Being a real estate independent contractor is one of those good news/bad news things. The good news is that you no longer have a boss. The bad news is that you ARE the boss.
Real estate agents are independent contractors, and independent contractors are very different from employees. They are self-employed “free agents”. This independence means that contractors operate with both greater flexibility and greater responsibilities, all at the same time.
As one industry writer puts it, independent real estate salespeople “have a lot of control over what they do, where they go, and when they work. The good side of independent contractor status for many salespeople is that they’re free to set their own hours. The entrepreneurial spirit is alive in the real estate industry.”
To be an independent real estate contractor, he continues, “a salesperson has to meet a three-part test. First you must have a license… Second, you must have a written agreement with a broker. Third, substantially all your remuneration must be based on output as opposed to hours worked. Very simple. Those three things make you a nonemployee for federal tax purposes.”[i]
Independent real estate sales people pay their own taxes, set their own hours, purchase their own supplies, keep their own records, and provide their own tools and equipment. They manage their customers in a time, place, and manner of their own choosing and are paid a percentage of their closed sales.
Be advised that the laws and rulings governing independent contractors change frequently, and it is your responsibility to keep abreast of the legal and tax changes affecting your status. Clarification of these changes may be obtained in real estate trade journals, at Mandatory Continuing Education classes, and from your personal accountant and/or attorney.
So congratulations! You're a real estate independent contractor, and you’re the boss!