3 Painless Ways for Real Estate Agents to Avoid the Hassle of the Tax Crunch

What?  Isn’t it only November, tax time doesn’t roll around until April.  Why should you worry about your taxes now?  Well, Real Estate Agents, does your company withhold taxes out of your commission checks?  Most don’t, because you aren’t an employee, you are an independent contractor.  Every year I see new agents struggle at tax time, because they didn’t think about putting any money away to pay their income tax.  The IRS tends to want their money, on time or they like to add little incentives to get you to pay it on time in the future, like penalties, extension fees, etc.  That is no way to spend the beautiful Spring month of April.

With this in mind, here are 4 tips to make April 15th, a little easier to bear, and make Uncle Sam and his boys at the IRS a bit less irritable.  You will need to know what tax percentage you paid last year, so you may need to look that up!

1. Open a savings account, make deposits to the account everytime you receive a commission check in the amount of your tax percentage.  If you are starting this now, you may want to start rolling in the percentages for your commissions from Jan 1st. through now.  At the end of the tax year, you’ll have the money to pay your taxes, and maybe even a little extra mad money to play with.  This works well, but remember this isn’t money that you can withdrawl for expenses etc.  You must be diligent, in putting the money aside.  This will work for annual, semi-annual and quarterly tax payments.
2. Set up an account with EFTPS Electronic Federal Tax Payment System.  After you set up the account you can make electronic payments from your checking account to EFTPS.  Works much the same way as the savings account, except if you have a hard time saving money - or get itchy fingers when there is money in an account, and you think that you really need spend some or all of it or expire from shear frustration, this effectively takes the money out of your reach.  You can set up the account for filing annually, semi-annually or quarterly.  There are no fees associated with filing, but at the same time you aren’t making any interest on your money.  Check out their website for more information.
3. Hire a financial planner/accounting firm.  Easy yes, but more costly by far, at least as far as initial investment.  A financial planner/tax accountant can help you set aside money for your tax payments, filing your returns.  They know what deductions you are entitled to and can help you plan for retirement, build your business, increase your portfolio, and improve your bottom line.  It may be worth your investment for their services and also for the time you free up by using them.  Ask around, there are bound to be a few Real Estate Agents that you know who could refer you to their financial planner/tax accountant.

Don’t get caught short in April.  Plan ahead and take some of the pain and hassle out of Tax Time, its easy.  Remember to organize your receipts, and make notes such as the client name you took to dinner.  If a reciept is both for business and personal, be sure to circle the business charge.  Keep all your tax documents together, and avoid the last minute rush to find everything.

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