It's TAX time again! What does that mean for Realtors®? The one thing that changed this year for me was that my tax man finally made me put my expenses in categories. In the past I listed each one line by line (date by date) and I guess he got sick of categorizing for me. LOL.
Another reason to bring this up again... is so the consumer realizes it's not just a paycheck and running to the bank. I put heart and soul into helping my clients sell their home or buy a home and though it is a means of making a living there are the rewards in the end with a job well done. If it were just a paycheck I'd be working a 9-5 job and not have to worry about.......
What is an Independent Contractor?
In a nutshell it means I am self employed. Even though I hang my license as a Realtor-Associate® with Century 21 Liberty Homes, Mililani, Hawaii.....I am my own business and I have responsibilities (paperwork and that dreaded itemizing expenses/deductions and PAYING my own TAXES) that automatically come with being an independent contractor.
- I pay my own quarterly estimated self employment 1) Hawaii State Tax, 2) Federal Tax AND 3) GET (General Excise State Tax).
- I pay my own expenses: postcards, real estate shows burned to cd, flyers, postage, gasoline, supplies, marketing, extra classes, licensing fees, MLS dues, NAR dues, HAR (Hawaii Association of Realtors) dues, HBR (Honolulu Board of Realtors) dues, E & O Insurance, Sentrilock lock System fees and dues, cameras, videos, computer equipment, pc upgrades, software (and that list goes on) client closing gifts and anything and everything that goes with my business down to my whole home office and the added expenses to run my own home office.
I do not get paid by the hour nor am I an 'employee'.
I do not get paid until a transaction closes (records) no matter if I'm representing a buyer or a seller. (In other words everything comes out my pocket and not always does a sale close) By time each brokerage gets their part of the commission, the buyer/seller agents then get their %. (Some think that we get that WHOLE commission) and then I am able to pay bills with that commission check.
I also set aside 30% to pay for my quarterly estimated self employment taxes (Federal/State) and 4.5% for quarterly General Excise State Taxes. I seriously wonder why I am paying more GET now for the Honolulu transit (rail) system when I KNOW I won't be riding around with clients on that rail system as long as I am a Real Estate Agent. lol.
Now. For expenses and deductions and keeping track all year for end of the year taxes?
- I have a yearly excel file with one sheet for commission (income),
- Another sheet for deductions (expenses) including payments for GET tax which is a deduction (scanned receipts to go with) Make sure to ask your professional tax person exactly what you are able to deduct.
- Another sheet listing all my clients and the mileage to and from wherever and the total milege for each as well as total for the year.
- And the last sheet has my auto expenses (gas, insurance, oil changes, maintenance etc.). My two year old car is paid off but there are still expenses and depreciation for my tax man to tally up.
- I have finally got Quicken installed so I can make life easier for me for this next year :)
- When the 1099's and the W-2's come in I am ready to send it off to ....MY TAX MAN!
This info just may help a new agent in the Real Estate Industry realize that it's much more than just closing a transaction.
It's income AND debit.
It's the following up and keeping up with the 'behind the scenes' work and responsibilities that come with running your own business.
It's about running a tight ship along with the professional service, caring and expertise we give our clients.
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Note: We received all our W-2's and my 1099's and as of two days ago, our tax man has filed our taxes. I'm glad that's over. Now...to start on this year. :) Yes, I'm on it :)
Note#2: I am also an employee for C21. I help with admin/property management, office support, websites, mls, opening/closing files etc.
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Celeste "Sally" Cheeseman is a Realtor-Associate with Century 21 Liberty Homes in Mililani, Hawaii. With a sharp understanding that a listening ear is the key to a client's needs she serves the island of Oahu (Honolulu County) and all Hawaii Military Relocating to Hawaii, Hawaii Retirees, Hawaii Job Transfers and Hawaii Residents. Website: www.hawaiihomesmarket.com
Celeste "Sally" Cheeseman is a Realtor-Associate® and Certified Residential Specialist (CRS) with Century 21 Liberty Homes in Mililani, Hawaii. With a sharp understanding that a listening ear is the key to a client's needs she serves the island of Oahu (Honolulu County) and all Hawaii Military Relocations, Hawaii Retirees, Hawaii Job Transfers and Hawaii Residents, Home Buyers and Sellers.
