Published by admin on February 04,2009
Over the last couple days we have seen various would-be members of President Obama's cabinet rocked by income tax issues. Whether these potential cabinet members paid their taxes late or failed to disclose something material isn't really the point. The issue is that they were allegedly not paying their fair share at the time that it was due.
So... what does this have to do with you and your real estate career?
Directly - nothing. However, the reason I am writing about this is because of the paradigm shift that occurs when you move into real estate sales from a "regular" job. It's like this - when you have a regular job as an employee you get a W-2 form at the end of the year which shows how much money you made and how much was withheld for income tax purposes. If they took out too much over the course of the year you get a refund, if they didn't take out enough you pay.
In real estate sales, for tax and compensation purposes you are typically treated as an independent contractor - Your broker generally doesn't withhold money out of each commission check for income tax purposes. We get a 1099 form at the following year that shows how much money we made in raw terms - there's no withholding on this form.
Early in your career it's important to get used to putting money aside to pay your taxes on your own. The broker doesn't do this for you.
As always, consult a tax or legal adviser if you have more questions.