Business Taxes - Vyde

How Much Should I Set Aside for Taxes as a Real Estate Agent? For Realtors, Real Estate Brokers, and Property Managers

How much should I set aside for taxes as a real estate agent? As a self-employed individuals are required to make estimated quarterly tax payments, a pay-as-you-earn system for federal taxes. Realtors, real estate agents, brokers, and property managers are considered to be self-employed by the IRS and are subject to these payments. If you anticipate, through your small business bookkeeping, that your end of year tax bill to be more than $1,000, you need to make quarterly payments to the IRS.

How to quickly calculate your estimated quarterly tax payment as a realtor, broker or property manager:

Estimate your total commissions and business expenses for the year. If you’re not sure, look back on previous years’ records and make a prediction at what your commission might be and take an average of what your expenses have been in the past. Subtract your business expenses from your predicted commission to determine your net income.
Multiply your net income by the Self Employment Tax Rate. Currently, the self-employment tax rate is at 15.3% (12.4% Social Security + 2.9% Medicare tax). A quick example: if you predict your total commission for the year to be $40,000, multiply that number by .153, which equals $6,120 in self-employment tax due for the entire year.
Divide your self-employment tax amount by two. Using the example in the previous step, take $6,120 divided by 2 and you have $3,060. You are allowed to use half of your self-employment tax as a deduction against your income.
Subtract ½ of your self-employment amount from your net income. In this case, $40,000 minus $3,060 equals $36,940.
Subtract your standard or itemized deduction from your net income from step 4. Estimate your itemized deductions or obtain the standard deduction form from the IRS website. If you estimate $10,000 in deductions, you now have $25,940.
Subtract the personal exemption allowed for the year from the new number in step 5. To see what your personal exemption is, click The amount of personal exemption you’re allowed to claim changes from year to year, so be sure to get the correct number from the IRS website.
Use the most current tax rate table (also found on the IRS website) to calculate the amount of federal tax due on your adjusted gross income (the amount calculated in step 6).
Subtract estimated tax credits from the number calculated in step 7. Be sure to see if you qualify for a child or dependent tax credit.
Add your total estimated federal tax due to the total estimated self employment tax due. Then divide this total by 4.
Make estimated quarterly tax payments of the amount calculated in step 9. Estimated quarterly tax payments are due on April 15, June 15, September 15, and January 18.

Need help filing your estimated quarterly tax payments as a realtor or real estate agent? We can help you out.

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Top 4 Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent

If you’re a real estate agent, you’re putting more miles on your vehicle than most other business owners. Constantly traveling to and from your office and home, real estate properties, home showings, listing appointments, and more; it adds up the miles quickly! In order to be in accordance with the IRS regulations when it comes to driving expenses, there are a few things you have to keep track of for your deductions to count.

Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent

Keep a business mileage log. Real estate agents’ routes are unpredictable. Unlike many other business owners, they aren’t simply driving to the office and around town to run errands every day. Some days they are in the car for hours, driving to locations they’ve never been and perhaps will never go to again. The IRS wants to know the total number of miles you drove for your business in a given year. While your commute to and from the office doesn’t count, almost all other business travel does. The best way to have accurate records for the IRS is to keep contemporaneous records—meaning your records are created each day you drive for business or shortly after. While a paper and pencil mileage log works just as well as anything, there are several ways to utilize technology to keep track. Logging the miles on your GPS may provide you with the most accurate record without much maintenance. Apps like Mileage Log+ or Everlance automatically calculate your distances by entering where you’re leaving from and where you’re going. When tax season rolls around, you just export your mileage for the year and hand it over to your account. How easy is that?
No records? No problem. If you haven’t been keeping a mileage log this year, you’re not completely out of luck. While the IRS frowns upon records constructed after the fact, if you can prove you drove to where you said you drove, you can still deduct your mileage. If you maintain a calendar, appointment book, or planner, you can go back through your records and calculate your mileage based on the appointments you attended. While a firsthand record is recommended and the most accurate, you can still deduct miles driven by calculating them this way. However, it is likely less likely to be accurate when looking back through records and trying to remember where you drove.
Calculate the actual expense of your vehicle expenses for business. While this method can be tricky, some real estate agents find that keeping track of all vehicle expenses throughout the year gives them a bigger deduction come tax season. This method requires keeping track of gas, oil changes, tires, repairs, insurance, registration fees, licenses, depreciation, and all other vehicle expenses. At the end of the year, you’ll provide your accountant with all these records to determine how much of a deduction you can take for your car.
Use the Standard Mileage Rate. This method of keeping track of vehicle business expenses is usually the easiest and most effective for a real estate agent. The standard mileage rate generally gives business owners a larger deduction, as long as their car is fairly economical. You still have to track your mileage, but records of other expenses are not quite as critical. Basically, with the Standard Mileage Rate, you are allowed a deduction of 57.5 cents per mile driven in a year. Using this method, you don’t deduct new tires, oil changes, or other expenses—it’s all factored in! If you drove your car 10,000 last year for you real estate agent business, you’re looking at a deduction of $5,750. Cha-ching!

