CPA TO THE REAL ESTATE INDUSTRY & SMALL BUSINESS - CONTRACTORS - SOLE PROPRIETOR - AGENTS - SENIOR BUSINESS MAN Tax Information for Real Estate Agents Presented by Walker Business Systems Business Structures A. Corporations may be set up in one of three ways: A regular C-Corporation S-Corporation Limited Liability Corporation Partnerships may be set up as either a: General Partnership Limited Partnership Limited Liability Corporation Sole Proprietorship Type of Taxes Federal and State Income Taxes Self-Employment Taxes Business Taxes Personal Property Taxes Sales Tax 2009 Tax Rate Schedules Filing Status – Single If taxable income is over --- But not over The tax is: $0 $8,350 10% of the amount over $0 $8,350 $33,950 $835.00 plus 15% of the amount over $8,350 $33,950 $82,250 $4,675.00 plus 25% of the amount over $33,950 $82,250 $171,550 $16,750.00 plus 28% of the amount over $171,550 $372,950 $171,55 plus 33% of the amount over $171,550 $372,950 no limit $108,216 plus 35% of the amount over $372,950 Self-Employment Taxes Self-Employment Tax is Social Security Tax and Medicare Tax For an employee the percentage is applied to Gross Income Social Security Medicare Total Employee 6.2% 1.45% 7.65% Employer 6.2% 1.45% 7.65% Totals 15.3% For a Self-Employed Person the percentage is applied to Net Income Example: Gross Commission Income $70,000 Business Expenses $15,000 Net Income $55,000 $55,000 times 15.3% = $8,415 Business Taxes : A way local governments collect more tax revenue. Businesses are charged a percentage of their gross receipts. (Real Estate agents do not normally have to have a separate business license from the company where their license hangs.) Personal Property Taxes : Examples of personal property are: vehicles, computers, office equipment, office supplies, leased equipment or vehicles. The county governments tax the businesses based on the estimated value of the assets. Sales Tax : Sales taxes are charged on goods and some services, purchased by your business. These taxes paid for business expenses are deductible from your gross business income. OVERVIEW OF INCOME TAX RETURN Income (from all sources - example: Wages, Interest, Dividends, Business, Partnerships, Rental, Director’s fee, gambling, etc…) Less: Adjustments For Adjusted Gross Income (AGI) MSA, Self-employed Health Insurance, Retirement Plans Adjusted Gross Income Less Standard Deduction or Itemized Deductions (For 2010: Single = $5,700; MFJ = $11,400; HH = $8,400) Less Personal Exemptions Taxable Income Income Tax Less Credits Child Care, Child Tax, Education Self Employment and Other Taxes or Penalties Less Amount of Estimated Payments or Withholdings Net Due or Refund How to Calculate a Profit & Loss John Doe Realtor Profit & Loss Statement 31 December 2010 Gross Income Income from Sales Commissions xxx,x Income from Listing Commissions xxx,xxx Income from Rental Commissions xxx,xxx Income - Other xx,xxx Total Income xxx,xxx Expenses Advertising Expenses xxx,xxx Car & Truck Expenses xxx,xxx Commissions & Fees xxx,xxx Depreciation Expense xxx,xxx Insurance Expense xxx,xxx Legal & Professional Fees xxx,xxx Office Expenses xxx,xxx Supplies Expense xxx,xxx Taxes & Licenses xxx,xxx Travel & Entertainment xxx,xxx Business Meals xxx,xxx Other Expenses xxx,xxx Payroll Expenses xxx,xxx Total Expenses xxx,xxx Net Income (or Loss) xxx,xxx The actual taxes due depends upon your business structure. Tax Deductions for Real Estate Agents Accounting & Tax Prep Advertising Newspapers General Magazine Proprietary Magazines Giveaway Items Business Cards Signs Radio TV Flyers Direct Mail Billboard Telemarketing Internet Internet Design Work Web Site Maintenance Fee Home page, access, email fees 1-800 Number IVR Technology Advertising - Other Tax Deductions for Real Estate Agents Automobile – Need to Keep a Log of all Miles Total Business Miles (Standard rate 2010 = $0.50) Total Miles in Vehicle Percentage Business Miles Actual Automobile Expenses Includes Fuel Repairs – Oil Changes, tires, other repairs Insurance Vehicle registration, license Vehicle lease or rental fees Tax Deductions for Real Estate Agents Bank Charges Checks Service Charges Tax Deductions for Real Estate Agents Continuing Education Books Newsletters Tapes / CDs Seminars Magazine Subscriptions Depreciation / Amortization Dues MLS NAR Board of Realtors Other Tax Deductions for Real Estate Agents Equipment Rental Copier Fax Computer Cell Phone Interest/Finance Charges Insurance E&O Insurance – Health Property Equipment Legal Lock Boxes Business Meals (Enter 100% of expense) Tax Deductions for Real Estate Agents Office Supplies Agent 360 Paper Ink & Cartridges Other Photography Postage/Freight/Delivery Printing (Non-advertising) Professional Fees Rent – Office Repairs & Maintenance Office Janitorial & Cleaning Computers Copier Tax Deductions for Real Estate Agents Payroll Expenses – Staff (Gross Pay) – Runner Telephones – CommuniKate System – Phone Line – Long Distance – Cellular Phone – Answering Service – Computer/Internet Line Utilities – Office Miscellaneous Concessions – Selling Expenses Tax Deductions for Real Estate Agents Taxes Payroll (FICA) Payroll (FUTA) Payroll (SUTA) Federal Income Taxes st 1 Installment 4/15/10 nd 2 Installment 6/15/10 rd 3 Installment 9/15/10 th 4 Installment 1/15/10 Payment made with Extension 4/15/11 Property Taxes State Taxes Annual Report Franchise & Excise Tax Deductions for Real Estate Agents Travel & Entertainment & Lodging Airfare Bus & Subway Bridge & Highway Tolls Car Rental Computer Time Charges Laundry Lodging (do not combine with meals) Meals (do not combine with lodging) Parking Porter, Bell Captain Taxi Telephone & Fax Charges Train Other Tax Deductions for Real Estate Agents Equipment Purchases Date Description Amount Home Office Deduction In order to claim this deduction: Business must show a Profit. Taxpayers must use that part of their home: Exclusively and regularly as their principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of their business, or in connection with their trade or business where there is a separate structure not attached to the home; or On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.