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My Responsibilities as an Independent Contractor

In a nutshell it means I am self employed. Even though I hang my license as a Realtor-Associate® with Century 21 Liberty Homes, Mililani, Hawaii.....I am my own business and I have responsibilities (paperwork and that dreaded itemizing expenses/deductions and PAYING my own TAXES) that automatically come with being an independent contractor.

I pay my own quarterly estimated self employment Hawaii State Tax, Federal Tax, GET (General Excise Tax).

I pay my own expenses: postcards (like the one in the picture that I paid someone to make because I was strapped for time) gasoline, supplies, marketing, extra classes, licensing fees, MLS dues, NAR dues, HAR (Hawaii Association of Realtors) dues, HBR (Honolulu Board of Realtors) dues, E & O Insurance, Sentrilock lock System fees and dues, cameras, videos, computer equipment, upgrades, software (and that list goes on) client closing gifts and anything and everything that goes with my business down to my whole home office and the added expenses to run my own home office.

My listing for a single family home recorded last Friday and the escrow officer drove down to our office not a half hour after she notified me of recordation; to hand deliver the closing docs and commission checks to us. As soon as she left I hopped on the phone and called Mililani Florist to deliver a 'tropical bouquet' to her.She called with an appreciative tone to her thank you. Anyway, these are the expenses I incur for just giving a thoughtful thank you.

I do not get paid until a transaction closes (records) and subsequently I am able to pay bills with that commission check. (like all those expenses I mentioned above) I also set aside 30% to pay for my quarterly estimated self employment taxes and 4.5% for my General Excise Taxes. I seriously wonder why I am paying more GET now for the Honolulu transit (rail) system when I KNOW I won't be riding around with clients on that rail system as long as I am a Realtor-Associate®.

Now. For expenses and deductions and keeping track all year for end of the year taxes?

I have a yearly excel file with one sheet for commission (income), another for deductions (expenses) including payments for GET tax which is a deduction, and yet another sheet listing all my clients and the mileage to and from wherever and the total milege for each as well as total for the year. And the last sheet has my auto expenses (gas, insurance, oil changes, maintenance etc.).

So, when the 1099's and the W-2 comes in by January 31st I am ready to send it off to ....MY TAX MAN!

Why do I have a 1099 AND a W-2? I ALSO work for Century 21 Liberty Homes as an employee 2.5 days a week. After so many administration people kept quitting ( and let go) and not knowing what they were doing....my Brokers asked me if I wanted to work for them (with my great skills in admin :) four and a half years ago. I have worked BOTH my career AND my job side by side.

Randy Prothero (fellow agent and Broker Associate at our office...not to mention my buddy) keeps telling me to stop calling myself a part time agent because I am around Real Estate more than most Full Time Agents. I agree. Most of my life is REAL Estate ....even while blogging.

And then I switch to Family mode :) I have a good life as long as I have balance.

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Why did I write this?

Because this info just may help a new agent in the Real Estate Industry realize that it's much more than just closing a transaction.

It's income AND debit.

It's following up and keeping up with the 'behind the scenes' work and responsibilities that come with running your own business.

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Posted by Celeste "SALLY" Cheeseman HAWAII Relocations & Real Estate on 08/08/2008 10:24 AM

Comments (31)

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Originally posted at: Hawaii Real Estate & Relocations : My Responsibilities as an Independent Contractor

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31 Comments on My Responsibilities as an Independent Contractor

AUG

2008

Aloha and Amen! To me this is why parttime Realtors cry they are broke.

It takes money to make money and earning an income as an independent means spending to reinvest in the business. Time is an investment and time management is something a successful Realtor will tell you is critical... You have learned to balance work and life.. Congrats!

Sally, you have a winning combination there....happy for all your success!

Michele: No need for anyone to cry...new or not. The bottom line here is we spend what we can afford and when we start getting the repeat clientele and new business from others it all balances out in the end. One thing is for sure....the transaction process is one huge process to learn....let alone all the ins and outs of having our own businesses.