© 2007-2012 Celeste "Sally" Cheeseman's Hawaii Real Estate and Relocation Blog.
All rights reserved.
Quicken makes things soooo much easier! You will love it. You just have to keep things up to date and at the end of year it's a breeze!
I used to work for a company and used Quick Books. Supposedly, Quicken is easier and more simpler to use for my business...right?
I agree 100% with your post. There are many hidden "jobs" to are profession that the public does not see or care to hear about. I am like you, where this is my profession, and I take it seriously 100% of the time.
Ugggh! I don't even want to think about taxes! However, your post is very true.
Great summary Sally.
I fear that there will be some agents who fail to pay quarterly for 2008 and will come up short at tax time.
Yes I understand. My CPA doesn't like having to go over my stuff and get into the correct AIC numbers. I am getting a little better each year but it is so hard. Especially when we are in such a busy market. Hope you will have a successful year and good luck on your taxes!
AMEN Sally ! Just this morning I thought about starting to get all my financials ready for the CPA. My CPA loves me....all my business stuff is on Quickbooks.
Sally, there is so much to keep track of. I've been breaking everything into categories for a long time. I keep a large accordion file of all my receipts in categories, so if I don't have time to post them into an excel spreadsheet right away or quicken, I can easily do so when I have a little down time.
So much to do when you are self employed as we all are. Like my dad used to say ---- you get to be the chief cook and bottle washer too. LOL!
Hi Sally. I worked on this last weekend, I have an excel spreadsheet I use also. Just helps to reconcile each month so it's not all at one time! KM
Sally-So much involved for us independent contractors! We really need to stay on top of things to make it easier at tax time. Thanks for your insight! Best to you in 2009!
Excellent article Sally. Taxes are one thing I am vigilant on. Your can save yourself quite a bit of money if you know all the relevant tax laws.
It is so much easier when you keep up with it on at least a basis.
Very detailed and interesting.
Aloha,
Keahi
Sally - I just signed onto AR after spending hours putting my tax stuff together. You sound a lot more organized than me. I have all my stuff in a box and have to go through each expense individually and before itemizing once a year. By the time I get to my accountant she appreciates that I am so organized, but she has no clue thee hours I spend re-constructing. Every year at this time I tell myself I'll get better about this and every year I'm doing it again!
You are smart keeping all those records. Me, I am the old show box type. I have the records - only takes a while to get them together....next month, maybe!
I am new to this business so I am still getting used to everything that I need to keep in order to file my taxes!
David: No kidding...all hidden jobs but lots of work!
Brian: Hurry..hurry get er done!
Lenn: I know some :(
Valerie: They're ALL done!
Christine: Yeah...mine loves me this year...next year he'll be real happy!
Sally, Way to be ON it! I am jealous that you are already finished filing!
Vickie: That sounds good...:0
Kristin: I did it by line by line...I can see how my tax guy was irritated.
Mary: Thanks much..sure tried harder this year!
Bill: I did too!
Bill - Ft. Myers- I sure do during the year...easier at the end!
Keahi: Thanks. Hope so.
Carol: I just get er done during the year and at the end get er in quick. Now....I can focus back on my clients :)
Gary: I get all my stuff done so tax man gives me good rates :)
Allen: At least you're taking it all in!
Kristi: Good...then you'll get on it too! :) :)
Great information! Just a reminder, many agents are incorporated...so they also pay self-employment taxes and are responsible for paying themselves salaries, filing 941's and other documentation...and a corporate tax return on top of the personal return! But the upside is that you often save tax dollars, so anyone considering incorporating their business should talk it over with their tax professional and attorney. :)
Sis - Sounds like you are waaaaayyyyyyyyy more organized that I. Where was this post when I started in the business?
... I'm so glad this wasn't a Members Only post ! ...maybe the public will realize that we are not just getting handed bags of money for assisting them without having our own expenses to handle too !!!
Very timely post Sally ! Thanks for the great advice :o)
Cheers !
Sheldon
Great post Sally. Wish I had already seen my tax guy. But even thoug I put it all in categories all during the year, I still haven't gotten it all together yet. Have a super year!
