Discussion:Real Estate Commissions - W-2 and 1099MISC
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Discussion Forum Index --> Tax Questions --> Real Estate Commissions - W-2 and 1099MISC
Www.cpa1.biz (talk|edits) said: | 4 December 2006 |
| Almanacers,
My client is an agent of a her own real estate company (C-Corp). She gets a W-2 and also says she can get a 1099-MISC for commissions on houses sold. I wanted to know since I am setting up her payroll if she needs to get a W-2 and 1099-MISC from the company or should I add commissions to her W-2 in some manner. If she is allowed to get a 1099-MISC as well, should I treat it like any other business and be able to deduct related expenses. Please advise. Thanks, Bj | |
| 5 December 2006 | |
| The form of or method of computing compensation has nothing to do with whether a service provider should be classified as an employee or independent contractor. That determination is made by analyzing the relationship & control factors. For example, an I.C. is in business just like the service recipient, while an employee is not in business. And, an I.C. may not get paid for their work (i.e. they can lose money) while an employee gets paid even for doing an unacceptable job. | |
| 5 December 2006 | |
| Real estate agents can sign a Sec. 3508 agreement with their employers. The Sec. 3508 agreement basically makes the agent an independent contractor with respect to any commission income paid to the agent. | |
| December 5, 2006 | |
| Yes, but in this case, she's her own employer/employee as well. And the issuance of a W2 and 1099 in the same year to the same person from the same company...IRS has insisted that that can't be done/shouldn't be done. Or doesn't that apply to realtors? More importantly, why? What possible advantage could there be in doing that, which would likely subject her to more SE tax and perhaps affect retirement contributions as well? | |
| 5 December 2006 | |
| JR: While I agree that she's probably an employee for all compensation, if it is appropriate, Sch C allows for the deduction in full of business expenses whereas an employee can only benefit from miscellaneous itemized deductions subject to the 2%-of-AGI floor. Social security tax is still limited to the $90,000 ceiling on earned income, whether W-2 or Sch C. | |
Death&Taxes (talk|edits) said: | 5 December 2006 |
| If her commissions were computed the same way as any other salesperson, and her salary was for managing the agency, I don't see the problem as long as she does not load up the Sch C with the expenses of the agency. | |
| 5 December 2006 | |
| I had a similar situation. Realtor is a RE broker dba an S corp. If I have the corp give the sole owner a reasonable w-2 only and no 1099, deduct all expenses at the S corp level would that be appropriate? Does there need to be recognition between running a brokerage (W-2), and being an agent (1099)? | |
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