Still have questions about using your car as a real estate agent? Give us a call, we’d love to help you out.

Other posts that might interest you:

How to Legally Structure a Real Estate Partnership or Agency

How to Track & Separate Business and Personal Expenses as a Realtor or Real Estate Agent

The Top 10 Tax Deductions for Realtors and Real Estate Agents

What You Can and Cannot Deduct for Advertising Your Real Estate Business

6 Ways to Save Time and Money on Bookkeeping and Accounting as a Realtor or Real Estate Agent

How to Calculate Self-Employment Taxes for Real Estate Professionals and Agents

How Do I Figure My Estimated Quarterly Taxes? For Realtors, Real Estate Brokers, and Property Managers

How to Develop an Exit Strategy for Your Real Estate Agency Partnership

How to Develop a Succession Plan for Your Real Estate Partnership

What You Can and Cannot Deduct For Advertising Your Real Estate Business

Realtors and real estate agents rely a great deal on advertising and promotions to build their business and keep it going strong. Almost any kind of advertising is tax deductible for a real estate business, as long as the expenses are ordinary, necessary, and within reason. However, there are some advertising expenses are not tax deductible. Before you start combing through your advertising budget for deductions and talking to your virtual bookkeeper, use this handy checklist to help you keep track of tax deductible advertising expenses.

Basic Tax Deductible Expenses for Small Businesses and Real Estate Agents

Business cards
Brochures
Flyers
Signs for storefront or vehicle
Yellow page advertisements
Internet advertisements
Magazine advertisements
Radio and/or television commercials and advertisements
Website set-up and maintenance
Fees paid to web developers, graphic designers, public relations agencies, and other people or businesses you paid to help you promote your company
Print materials promoting your business
Balloons, decorations, refreshments, and other items used at open houses
Billboards
The cost of staging a home to increase its appeal to buyers (Raylynn, does this make sense? Would you consider this advertising?)

Tax Deductible GoodWill Advertising Ideas

If it relates to your real estate business and you expect to gain in the future, you can deduct “goodwill” or institutional advertising meant to keep your name before the public. Examples of goodwill advertising for realtors include:

Sponsoring a youth sports team such as Little League baseball or soccer
Advertisements (print or online) that encourage people to donate to specific charities
Donating money to local school events or causes
Walking in a parade to promote your business and handing out Frisbees, t-shirts, or other materials with your business’ name on them
Giving away products or samples
Holding contests and giving away prizes

Tax Deductible Promotional Giveaway Items

Structuring giveaways correctly can be tricky, but beneficial for your real estate business. Giveaway items that you use to publicize and promote your business are tax deductible. A few common items realtors give away include:

Pens
T-shirts
Tote bags
Keychains
Mousepads
Magnets
Coffee Cups
Calendars

Advertising Expenses You Can’t Deduct as a Realtor

Permanent signs for your business. Signs that will last less than a year (cardboard signs or banners) can be deducted, but permanent signs are considered a business expense and can be depreciated from year to year, but cannot be deducted as an advertising expense
Advertisements to influence government legislation
“Help Wanted” ads are not considered advertisements, but can be deducted as operating expenses
Time and labor put into the creation of a giveaway and distribution of products
You cannot deduct more than $25 worth of “gifts” per recipient, per year
Expenses that are primarily personal, even if they promote your business. For example, you can invite your best customers to your child’s wedding, but you cannot deduct the cost of the wedding because your clients came

There are thousands more tax deductible real estate business expenses than listed here. Have a question about a deduction for your real estate business? Vyde can help you answer it.

