Considering tax season is upon us and I know many Realtors read Real Estate Radio USA, I thought I would share my (unshared?) thoughts on the oh so entertaining subject of income taxes.
Sure, you take 30% from each and every one of your commission checks and put that amount into a savings account. Then on April 15th each year use that account to pay your taxes. Sounds easy, right?
Hello! This is America. We love us some credit cards and love to spend beyond our means. There’s a reason people escrow their property taxes and roll it into their mortgage payment. And why else are people walking away from their homes and are so willing to accept foreclosure or a short sale as their only option?
It’s because we’re inherently fiscally irresponsible. And Realtors are notorious for not being too business savvy. How many agents in your office actually have a business plan, much less a marketing and advertising budget?Â
I can’t tell you how many Realtors I know that owe the ‘gubment’ tens of thousands of dollars (if not hundreds of thousands) because they haven’t been paying their taxes as I’ve described above. I have to admit I have been guilty of not being as responsible as I should have been but I’ve certainly always been able to pay my taxes on time. Painful as it was.
This is the unfortunate reality of the real estate industry. But it doesn’t have to be this way. Ever since I began my real estate career I heard from the old timers and NARÂ that we want to keep taxes – and the government – out of our commission checks.
Um, I don’t! Have at it! I say this at the risk of getting hate mail from my fellow Realtors but I’m sorry, if I don’t have to stay up till 4:30am for 3 to 5 days straight running through my Quickbooks, calling my CPA trying find tax deductions, calculating and re-calculating every marketing expense and commission check. And once all that is over write a big fat check for $30,000, then I say, “PUH-LEEZ TELL ME WHERE TO SIGN UP!”
Take a look at FairTax.org…
But, failing that, are you saying that a death of a thousand cuts would be better? Most people have NO idea what they pay in taxes because they never see it. We do.
The next issue is deductibility. We have the capability of deducting MANY things than we wouldn’t be able to deduct if we were employees… to tack some more money onto that bill.
Finally, for those of us that have staffs, would our broker have to hire them as well. I don’t know about oyu, but I run a business. I’m not just an employee that is responsible for my own taxes.
We would be able to see what we pay in taxes if it were a certain percentage that was taken out of each paycheck. So I’m not sure what you mean by saying most people have no idea what they pay in taxes.
Yes we can deduct many things but I;m not sure it would be come out to save us any money in the long run. We still have to pay a ridiculous amount in taxes. And the problem is that many agents don’t do a good job of saving up when the time comes to pay them. That’s the root of the issue.
If you have a staff then you are probably paying them using a payroll service which takes taxes out of their paychecks. Most Realtor teams in my office use a company called ADP to pay their staff and the taxes are taken care of that way. So why would a broker have to hire anyone? I don’t see what you mean by that.
It’s simply a notion of convenience and saving us the time to calculate all of these things and will also save us the money we spend on CPA’s. And no one has ever shown me proof that it will cost us more if they tax our commissions vs. doing taxes ourselves. If you have that information I would love to see it.
Howdy! I’m very impressed by the useful information. Do I have your permission to quote a part of your post in my blog? Thanks!
Hi Collette. Sure. Quote away!