Jeanean: Thanks....I think success comes from inside...but it sure shines outside!

I don't think many new agents understand all that they must do to make it in this business. You have to be a good business person first and foremost if you are to succeed. Too many agents don't keep track of expenses or get behind in taxes and are lazy about record keeping. That will kill a career faster than a market slump, in my opinion! Some agents also have to pay their own health insurance (luckily I am covered by my husband's company) and that can take a huge bite out of that commission check.

Kelly: You are so right. I think many of us are under the husbands company...thank goodness...because 800 dollars a month doesn't sound cheap. The ones that some into the business with the notion that they get to make quick money are the ones that will bomb out quickly. The ones that don't pay their taxes get to be put online on our RE Commission site :) and go to court...and subsequently could lose their license.

This is a great explanation. I probably should send this out to some people so they understand the EXPENSES that I have.

Chuck....well, hopefully they'll understand it's more than just riding around looking at homes or putting an ad in the newspaper to sell their home :)

Amen Sally. Expenses are part of the business. We don't get to spend what we make until someone is happy. Same for us on the lending side. I don't make a dime until the loan closes either. Great explanation.

Fred: No kidding...i realized that some agents do not even know when they first come to our office. I realized how many got in trouble from not paying taxes too.

WooHoo, I read this post and it reminded me of how much it costs to be in this business. It's a WHOLE bunch!!! And it's so important to keep good records. I've used QuickBooks for about 8 years and don't know how I would survive without it.

The State of Florida recently made it a requirement that one man corporations, as I am, be paid a salary. So I too get a salary (W-2) and a 1099. The State did this to force me to pay unemployment tax!!! I have to pay a whooping $89 every six months BUT I have to file every 3 months and my CPA charges me $150 each time. So it costs me $600 a year to file in order to pay a $178 tax. Bummer.

BB:

I used Quickbooks in companies I worked for but mine is manini (sp?) compared so I made spreadsheets....and then I can just send em over to my tax guy....forms and all in one big pdf file :)

Wow...more expenses for your own company too! Wow... more ways for collecting extra taxes huh? And,...of course it costs 2/3 more on top of your payment just to file it. Whatever makes life harder right?

That's like our Transit Rail System....their still fighting over if the people should have a say and if it can be included on our ballot. Talk about being "forced" (up until this point hopefully) to go along with it.....and they've been collecting the extra .5 % since January of O7!

Can you just see me riding a rail that only goes from the west side to downtown...and doesn't even go by the airport to accomodate our tourists? Oh, now look...I'm ranting about the rail system again.

Sally, I'm not a real estate agent but believe me I know what you're saying. I am as careful as I can be with everything---and many people don't understand all the work involved in running your own business. Btw, I have to pay for health insurance---currantly $812 a month going (I hear) to $916---I think I'll have to take my chances :)

Sally, I am still somewhat new and have to admit I am all over the place. I just stuff my receipts into an envelope and tell myself I'll deal with it later. I have no idea what I have spent, I just know it's alot. I became a realtor last July but didn't join anywhere until November, so it hasn't been a year yet. It's just chaotic trying to figure it out, and stil be a wife, mother, and house keeper.

Sally, It's no small job. I wonder if our government is going to raise the per mile exemption?? They certainly should unless we are riding horses! This is a very serious subject you covered here and it's good to let the Newbies in on all this.

When you're young it seems like there are so few responsibilities when it comes to income and taxes. I've known a few young ones that got into trouble because they didn't take it seriously.

I agree with BB. I have (my company) been using Quick Books for 10 years now and I don't know what we would do without it. I remember one year taking a huge box of receipts to a CPA in town and they laughed at me. They said I couldn't afford to have them organize it!

Thank heavens my new son-in-law has his own CPA firm...you know who does it now!

Thanks for a great post. Later in the rain~Deb

Sally, I know you post this with hopes that new agents will gain a better understanding of our business but I believe there are many clients that should have a greater appreciation of all we do and what it costs to do these things, while they feel we are over paid. Steve

Carole: You're not a real estate agent but you sure are an independent contractor! I sure feel for you about that health insurance. yipes!