Other posts that might interest you:

How to Legally Structure a Real Estate Partnership or Agency

How to Track & Separate Business and Personal Expenses as a Realtor or Real Estate Agent

The Top 10 Tax Deductions for Realtors and Real Estate Agents

Top 4 Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent

6 Ways to Save Time and Money on Bookkeeping and Accounting as a Realtor or Real Estate Agent

How to Calculate Self-Employment Taxes for Real Estate Professionals and Agents

How Do I Figure My Estimated Quarterly Taxes? For Realtors, Real Estate Brokers, and Property Managers

How to Develop an Exit Strategy for Your Real Estate Agency Partnership

How to Develop a Succession Plan for Your Real Estate Partnership

Q&A: Personal and Corporate Business Tax Extensions

If you have filed (or plan to file) a tax extension, Vyde has got you covered. From everything on how to file a personal or business tax extension with the IRS to what to do if you miss the tax deadline, and more…it’s all here. Check out the Q&A series on personal and corporate business tax extensions by exploring these posts:

Corporate Business Tax Extensions

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

Top 10 Things You Should Do If You File a Corporate Business Tax Extension

Q&A: How to file a corporate business income tax extension with the IRS

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

Q&A: My 6 month extension on my corporate business taxes is due on 9/15. Help!

Q&A: What if I can’t file my corporate business taxes by my IRS tax extension deadline?

Q&A: Can I file a second IRS tax deadline extension for my corporate business taxes?

Q&A: How do I file an amended tax return for my business?

Q&A: What if I missed the IRS tax extension deadline?

Personal Tax Extensions

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

Top 10 Things You Should Do If You File a Personal Tax Extension

Q&A: How to file an individual income tax extension with the IRS

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

Q&A: My 6 month extension on my personal taxes is due on 10/15. Help!

Q&A: What if I missed the IRS tax extension deadline?

Q&A: What if I can’t file my personal taxes by my IRS tax extension deadline?

Q&A: Can I file a second IRS tax deadline extension for my personal taxes?

Q&A: How to file an individual income tax extension with the IRS

Personal tax returns are due on April 15th, but with an extension, the deadline is extended until October 15th. If you have not filed taxes by the traditional April 15th deadline, there is a late filing penalty on 5% of what you owe, which is added to your tax balance each month you do not file taxes. Additional taxes and fees are also added if you do not file taxes on time.

However, if you know you will not be able to file your taxes on time, there is some relief. You can file an individual income tax extension that provides you with an additional 6 months to pay. You do not have to provide the IRS with a reason for your tax extension, you simply have to request one by the tax extension request deadline of April 15th.

In order to file a tax extension, you will need to fill out a Form 4868, available on the IRS website. This form can be submitted electronically or by mail, but it must be postmarked by the original tax deadline of April 15th or sent electronically by midnight.

After you’ve filled out the Form 4868, your tax deadline is now October 15th. However, filing a tax extension does not give you extra time to pay your taxes–it only provides you with time to calculate and file your income tax forms. Even with an extension, your tax payment is still due on April 15th, and needs to be submitted with your Form 4868. If you do not pay 90% of your tax payment by April 15th, you will incur late fees and penalty charges from the IRS.

If you filed an individual income tax extension this year and need help preparing your taxes, Vyde can help.

Other posts that might interest you:

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

Top 10 Things You Should Do If You File a Personal Tax Extension

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

Q&A: My 6 month extension on my personal taxes is due on 10/15. Help!

Q&A: What if I missed the IRS tax extension deadline?

Q&A: What if I can’t file my personal taxes by my IRS tax extension deadline?

Q&A: Can I file a second IRS tax deadline extension for my personal taxes?

Q&A: Can I file a second IRS tax deadline extension for my corporate business taxes?

If you filed a tax deadline extension this year for your corporate business taxes, your tax deadline moved to October 15th. Now that the second tax deadline is approaching, you may be wondering if you can file a second IRS tax extension. The simple answer to this question is no.

There is a lot of confusion regarding second tax extensions. The IRS used to offer what they called a “second extension.” The second-extension granted businesses an additional two months to file their taxes. However, the original IRS tax deadline extension only granted a four-month extension.

