How Tax Problems Can Ruin a Realtor’s Business

Working in Real Estate comes with a lot of challenges and rewards.  As a Realtor, you have the burden and pleasure of running your own small business.  Marketing, sales, customer service and every other department a normal business has to manage – they all fall on your shoulders.  Budgeting for the expenses of managing your business is hard enough, as commissions fluctuate greatly from month to month.  Add in dealing with your personal budget, and now and then, hard-working agents run into issues with the IRS. 

Marketing, prospecting, listing and selling homes is super challenging and can eat up all your dedicated weekly work hours.  Many Realtors find themselves falling behind on their bookkeeping.  Weeks of not tracking expenses turn into months, months into quarters, and quarters into years.  Catching up on this entire process can be an intimidating and daunting challenge.  If you have found yourself in this spot, take that first step today! 

What many Realtors, especially new agents, may not understand is the way your income is treated by the Internal Revenue Service (IRS).  As an independent contractor, your company or broker does not withhold your taxes.  All the freedom you have to manage your own business the way you want also comes with a significant tax burden that typical employees don’t face.  As an independent contractor, you receive a 1099 rather than the W2 that employees receive.  The differences are stark.  As a W2 employee, your employer will withhold and pay taxes for all the different taxes you owe.  This includes Federal taxes, State taxes, employment taxes and even local taxes in some cases.  All of this information is sent to you on your W2 that you then use to prepare your taxes. 

When you receive a 1099, the information given to you is simply a total of the commissions you received from your broker.  It is typically net of any office fees or splits they have withheld.  There is no other information because your broker didn’t withhold or pay any taxes on your behalf.  A question frequently asked by a realtor upon receiving the 1099 is... "Oh no! What do I do now?"

Aside from a few daring individuals with experience in preparing taxes, it is highly recommended that you seek out an experienced CPA or licensed tax preparer who has experience working with Realtors to help you with your taxes.  Ideally this is done when you first begin your career in real estate.  As a benefit, you might even be able to use this person as a good referral source!  The professional you choose should be able to help you build a plan around how to track/record your expenses and how to deal with quarterly and annual filings.  You should enter each year knowing how much has to be paid quarterly for your estimated taxes and exactly which expenses can and cannot be used as deductions.  As you grow your business, you may seek to move your business into an LLC as well and your tax professional should help you with that decision.  Your bookkeeping and taxes should be just another department you are running in your business.  With the right advice and help, it can run smoothly. 

But what if you didn’t…

Too many agents fail to start with the end in mind.  Too many sponsor little leagues, buy advertising, and work like crazy to find clients without ever recording their expenses.  Many find themselves “saving” money by not paying taxes in lieu of growing their business or managing their budgets.  If this is you, STOP IT!  Every part of your business needs to function properly.  Moreover, not managing your tax liability each year can quickly become your largest expense.  The faster you act to take control of your tax issue the easier it is to fix.  Unfortunately, your typical tax preparer is likely unable to help.  Filing current taxes are their strong suit, doing forensic tax analysis, back tax preparation for multiple years is not.  Unraveling what can become an exceedingly complicated filing process and an all too large tax bill requires very specific help from a qualified tax resolution expert.  Companies that deal with tax “resolutions” focus their efforts on getting taxpayers in tough situations with the IRS, State or both, back on the right track with their taxes. 

Unfortunately there are countless taxpayers who owe money to the IRS or are behind on their taxes.  Given most realtors are independent contractors, thus have their taxable income provided to the IRS  on a 1099, your situation is much more complicated.  Not only can your tax issues grow more quickly as the IRS (and State) have more leverage to increase what you owe through fees and penalties, but they also have a greater ability to collect from you through bank levies, garnishment and liens.  When independent contractors are garnished by the IRS, they do not seek a percentage of your commissions – they take your ENTIRE commission! 