Michelle: I commend you for all you are doing although you have to keep track of all these. If you have made a commission you have taxes to pay. It's really important....or you will get hit big at the end of the year if you are not estimating during the year.

Deb: I really think they ought to! The following is mileage now... and the rate after 7/1. I guess that doesn't help when gas prices soared ...and only now came down a little. So,.....our gas is $4.19 a gallon...today...what's yours?

Mileage Rate Changes

Purpose	Rates 1/1 through 6/30/08	Rates 7/1 through 12/31/08
Business	50.5	58.5
Medical/Moving	19	27
Charitable	14	14

I don't have my OWN company so really doubt I have as many receipts as you folks...but believe me...it is 1/2 of my commission that i spend on my expenses...then 30% + for taxes....gee, I get a little after all that :)

Steve: People believe that we get paid the whole % of commission ....little do they realize ..if we are under a brokerage it goes to the firm...then franchise fees come out off the top and then whatever % our commission is off that.

Add all the expenses, taxes etc. ....and gee....if they only knew, huh?

Sally I am surprised you have anything left after all those expenses. Real Estate can be a big investment of time and money.

Part time agent? I think not! Wonderful agent, great person, great family woman, Jennifer of all trades! That's our Sally! xxoo

George: Sure can....now about donations LOL! I'm sure you folks have some expenses too...

Susan: Okay,....okay. Hey, I saw two puppies that look like yours at the Navy Pet Store the other day....oh, goodness they were so cute...all white but I think it was a boojoo or something LOL

Isn't it amazing, how many of our customers don't have a clue about our industry?

Also, if it wasn't for the Fibromyalgia that keeps my home-bound so much, what you're doing is exactly what I would be looking to do. I enjoy doing a litle bit of secretartial work. I just don't want to do it full-time. A little bit is a great way to supplement your income =)

AUG

2008

Lisa: Yup...and so quick to assume we are rich..make a bunch of money and have no expenses and live in luxury. Wouldn't it be grand?

Believe me Lisa...that same reason is the one BIG reason I do the part time thing. It's so easy for me and my fibro to stay home and just 'relax'. If I over do it I'm out of commission for a couple of days.

Just found out my husband's gramma was just diagnosed with it too. She had gallbladder surgery two months ago and couldn't eat....literally. They finally gave her medication and we've sent her two goodie boxes in two weeks...lol.

Sally- An Independent Contractor....yep that would be right. Oh and there's really nothing more to say except we all work for what we get, and only get if and when an Escrow closes.....the bills don't change if no money comes in either. So, here's to hats off to everyone that works for a Commission, and puts their own money upfront and not even knowing if they will get it back :)

I agree with Randy....you are so much more than a Part time Agent......

I hate the paper work part but it really is the foundation. Keeping track of every penny gives one the flexibilty when the market changes to make adjustments. I would not want to work any other way. I can't imagine working a real job for someone else. I've been self employed all of my adult working life with the exception of three miserable years. Great post!

Kathy: Yup...bills don't change if no money is coming in.

Nannette: So true! I have no problem adjusting either.

I am lucky my wife is an accountant. I am very frugal by nature, so I don't over spend. I don't think people realize the overhead we have.

Sally, you're right about that! Our gas today is anywhere from 3.65 to 3.95 per gallon. We're feeling it everywhere from the grocery stores to the Doctors office! Even my co-pay on our insurance went up! Whew.

Gee, but isn't it great that the oil companies are breaking records for quarterly profits???

Go figure.

Later in the rain~Deb :-)

SEP

2008

Celeste, very well put. So many people get into this business and want to treat it like a job. Those who treat it like a job are not going to be in the business for very long. I have never paid less in taxes than I do now, and I gross much more income than ever before. If Realtors and Mortgage agents would learn how to run a business they would be much more successful.

Paul: Yes you are...I have to do a lot myself before turning it over.

Deb: Our is still up...

Thomas: Well, those are the ones that do not last.

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