Now, the IRS offers a one-time tax extension of six months. Which means, there is no longer a second tax extension. Now, when a corporate business files for a tax extension they get one six-month extension, rather than two shorter extensions.

If you filed a business tax deadline extension with the IRS this year and are worried about the upcoming October deadline, Vyde with their virtual bookkeepers can help you gather and file your tax documents before the deadline.

Q&A: What if I can’t file my corporate business taxes by my IRS tax extension deadline?

The IRS does not allow additional time to file taxes after a six month a tax extension deadline has been granted. However, if you requested an extension for your corporate business taxes and cannot make the October 15th deadline, you’re not off the hook! You still need to file taxes appropriately and as soon as possible.

After October 15th, the IRS does not accept e-filed taxes. You will now need to print out all your tax paperwork and mail it to the IRS. If you have a refund coming for your corporate business taxes, there is no late fee or penalty for filing late.

However, if you owe a tax payment and missed the tax extension deadline, you are subject to late fees and penalties. Penalties are calculated as percentage of the amount of taxes you owe.

The Three Penalties You Are Subject to if You Miss the Tax Extension Deadline Are:

Failure to File Penalty: The failure-to-file penalty will probably be the most expensive, as it starts out at 5% for each month the tax return is not filed, up to a total penalty of 25% of your balance due. Even if you owe money and can’t pay it, you should still file to eliminate this penalty. Filing as soon as possible, even if it is after your extended tax deadline, can help keep this penalty low. If you are more than 60 days late on your extended tax deadline, this fee will be the smaller of $135 or 100% of the unpaid tax bill.
Failure to Pay Penalty: If you missed your tax extension deadline, you will also be subject to a failure to pay penalty of .5% of your unpaid taxes for each month. This penalty can end up being 25% of your unpaid taxes. The good news is that if you requested an IRS tax extension for your corporate business taxes, and paid at least 90% of your tax bill by the original filing due date, you will not face a failure to pay penalty if you pay the remaining balance by your tax extension deadline.
Interest: The amount of interest owed on your corporate business taxes will vary depending on your tax bill and how far past your tax extension deadline you file.

You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.
If you missed (or know you are going to miss) your extended tax deadline, the best thing to do is file your taxes by mail with the IRS as soon as possible to avoid increasing penalties and interest charges. If you need assistance in filing your corporate business taxes, Vyde and their virtual bookkeepers can help you gather your documents and file as quickly as possible.

Other posts that might interest you:

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

Top 10 Things You Should Do If You File a Corporate Business Tax Extension

Q&A: How to file a corporate business income tax extension with the IRS

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

Q&A: My 6 month extension on my corporate business taxes is due on 9/15. Help!

Q&A: Can I file a second IRS tax deadline extension for my corporate business taxes?

Q&A: How do I file an amended tax return for my business?

Q&A: What if I missed the IRS tax extension deadline?

If you filed an IRS tax extension this year, or in previous years, and missed the extended filing deadline, you need to take action as soon as possible.

Here are a few tips to consider if you missed the IRS tax extension deadline:

File as soon as possible. Taxes cannot just be forgotten or ignored. If you missed filing taxes, no matter the year, they still need to be filed. If you owe taxes, you’ll need to file as soon as possible to keep penalties from increasing over time. If you are due a refund, there is no penalty for filing late but filing sooner rather than later will get your refund coming sooner.
Pay as much as you can. If you filed an IRS tax extension, technically your tax payment was due with your tax extension request form by April 15th. However, if you didn’t make a payment by that deadline, you’ll want to pay as much as possible as soon as possible. Paying down your tax bill will minimize penalties.
File by mail. After the tax extension deadline, the IRS no longer accepts taxes filed electronically. However, you still have the option of printing, filling out, and mailing your tax documents if missed the deadline.

Whether you’ve missed only one year of filing taxes or several, Vyde can help you compile your tax information and file it with the IRS. The most important thing to do if you missed the IRS tax extension deadline is to file as quickly as possible.

Other posts that might interest you:

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

Top 10 Things You Should Do If You File a Corporate Business Tax Extension

Q&A: How to file a corporate business income tax extension with the IRS

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

Q&A: My 6 month extension on my corporate business taxes is due on 9/15. Help!