At Victory Tax Solutions, the tax resolution team starts by doing a forensic tax analysis of everything that has transpired to create the issue.  Ascertaining the extent of the problem helps our licensed tax attorneys gain an understanding of how it can best be resolved.  Often, mistakes could have been made that inflated the tax amount owed. Right off the bat, this has the potential to reduce the tax debt owed.  The tax attorneys then determine a strategy to minimize the liability, achieve filing compliance and formulate a strategy to resolve the liability once and for all.  Further, they work with clients to have a plan in place to maintain compliance and help avoid future tax issues.  Throughout this process, Victory Tax Solutions will take the reins and handle all required paperwork as well as any conversations that need to take place with the IRS and/or State, alleviating the stress these tasks can create and freeing up the realtor’s time so you can focus on your business. 

Once a client is brought into filing compliance and all avenues for mitigating the balance have been pursued during tax preparation, there are several options Victory Tax Solutions will pursue to help resolve the liability.  These “resolutions” vary from client to client as all situations are unique.  It may include anything from penalty abatement, to a negotiated settlement for far less than taxes owed, to a short or long term payment arrangement.  In nearly all cases, Victory Tax Solutions is able to get the problem quickly behind their clients and within their budgets.  "Ahhh, peace of mind at last!"

Victory Tax Solutions is built on the foundation of our Core Values, including commitment, trust and respect for our clients. Our goal is to provide every client with efficient, permanent relief from the stressful burden of tax debt. We don’t just want you to be free from debt, we want you to leave Victory Tax Solutions with the knowledge and tools you need to never find yourself in the same situation again. Our client Bill Irions said, “Hey, I just wanted you to know that when I contacted Victory Tax Solutions with my tax problem, they were very professional to tell me all the options that I had. They worked with me and we found the best solution and they not only explained it to me, they put work to their words. I was very happy in the outcome and would gladly recommend this company to you or anyone else!!”

The company is uniquely poised to help with a variety of issues from bankruptcy to back taxes, audits, liens and levies, wage garnishments, and other issues.  It is possible to be free and clear of looming IRS issues. To see what programs you may qualify for CLICK HERE.  If you prefer to speak directly with an experienced tax consultant, you can call Victory Tax Solutions today at 844-868-3170 to set up a free consultation. 

How back taxes can be eliminated for contractors without penalizing their cash flow.

There are a couple of core truths about the Internal Revenue Service’s (IRS) reach when they want the taxes they believe are due to them.  First, they can and do place liens against taxpayers and their properties.  Second, they can reach right into bank accounts to take money owed them.  And third, they can garnish wages, often taking 30% – 80% off the top of a paycheck. Even worse, they have the authority to take 100% of a paycheck – plus, go after money from a contractor’s customers.  They can do one or all of these actions combined, and they are not worried about whether or not this leaves money for rent, food, and lights. And if they seize a car or house through a blanket levy, it is the taxpayer’s problem to get to work or find a place to live.  It is no wonder that receiving calls and letters from the IRS to collect taxes is intimidating to recipients.  The penalties are severe.

 Make no mistake about it; the IRS is the largest collection agency in the world. 

Contractors have overhead in the midst of getting jobs done, and it can be difficult to keep money in the bank.  It is important to pay employees before taxes; after all, they have families to support and bills to pay.  So the objective becomes getting more business, and working hard to try to keep the IRS at bay while preventing Revenue Officers from showing up in person at a job site.  As one can imagine, it would be embarrassing in front of the crew and customers.  Back tax problems are not something business owners want anyone to know about; it would hurt business, making it harder to get the debt paid, and impact one’s ability to provide for the family and be a good role model for the kids. 

As much as business owners want the IRS problems to just melt away, it won’t happen.  The debt will just get steeper through interest and penalties. 

Qualified assistance is key to reaching tax resolution with the IRS.  And anyone who receives a Final Notice of Intent to Levy and Notice of Right to a Hearing from the IRS, needs to get expert assistance immediately. Failing to get representation quickly can lead to levies, liens, and invasive collection actions. 

Understand that this is the last chance to bring closure in a proactive manner. With that being said, it is best to reach out to a tax resolution specialist after any letter is received.

