Around tax season many real estate agents find themselves stressed. Between gathering their receipts to organizing their write-offs, many tax tips for real estate agents start and end with hiring a professional accountant. But having a CPA on staff isn’t something that every agent can afford. With that in mind, these tax tips can help an agent who has a CPA and an agent who is filing on their own this year.
What is a 1099 Form?
Anyone who is paid by a person or entity should be filling out a 1099 tax form, and there is more than one type of 1099. There are 1099s from the bank for interest paid on our account. Some will get the form from the entity that pays their IRA or even from the state who paid your tax return out last year. Freelancers also often get 1099 forms from their clients in the first weeks of the new year.
A real estate agent who is an independent contractor will generally get a 1099 form from their brokerage. The receipt of this form means that there were no taxes withheld from our commissions. But it also means that it’s time to pay up on that income. For this reason, it is recommended that agents keep track of all possible tax deductions throughout the year. This includes mileage traveled, home office & other business expenses, and more. This is the most important tax tip for all real estate agents. Now that you know expenses can be deducted, keep track of them so you don’t have to scramble during tax season.
Build A Good Foundation
Budgeting our business and organizing our time can be the best foundation for an entrepreneur. Being on top of our time management with techniques like batching can help us monetize our time and ensure we’re making the most of every day. Time management can also ensure we have our tax paperwork organized and sent to our accountant expediently each year.
Before even setting a budget we should take a very hard look at our business.
- What is our yearly and monthly revenue?
- What expenses can we expect in these time frames?
Subtract the revenue from the expenses and this will be your profit. Once you are aware of your profit you can use that number to calculate your potential tax bill. Knowing in advance what type of cash you need to be putting aside each month for taxes can help ensure that you don’t get sideswiped by a huge bill in April. It is also important to reassess your budget monthly to ensure that the amount hasn’t changed.
Take Advantage of Real Estate Tech
Being able to track business expenses for the tax man throughout the year has been a yearly challenge for many. But now, there’s an app for that. Everlance is a slice of real estate tech that every agent can get behind. The app is built for self-employed entrepreneurs in mind. Everlance will track our business mileage and each of our individual business expenses to maximize our tax deduction come the new year. Aside from these easily applicable uses, Everlance will also help us know the taxes to pay and when. It will also compile and send all of our information to our accountant when it’s time to file.
Everlance isn’t the only real estate tech built to help during tax season. QuickBooks can also streamline our yearly business filing. As we mentioned, not every entrepreneur can bring on their own CPA and QuickBooks is built by people that understand that. You can keep all of your accounting, expenses, payroll and more in one place using this software. It will even let you connect your bank accounts to categorize transactions and ensure the most optimal deductions. Use the analytics, and always know where the business stands. Lastly, real estate agents without a CPA can e-file taxes through software like TurboTax, a company that guarantees you get your biggest possible tax return. With the help of this software and technology, you can be sure you’ll be ready for taxes come filing time.
With the help of apps, tracking purchases and expenses throughout the year becomes easy. Just be sure to know a 1099 form from the inside and out so that you can get the biggest tax return possible as a real estate agent.