Q&A: What if I can’t file my corporate business taxes by my IRS tax extension deadline?

Q&A: Can I file a second IRS tax deadline extension for my corporate business taxes?

Q&A: How do I file an amended tax return for my business?

An amended tax return offers the opportunity to make changes to an e-filed tax return that has been accepted by the IRS, OR to make changes to a paper return that has already been mailed. Making changes to a return that has not yet been mailed or accepted by the IRS is not considered an “amended tax return.” An amended tax return can be submitted for several reasons including the addition of more information, change in filing status, or change in any information included on an original tax return.

There are several types of IRS amendment tax forms for varying types of business structures. They include:

Form 1040X if you’re filing as a Sole Proprietor or single member LLC
Form 1120X if you’re filing as a Corporation
Form 1065 for a partnership or LLC with multiple members. You’ll need to check box G5 on the first page and then submit a statement that identifies the line number of each amended item, along with the correction for that line. You’ll also need to provide a brief explanation of the reason for changing each line.
If the Schedule K-1 for your partnership or LLC needs amended, you’ll need to fill out a new Schedule K-1 and check the “Amended K-1” box at the top of the page.
Check with your state to see how to file an amended state tax return in your area. Since tax laws vary from state to state, amended business tax returns are often filed differently and have specific instructions.

The IRS requires that an amended tax return is filed within three years of filing the return, or two years of when the tax was paid–whichever date is later. An amended tax return cannot be e-filed, but have to be sent to the IRS by mail.
Have more questions about your amended business tax returns? Vyde can help.

Other posts that might interest you:

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

Top 10 Things You Should Do If You File a Corporate Business Tax Extension

Q&A: How to file a corporate business income tax extension with the IRS

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

Q&A: My 6 month extension on my corporate business taxes is due on 9/15. Help!

Q&A: What if I can’t file my corporate business taxes by my IRS tax extension deadline?

Q&A: Can I file a second IRS tax deadline extension for my corporate business taxes?

Q&A: What if I missed the IRS tax extension deadline?

6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision

There are few deadlines in the year more important than April 15th. Every adult in the nation is affected by tax day, and all can feel a little stress because of it. However, sometimes that April 15th deadline seems to come sooner than we would like it, and there’s just no way to get income taxes filed on time. That’s why the IRS offers a tax extension option to individuals and businesses who cannot meet the April 15th filing date. This gives taxpayers an additional 6 months to properly fill out and file their tax returns.

Feeling a little guilty about needing extra time on your taxes? Don’t. Millions of tax extension are filed each year.

Here are 6 reasons why filing a tax extension is a good idea:

It offers the chance to do it right the first time. The IRS would rather you file your taxes accurately the first time they receive them, rather than waiting for you to make corrections and fill out an amended return. It also saves you time by making sure your information is correct when you fill out your return and not having to rush through and make simple errors.
Returns that have been extended are less scrutinized than amended returns. A tax extension request doesn’t raise any red flags with the IRS, but amended returns sometimes do. The IRS will likely not be suspicious of an extended return and you are not more likely to be audited because you submitted one. However, filing a tax extension does not decrease your risk of being audited either.
Extensions are easy to file. All it takes is one quick form sent to the IRS (Form 4868) and you’ve got an extra six months to gather your paperwork and fill out your return. Keep in mind though that a tax extension doesn’t give you more time to pay your tax obligation; it only gives you more time to file your paperwork. Your tax payment is still due by April 15th.
Extensions are automatic. You don’t need to wait to hear back from the IRS if you filed an extension on your personal taxes. As long as you submitted your request on or before April 15th, the extension is automatic and you will not be notified.
It allows you more time to file. The most obvious and rewarding reason for filing a tax extension is that it can help you breathe easy for a while if April 15th came just a little too quickly this year. A tax extension gives you six extra months to gather important paperwork like 1099s and K-1s.
You can work with a professional CPA. If you didn’t have time to squeeze in an appointment with your CPA during the official tax season, a tax extension gives you plenty of time to do so. Your CPA will likely have more time to meet with you after April 15th, and it may work better for your schedule, too. Consulting a tax professional will help you feel secure in the accuracy of your tax return.