One surprising fact that most people don’t know is that it is possible to negotiate with the IRS.  The best way to do this is with a tax attorney in one’s corner who is entrenched in tax law and wise to Revenue Officer tactics and strategies.  At Victory Tax Solutions, tax attorneys are a critical part of a very customer-focused team of professionals. They work with clients across the country and military personnel around the world.   One of the first things the team does is determine if there were errors made in how much a business owner owes, and they take a good look at solutions to one’s situation.

 Experienced tax professionals know taxpayer rights and strive to protect them and deliver results that take the IRS pressure off and give clients their lives back.  At Victory Tax Solutions, the client services team is led by tax attorneys and tax professionals with over 40 years of experience.

 A glance around the website shows a number of positive reviews. One story is particularly inspiring.  Giving the company a five-star rating without compromise, one client said:

“I recommend this company to anyone, and I will be returning to have my taxes done by this company every year from now on. Victory Tax Solutions provided me with amazing (EMPHASIS AMAZING) service. When I called Victory, half of my paychecks were being garnished by the State of California, and the IRS was coming for me soon after for 3 years of back taxes,” explains Virgilio. “Victory truly found me a solution with payment plans that were more than accommodating to me, especially since I had a new baby on the way and money was super tight. Victory Tax Solutions had the garnishments on my paychecks released within a week or two of submitting my first payment beginning my case. Also, they worked mostly with my fiancée, which was much appreciated since my work schedule is so hectic. Victory was always sure to update her regularly with the status of things, and would even call every few weeks just to ask how we were doing. In the end, the deal that Victory worked out for me with the State of California and the IRS totally fit my budget and I now have a renewed sense of comfort in knowing that I will have all of my back taxes repaid in a few years and my family won’t suffer from it; and I never had to call the collectors and sit on hold, not once. Thank you, Steve, Starla and Heather at Victory Tax Solutions for all of your help!!”

Daily, Victory Tax Solutions is securing successful results for clients like Virgilio.  If you have tax issues weighing down your life and livelihood, CLICK HERE to see what solutions are available for you!

Filing Tax Deadline Extensions

FILING TAX DEADLINE EXTENSIONS

For many of us (especially those stuck in the frozen grip of winter), April 15 seems like a long time away.  However, a quick glance at the calendar reveals that, in reality, the income tax filing deadline is only two months away.  For many taxpayers, this is not much time to gather, organize, and submit your tax information, especially for self-employed individuals or taxpayers dealing with a unique tax issue this year.  As the tax deadline approaches, many taxpayers will find themselves unprepared to file their tax returns on the filing deadline date.

The Internal Revenue Service recognizes that there are situations where the taxpayer, in spite of their diligent attempts to comply with the April 15 tax filing deadline.  Therefore, they allow the taxpayer an opportunity to extend the tax filing deadline by filing Form 4868, Application of Automatic Extension of Time to File U.S. Individual Income Tax Return.  By filing this form on or before the April 15 tax filing deadline, the taxpayer is automatically granted a six-month extension of time to file the income tax return without incurring a late filing penalty.  In certain situations, such as matters involving taxpayers who are living overseas, the extension may be even longer.

When filing a tax deadline extension, the taxpayer must be aware that, while the time for filing the return has been extended, this does not mean that any payment that is owed for tax is also extended to the October 15 date.  When filing Form 4868, the taxpayer must estimate the amount of tax that will be owed when the return is finished and pay that amount on or before April 15 to avoid a late pay penalty.  If the taxpayer is unable to full pay the amount of tax owed, he or she should pay as much of the tax as possible, as the late pay penalty is a percentage of any unpaid tax.

At Victory Tax Solutions, we can prepare your tax returns and get them timely filed for you.  Our experienced staff is ready to assist you with any return that will benefit your situation, and can even help in many cases where you are unable to locate your tax documents for the tax year(s) at issue.  If you are unable to pay the full amount of tax, we can also help get you into a resolution that is going to work for you.  Call one of our account executives at (877) 772-0123 today!

Debt Cancellation

Debt Cancellation

What is debt cancellation? If you borrow money from a lender and the lender later forgives the debt, you may have to include the cancelled amount in income for tax purposes.  When you borrow money from a lender you are not required to include the amount you borrowed in income because you are obligated to repay the loan. If the lender later forgives your obligation to repay the debt you may have to include the loan proceeds in income because you are not required to repay the lender.

