The previous Legal Briefs video discussed the elements that determine if you must use a 1099 form. In this Legal Briefs video, Lori Levy, Texas REALTORS® Vice President of Legal Affairs, explains:
- the appropriate entity that requires the filing of a 1099 form
- how to know if a party is a corporation or an individual
- when you should submit the 1099 form.
Watch the episode below or click here to access all the videos in the Legal Briefs series.
Agents and Brokers should also know that when an Agent rebates part of their commission back to their Buyer (Client) it is NOT considered income by the IRS. Therefore a 1099 is not required nor appropriate. Unfortunately there is much misinformation and ignorance amongst Agents and Brokers. Individual Agents need to keep accurate and complete records of the movement of rebated funds so as to be able to substantiate the write-off from THEIR taxable income. IRS RULING: PLR-157111-06
What happens when the realtor does not show their contribution in the settlement statement and later writes a check to their client? But the settlement statement shows the realtor made 3%
Then the realtor lists the check amount sent to the client as a rebate expense on the agents Schedule C in their tax return. This allows the agent to deduct the expense.
The requirement is on the agent/ broker to obtain a W9 form from all contractors they paid more than $600 for that year. The W9 will allow the contractor to note if it is exempt or not. For example an LLC that is taxed as an S corp is exempt. All 1099 forms must be sent to anyone not a corporation (1120 or 1120S). The only way you know the LLC is exempt if they complete the W9 and state they are exempt and sign the W9 form. If you dont file a 1099 form there are penalties for each… Read more »