This is so well put, we are paid last and still have to pay all of those debts we incur! I hate tax time!
Kelly: Lots to digest for incorporation as well..thanks for adding in. :)
Jason: It took me time in the begining to get it all together...believe me. And I'm still to the point I feel real comfy.
Sheldon: No kidding...small biz owners such as us...sure have a lot to think about .... besides taking care of our clients :)
Unknown: Wishing you luck in taking care of your taxes soon!
Sally a lot of expenses in this business that most people do not realize.
Start to put my tax information together yesterday and hope to meet with my accountant tomorrow. I do not like this time of the year :)
Caren: Actually, it's not all that bad. I have conditoned myself ot pay everything during the year and owe nothing at the end :)
Jason: Long term is that my clients may benefit later on, the tourist industry (now that they are rerouting) will benefit as tourist like to get on buses...which I am all for now. Before I voted against it because they were going through Salt Lake...which would benefit no one. Now it seems it could aleviate some of the traffic. For those working people who need to use their vehicles for their businesses (both my husband and I) we need to take care of our existing roads and FIX THEM! As for Hawaii, our zip lane is a flop (billions there) our contraflows are a flop...none of this has helped our traffic situation. Who knows how much it'll benefit...
In the meantime, this was not only about the rail system ...any input on our business and keeping meticulous detail during the year for tax time?
George: Just think ...woohoo can do it...so can I hahahah!
Having already been self employed for years this is not new to me but I still hear the talk about how much agents get paid - in no way realizing that we do not get the whole commission and that there are very real expenses to running a business. WE certainly need to lay this out better for them.
I have mine ready waiting for the 1099. Categories do help in assessing what works and what does not when it comes to expenses.
Very timely post, Sally - Always a challenge, even for those of us who have done it for a while!
Goodness, Sally, this just helped ME. I never add some of the expenses like mileage or car wear and tear--and my accountant never mentioned it. Thank you--if you want to learn something REALLY helpful, come to your posts!
Wow Woohoo you are way ahead ofme. I donlr even start thinking about taxes until around August!!! Fortunately since I'm incorporated I don't have to file until September. I don't like taxes.
Well, I must admit I have a bit of an advantage in all of this accounting since my husband is a CPA:) But, I have yet to keep records on quickbooks so dread this time of year when I have to tally up all of my expenses...which are many! Thanks for making me face the music and get going!
Gosh! You are an inspiration to me. I really need to start doing this...but I say that every year! I'll try harder this year!
I get my mindset off the money so I want lose my focus on what I do....service people. So I merely focus on number of homes. I never ever care about a commission check......ever. The reason is that I know my average price point so why would it matter if I made $2000 more on this transaction versus the last. In time it balances out. Focus on the homes.........
Sally,
I think my accountant got "sick" of my dis-organization! Several years ago he started sending me large,columned ledger sheets. Now I just copy the column headings from the previous year, add/subtract any that now apply or no longer apply, and copy my receipts in the correct column! Then I add the columns and drop them off! I used Quicken one year and when I hit "print" the whole thing crashed!!! I think it was MY computer rather than the program, but it left me doing all the work again! So I sharpen my pencils and do it the ol' fashion way.... something about old dogs.....
Kathy Opatka Re/max OCEAN CITY,MARYLAND
Great post. I am looking at the box of receipts. AHHH. Maybe this year I will be more organized. THanks for the tips EVERYONE.
Kathleen: I was surprised that many new agents do not realize they have to pay taxes...especially our GET tax.
Scott: All I know is my tax man is happy :)
Hey Margaret! No kidding...every year there's a new twist to it :)
Carole: I have a good tax man...he tells me everything! You can also tag on milege to and from the office store etc. It's all business related!
Jason: What I don't get is that we just have so much land here. To get to and from the station (start) is a drive. Parking?
BB: Too funny...I almost had a heart attack thinking what would happen to me if I didn't think about taxes...lol.
Diane: My ex is but I don't think he'd do mine lol.
Richelle: Great...no time like the present. :)
Tim: It's a part of the business and though it's not priority I do think of paying my taxes and keeping everything in order...it's all part of the business.
I definitely agree with you! Thank you for sharing that with all of us! I hope you have a great day!
Kathy: Mine did too but I didn't heed until he practically TOLD me to do it this year.
