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SudoNym · Oct 31, 2006, 12:40 PM

I work as a marketing assistant for a real estate company, I get a base salary that the company pays, and on top of that I get a "commission bonus" from the specific agents I work for that is paid directly out of pocket by those agents. The commission bonus is based on what those agents themselves make and is attributed to the work I put into helping them close deals. The commission bonus is typically paid by the on a 1099 while my base salary is paid on a W-2.

My question is is this legal to be paid as both an independent contractor and an employee for doing the same job? I'd really rather not pay the extra taxes for the money I get on the 1099. I feel like I should be fully classified as an employee because I don't have any autonomy in my work schedule and must report back to my agents on projects. Not sure what to do.

ScottGem · Oct 31, 2006, 02:12 PM

I'm pretty confident it is legal. The company is paying you a salary. The agents are paying you the bonus.

I'm not sure why you think you are paying "extra taxes". Unless you file a Schedule C (which may be more tax advantageous to you), the 1099s would just be lumped into gross income.

If you are concerned about witholding, I suggest you talk to the company's payroll department. They can provide you estimates so that you can self withhold and file quaerterly estimates.

SudoNym · Oct 31, 2006, 04:23 PM

Originally Posted by ScottGem

I'm pretty confident it is legal. The company is paying you a salary. The agents are paying you the bonus.

I'm not sure why you think you are paying "extra taxes". Unless you file a Schedule C (which may be more tax advantageous to you), the 1099s would just be lumped into gross income.

If you are concerned about witholding, I suggest you talk to the company's payroll department. They can provide you estimates so that you can self withold and file quaerterly estimates.

What I mean is, don't I have to pay as an independent contractor (since I'm paid on a 1099) an extra 7.5% of employment tax that employers usually pay if you are an employee? From what I can tell by googling it is 15% and employees and employers usually split it in half. But if you are an independent contractor you have to pay the full 15%. Since I am not actually my own business and it is for the same job I am working as an employee, I don't have any deductible expenses to offset this additional amount.

Thanks for taking the time to reply!

AtlantaTaxExpert · Oct 31, 2006, 05:37 PM

This time, ScottGem's advice is NOT quite accurate! :(

Your Google research is accurate. You must pay BOTH sides of the Social Security and Medicare taxes as a self-employed individual on the money documented by the Form 1099-MISC.:(

You will report the money using Schedule C, which may let you deduct some employee-related expenses that you otherwise have to itemize to claim. :)

The SE tax rate is 15.3% on the NET income (your 1099 figure MINUS whatever deductions you come up with).

You probably should get professional help filing your tax return this year. A good tax pro will probably be able to find enough deductions to reduce your taxes well in excess of whatever fee he charges, and you know the return is done correctly!

Fr_Chuck · Oct 31, 2006, 05:54 PM

I will asl add that you may want to check with your state real estate licensing department.

According to the class I am talking, Book, Real Estate Fundamentals, by Wade Gaddy Jr, ( this is the class on overall laws, not state specific)
No real estate agent can pay commissions out of their commission.

If you are doing work for them, it would have to be the broker to pay you, not the agent.

I do really believe this is illegal in the real estate business. Legal in other industries, but real estate has some very strange and specific laws.

You can be set up by the broker to work on a salary plus percent of profit or based on some fee ( this should be a set monthly fee) that the agents pay to the broker for use of office help or other fee the broker charges for use of the office.

I don't mean to upset you, but ( and now remember I am taking the class, not licensed. But I have just reread the chapter and this sounds illegal according to real estate law.

ScottGem · Oct 31, 2006, 07:27 PM

Whoops mea culpa. I've been running my side biz at a loss the last few years so I haven't had to pay that.

I would still take a look at what deductions you might be able to take to mitigate the extra tax.

Chuck also may have a point. Here as well. You need to do some more research.

AtlantaTaxExpert · Oct 31, 2006, 07:52 PM

Agreed. A call to the real estate commission is in order.