I remember when I was a realtor, I never 1099’d anyone. Looking back now, I should have. I should have given 1099s to other realtors, transaction coordinators, photographers, stagers, and other Non W-2 employee. That cost me a lot of money. I just didn’t bother with it thinking it was too complicated. I should have gotten professional tax advice.

…

As a former 1099 employee realtor, the minimum tax I was paying is 15.3% of my net earnings. So think of it as $150 per thousand dollars. So say I did 6 transactions and my TC fee was $500 per file. That would be $3,000 I am paying someone for the year. So I’m paying approximately $450 in taxes for the $3,000 I’m paying THEM! Now $450 may not seem like a lot to you but it adds up.

…

Like I said, I never gave a 1099 to anyone. Including realtors that I gave a referral fee to. So like the TC, I paid them and paid for THEIR taxes. But what’s funny is I rarely had other agents 1099 me when I got a referral fee from them so they didn’t know either! They paid for my taxes. I personally do not think realtors do this enough. Anyways, with the commissions that you make, a 25% referral fee could be in the thousands. DO NOT PAY THE TAX FOR THEM! You already have to pay taxes for yourself.

…

This is what you do. You have to get them to fill out a W-9 form. Right away. It is like a W-4 form that W-2 employees fill out but for Independent Contractors. It’s to get their info so you can report the money you paid to them. When it’s time to do your taxes for the year, you or your tax person will issue them a 1099 NEC for all the money you paid them for that tax year.

…

Get the W-9 signed before you issue any money to them. This is important!!! I know someone whose TC did not want to sign a W-9 for all of the transactions she coordinated the previous year. The realtor’s mistake was not getting them to sign the W-9 right away when establishing the relationship. It was a lose – lose situation. The realtor had to pay the taxes and the TC never got to do a file again with that agent.

…

So if you’re a realtor, once you know you will be giving a referral fee, give the other agent a W-9 to fill out at the beginning of escrow and give it to escrow. Before you give a file to a TC, give them the W-9 to fill out. Let everyone that is an independent contractor like you know that you will be giving them a W-9 to fill out. From here on out, you’ll be like Oprah with W-9s. You get a W-9! You get a W-9! YOU get a W-9!