Cancellation of Debt income is not always taxable, there are a few exceptions.

  1. Bankruptcy: If you have debts that are discharged through bankruptcy these are not considered taxable income.

  2. Principal Residence Indebtedness: Under the Mortgage Debt Relief Act of 2007 you may be able to exclude cancelled debt from mortgage restructuring or foreclosure on your principal residence. This applies to indebtedness forgiven in 2007 through 2014.

  3. Insolvency: If your total debts are more than the fair market value of your assets you may be considered insolvent.  Some or all of the cancelled debt may not be taxable if you were insolvent when your debt was cancelled.

  4. Farm Debt: If the past three years more than half of you income was from farming, the loan was from an agency regularly engaged in lending and you incurred the debt directly from the operation of the farm, the income may not be taxable.

If a lender forgives a debt of more than $600 they should report the amount of cancelled debt to the IRS and to you on a Form 1099-C.  If you have received a 1099-C it is important that you take this document seriously, as it could have a large impact on the amount of tax that you owe. It is important if you receive a Form 1099-C that you have someone trained in tax matters review your tax documents in order to determine if the cancelled debt must to be included in your income.

Here at Victory Tax Solutions we have tax attorneys that understand the ins-and-outs of debt cancellation and how it can impact your tax liability. Make the right choice, allow the professionals at Victory Tax Solutions to prepare your Federal and State tax returns accurately.

Call Victory Tax Solutions to speak with one of our account executives today. The call is toll free 1-877-772-0123.

Tax Protesters

Tax Protesters

The Dangers of Taking Extreme Positions on Tax Returns

Victory Tax Solutions, LLC.

"Americas Trusted Tax Team"

In some corners of the Internet, you can read about how taxpayers aren’t actually required to file taxes, or pay taxes, or maybe if you sign your return under protest it won’t really count. There are a hundred variations on the same theme: that somehow, some way, there’s a legal trick to get out of having to pay taxes.

It’s just not true.

Every year, a small number of people go from taxpayer to tax protester, taking an extreme position on their taxes, or not filing their returns at all in defiance of federal law. When taxpayers become tax protesters they face not only stiff penalties, but possible criminal prosecution.

In 2006, Congress passed the Tax Relief Health Care Act, which in part imposed a $5,000.00 penalty for filing frivolous tax returns or other “submissions” with the IRS in place of an actual tax return. The penalties can be assessed for each tax return or submission, with a maximum penalty of $25,000.00. Taxpayers may also face criminal prosecution for tax evasion in particularly egregious situations under IRC Sec. 7201.

Frivolous positions are defined on a list published by the IRS annually. To review the list, go to IRS.gov and search for “The Truth About Frivolous Tax Arguments.” Common arguments include:

  • Filing or paying a tax return is voluntary.  The Internal Revenue Code Sec. 6011-12 is very clear that unless you fall under one of the clearly outlined exceptions, everyone must file a tax return.

  • Redefining what counts as “income” to reduce or eliminate what can be taxed.  IRC Sec. 61 defines income broadly, and the courts have systematically interpreted it broadly.

  • Disputing the meaning of terms within the law. For example, claiming that the “United States” is only Washington D.C., federal territories and other enclaves. Obviously, this is not true, legally or by common sense.

  • Constitutional challenges to taxation. There are many arguments here, mostly to do with due process. But the absolute best argument is that the 16’th Amendment is unconstitutional. That’s right: people actually argue that a part of the Constitution is unconstitutional.

So what can you do if you have already filed a return or a submission with a frivolous position? The good news is that in many situations a tax protester will have administrative opportunities to get right with the law. However, depending on how extreme a position they took, the situation might slip beyond civil penalties and into criminal territory. For that reason, if you find you have taken a frivolous position in the past, you should contact a tax attorney with experience in this area to advise you on how to proceed.   

If you have any questions or would like to discuss further, please call Victory Tax Solutions for a free consultation. Our toll free number is 877-772-0123.

(810) 991-4462