Real Estate Agents – Statutory Nonemployees

Michael Lodge

by Michael Lodge

Real Estate agents are out there everyday, under contract with a real estate broker or firm as independent business people, their contracts always say – they are are not employees but rather independent contractors – responsible for their own business and paying the taxes on the commissions earned.  So agents – you are not an employee of the firm or broker, you are running your own business and need to always think of yourself as a business, not an employee.  So form your company, record the revenues and take advantage of the legal expenses to go against your income.

Most real estate professionals operate their business as a sole proprietorship. This means that you are not someone’s employee, you haven’t formed a partnership with anyone, and you have not incorporated your business.

Statutory Nonemployees

Licensed real estate agents are statutory nonemployees and are treated as self-employed for all Federal tax purposes, including income and employment taxes, if:

  • Substantially all payments for their services as real estate agents are directly related to sales or other output, rather than to the number of hours worked
  • Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes

This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output.

If you have a tax issue call our office at:  877.778.1770