leagues, buy advertising, and work like crazy to find clients without ever recording their expenses. Many find themselves “saving” money by not paying taxes in lieu of growing their business or managing their budgets. If this is you, STOP IT! Every part of your business needs to function properly. Moreover, not managing your tax liability each year can quickly become your largest expense. The faster you act to take control of your tax issue the easier it is to fix. Unfortunately, your typical tax preparer is likely unable to help. Filing current taxes are their strong suit, doing forensic tax analysis, back tax preparation for multiple years is not. Unraveling what can become an exceedingly complicated filing process and an all too large tax bill requires very specific help from a qualified tax resolution expert. Companies that deal with tax “resolutions” focus their efforts on getting taxpayers in tough situations with the IRS, State or both, back on the right track with their taxes.
Unfortunately there are countless taxpayers who owe money to the IRS or are behind on their taxes. Given most realtors are independent contractors, thus have their taxable income provided to the IRS on a 1099, your situation is much more complicated. Not only can your tax issues grow more quickly as the IRS (and State) have more leverage to increase what you owe through fees and penalties, but they also have a greater ability to collect from you through bank levies, garnishment and liens. When independent contractors are garnished by the IRS, they do not seek a percentage of your commissions – they take your ENTIRE commission!
At Victory Tax Solutions, the tax resolution team starts by doing a forensic tax analysis of everything that has transpired to create the issue. Ascertaining the extent of the problem helps our licensed tax attorneys gain an understanding of how it can best be resolved. Often, mistakes could have been made that inflated the tax amount owed. Right off the bat, this has the potential to reduce the tax debt owed. The tax attorneys then determine a strategy to minimize the liability, achieve filing compliance and formulate a strategy to resolve the liability once and for all. Further, they work with clients to have a plan in place to maintain compliance and help avoid future tax issues. Throughout this process, Victory Tax Solutions will take the reins and handle all required paperwork as well as any conversations that need to take place with the IRS and/or State, alleviating the stress these tasks can create and freeing up the realtor’s time so you can focus on your business.
Once a client is brought into filing compliance and all avenues for mitigating the balance have been pursued during tax preparation, there are several options Victory Tax Solutions will pursue to help resolve the liability. These “resolutions” vary from client to client as all situations are unique. It may include anything from penalty abatement, to a negotiated settlement for far less than taxes owed, to a short or long term payment arrangement. In nearly all cases, Victory Tax Solutions is able to get the problem quickly behind their clients and within their budgets. "Ahhh, peace of mind at last!"
Victory Tax Solutions is built on the foundation of our Core Values, including commitment, trust and respect for our clients. Our goal is to provide every client with efficient, permanent relief from the stressful burden of tax debt. We don’t just want you to be free from debt, we want you to leave Victory Tax Solutions with the knowledge and tools you need to never find yourself in the same situation again. Our client Bill Irions said, “Hey, I just wanted you to know that when I contacted Victory Tax Solutions with my tax problem, they were very professional to tell me all the options that I had. They worked with me and we found the best solution and they not only explained it to me, they put work to their words. I was very happy in the outcome and would gladly recommend this company to you or anyone else!!”
The company is uniquely poised to help with a variety of issues from bankruptcy to back taxes, audits, liens and levies, wage garnishments, and other issues. It is possible to be free and clear of looming IRS issues. To see what programs you may qualify for CLICK HERE. If you prefer to speak directly with an experienced tax consultant, you can call Victory Tax Solutions today at 844-868-3170 to set up a free consultation.
