As a real estate agent, you work hard for your money and are always on the clock. You are showing houses night and day and have to be ready to answer the phone every time a client calls. For better or for worse, you are considered self-employed by the government. It can be easy to think that you will be responsible with your income and be able to pay what you owe at the end of the year. However, the government feels differently and here’s why.
You are responsible for your taxes. Yes, all of your taxes.
The government requires those who are self employed to pay their taxes quarterly on your estimated earnings for the year. These quarterly tax payments will cover your tax obligations to pay the income tax and self-employment tax that you will owe at the end of the year.
[clickToTweet tweet=”Real estate agents, avoid tax penalties and interest charges with these tax tips from A1 Mortgage Kansas City” quote=”The government requires quarterly payments to avoid people owing a lump sum at the end of the year that they might not have. Think of it as a savings account that keeps you out of trouble with the IRS come tax season. These payments are due every three months; failure to pay will result in penalties and interest charges.”]
The Government is keeping tabs on you.
It’s easy to fall into the trap of thinking, “hey, I’m self employed. I’ll pay when I want to.” Well unfortunately the government keeps tabs on you and has trust issues. Having all that money tax-free up front can be easy to lose track of or be spent accidentally. They want to avoid chasing you down and begging for payments.
To avoid this pitfall, make a tax profile and see how much you will end up owing at the end of each quarter. There is an easy tax reports feature that lets you create a report that can be sent to your CPA or kept for your records. This feature even has a receipt capture and mileage tracker that will help you with business expenses that can be used for tax write offs at the end of the year. If you are new to this, it would be in your best interest to consult a tax professional until you get the hang of this or if you simply don’t want to do it.
As a realtor, you can have a wonderful income. Just be sure to pay when taxes are due and avoid costly penalties and interest charges. Those can really add up. While this can seem daunting at first, with some due diligence and budgeted saving, you will have all the tax fees ready to go and not feel stressed come payment time.
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