Gina: I am so organized I do my receipts monthly..print, scan and file :) I know...I'm bragging :)
James: You're welcome!
Taxes for REALTORS are a pain in the butt! Only I wish my accountant had let me just hand him everything written line-by-line >=I I always have to categorize >.<
Lisa: Oh...it's the pain we deal with for a business that's gratifying and rewarding (the inside self stuff :)
Sally - Great post. Thanks for all the tips to getting organized for 2009.
Sally, great recap of life as an independent contractor and keeping track and paying your expenses.
Sharon: Motivated!
Gary: Oh...it's more than what some realize.
Owe man taxes! I must learn to love them. NO I must learn to do them. Thanks for the post.
Craig: Ahhh another who got motivated :)
While I cringed when I heard the word "tax", one can never be kept too far from logging expenses. We do things very similar. I have separate worksheets within an Excel file, one for each category, and then I roll them all up into a summary/main tab. I also cross-reference things in another spreadsheet and track expenses by month, so I know when to budget what. It's both depressing and a relief to know how much money is spent when.
Now...if only the income portion was as time consuming to track as the expenses, I'd be all set! :-)
Oh, I always have such good intentions -- and this year I entered everything faithfully until about mid April. Now I'm 9 months behind in data sorting! I envy your organization! This year perhaps --
I also use an excell spread sheet for all my tax expenses. I try to do it daily, but somestimes I go a week, before entering data.
Great Post!
Best Wishes for a Wonderful New Year!
Joyce Logan, Realtor, Real Living HER, Columbus Ohio
Yep-- gotta pay ones' taxes or else bad things can happen . All the best.
Sally, that was great. There are so many people out there that seem to think that Realtors get a paycheck from the Broker. And better yet, the Broker pays for everything.
So many misconceptions about Realtors.
The only thing I would add is the high cost of health insurance that we pay to your list of expenses.
I hope that the public reads this and gets a better understanding of what's behind that commission.
Sally- great job staying organized!!!
Sally - That's a good list of all the things e have to keep up with for taxes. We have one issue with our great accountant. He makes us use Quickbooks instead of Quicken. I love Quicken but Quickbooks is another thing to master! Thanks for the info!
Great post Sally. I am not in that organized of a state. It is good to get the word out that we don't KEEP all the money from the commission. It is definately not all about the $ for me.
Great post! Something that everyone should be aware of. Thank you for sharing!
Hi Sally,
It doesn't surprise me that you are on top of this, I'm almost ready...Good post for those that don't realize all the expense Realtors have. :)
Chris; Takes some work for a very rewarding job :)
Alexsandra: It take consistency to get organized ...believe me. I don't like it....but it has to be done. :0
Rebecca: I think I go a week and then enter...sometimes two :)
Hi Carolin! No kidding...do what we have to and everything is just dandy :)
Gina: No kidding...health insurance can run into some big bucks! And...there sure are MANY assumptions about pay. I mean, I don't go around asking everyone how much they make and act like they're all rich. :)
Thanks JB
Bruce/Mary: I used Quickbooks when I worked as an employee for a big co. It's just not needed for small biz like me :)
Paddy: Nor for a lot of us. A lot of the assumptions come from 'others' not in the industry that pass those rumors around :)
Thanks Thea
Suzanne: Big expenses when I look at my tally.
Sally,
It sounds like you're well on top of the business side of this business....good for you for being so organized!!!
Jo
Hey Jo! Second nature or something like that. I learned from my husband :)
Sally - what a nice tidy overview of how to track your income and expenses and prepare for tax time. Amazing how much record keeping there is.
Jeff
Hey Jeff....I think I have a routine now...kinda :) AT least I'm done and can focus on other stuff now :)
Sally I sure wish I could say I was done. But you are a great inspiration!
This is where my accounting background really helps me out! Being organized makes it so much easier.
Nanette: Motivate motivate!
Ann: Good for you!
Sally,
Thanks for taking the time to sum-up being self-employed. I think the general public thinks we are just receiving a huge check for driving around showing homes and there's no work and/or expense involved!
Great Blog!
Kathy Opatka
Kathy: No kidding...I've had kids of my clients tell me I'm rich.