Comments on: The Taxman Does Not Cometh http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html Redfin Corporate Blog Fri, 10 Feb 2012 02:35:37 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Andy http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-11519 Andy Fri, 11 Mar 2011 13:09:15 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-11519 This is the new big revenue deal for the IRS.<br> I talked to my IRS agent about this as it came up in an audit! I am I real Estate Agent, I just went through an Audit for 2007-2009. I had refunded a few clients part of the commission, one was $3500 and 5 others were between $2000-$3000. At that point I did not have to send out a 1099 to them but the agent said that they were to report that money as ordinary income. With the new rule about1099s, anyone that you pay more than $600 you MUST 1099 them. I’m sure that Red Fin does NOT report the refund of commissions to the IRS as income to them and pay the Tax. So if you receive a check in cash from Red Fin or any Real Estate deal and it is not part of a reduction on price you will have to report that as income. It is like the banks that will give you a 1099 for a short sale, as they report that as a loss and so you have to pay their loss as income. So far the IRS is not going after Primary residences for the loss but a friend of mine just received a 1099 for 2 rentals he sold short for $120,000 he will owe tax on that of $36,000. I was told that the IRS has just hired 20,000 new audit agents to go after Real Estate related taxes as the banks have taken HUGE tax losses. And from what I was told by my IRS agent “if you receive Cash back from any Real Estate Commission that the agent writes off as an expense you will owe ordinary income tax on it” and I don’t know of any agent that is going to pay income tax on money they don’t receive! They have to send you a 1099 for it starting in 2010 tax year I think but 2011 for sure. They are getting aggressive about it. So if you receive a check from your Real Estate agent I would seek advice from a CPA and save a few bucks for the tax, and all so see if it pushes you into a new tax bracket. A great way to get the max out of your refund is to reduce the price. Believe me the IRS is ruthless with this and it was really not fun. I have offered to my clients that I did give cash back to pay any penalties, but so far they have not been targeted! But believe me I will be sending out 1099s from now on.<br> This is the new big revenue deal for the IRS.
I talked to my IRS agent about this as it came up in an audit! I am I real Estate Agent, I just went through an Audit for 2007-2009. I had refunded a few clients part of the commission, one was $3500 and 5 others were between $2000-$3000. At that point I did not have to send out a 1099 to them but the agent said that they were to report that money as ordinary income. With the new rule about1099s, anyone that you pay more than $600 you MUST 1099 them. I’m sure that Red Fin does NOT report the refund of commissions to the IRS as income to them and pay the Tax. So if you receive a check in cash from Red Fin or any Real Estate deal and it is not part of a reduction on price you will have to report that as income. It is like the banks that will give you a 1099 for a short sale, as they report that as a loss and so you have to pay their loss as income. So far the IRS is not going after Primary residences for the loss but a friend of mine just received a 1099 for 2 rentals he sold short for $120,000 he will owe tax on that of $36,000. I was told that the IRS has just hired 20,000 new audit agents to go after Real Estate related taxes as the banks have taken HUGE tax losses. And from what I was told by my IRS agent “if you receive Cash back from any Real Estate Commission that the agent writes off as an expense you will owe ordinary income tax on it” and I don’t know of any agent that is going to pay income tax on money they don’t receive! They have to send you a 1099 for it starting in 2010 tax year I think but 2011 for sure. They are getting aggressive about it. So if you receive a check from your Real Estate agent I would seek advice from a CPA and save a few bucks for the tax, and all so see if it pushes you into a new tax bracket. A great way to get the max out of your refund is to reduce the price. Believe me the IRS is ruthless with this and it was really not fun. I have offered to my clients that I did give cash back to pay any penalties, but so far they have not been targeted! But believe me I will be sending out 1099s from now on.

]]> By: Anneswong1 http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-11302 Anneswong1 Tue, 11 Jan 2011 03:45:14 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-11302 ok. if Redfin received the commission for services, how can it be a return of capital? Only the seller can refund money back to the buyer. Not the agent, the service provider. ok. if Redfin received the commission for services, how can it be a return of capital? Only the seller can refund money back to the buyer. Not the agent, the service provider.

]]> By: Anneswong1 http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-11303 Anneswong1 Tue, 11 Jan 2011 03:42:34 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-11303 I agree with you. Did you ever find out the answer to this? I agree with you. Did you ever find out the answer to this?

]]> By: jDeppen http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-6483 jDeppen Fri, 18 Sep 2009 06:22:07 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-6483 I would assume that this is similar to refi money not being taxable. It's a loan not income, the buyer is paying it back. If it's a cash deal then it's the buyer's money being returned. IMO I would assume that this is similar to refi money not being taxable. It’s a loan not income, the buyer is paying it back.

If it’s a cash deal then it’s the buyer’s money being returned.

IMO

]]> By: Anders http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-5809 Anders Tue, 12 May 2009 20:23:15 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-5809 But does the refund create taxable income to Redfin in the full amount or just their undistributed portion that is kept by Redfin? But does the refund create taxable income to Redfin in the full amount or just their undistributed portion that is kept by Redfin?

]]> By: WSK http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-2800 WSK Sun, 16 Mar 2008 16:22:11 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-2800 Thank you for posting the IRS ruling on your blog. Unlike the IRS agents that I consulted on this issue in multiple telephone calls, It was very helpful last year in deciding how to deal with this issue when preparing my taxes. Thank you for posting the IRS ruling on your blog. Unlike the IRS agents that I consulted on this issue in multiple telephone calls, It was very helpful last year in deciding how to deal with this issue when preparing my taxes.

]]> By: PlanOpen http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-2700 PlanOpen Fri, 22 Feb 2008 02:50:53 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-2700 Love the costume! Love the costume!

]]> By: Bob http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-2433 Bob Thu, 17 Jan 2008 16:27:32 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-2433 The ruling is legit - check out the IRS website http://www.irs.gov/pub/irs-wd/0721013.pdf The ruling is legit – check out the IRS website

http://www.irs.gov/pub/irs-wd/0721013.pdf

]]> By: Pamela Mullen http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-2358 Pamela Mullen Fri, 28 Dec 2007 18:22:14 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-2358 Commission is paid to agents at the closing of a home, they recieve the money which is then tax due income to the agent/broker; 2/3 of the received money is then refunded to the buyer after closing; (it has to be refunded after closing because as it is not available to agents/brokers until the home closes meaning funds are transfered from buyer to seller) if received after closing the money is not available to buyer's for closing costs. If money is sent to buyers after closing that money is income/gain to buyers and should be taxed like any other income. If the money is from the broker's account then the broker has received the money and owes tax. If the buyer receives money from the broker, the buyer owes taxes. By giving the buyer 2/3's of 3% of the purchase price of a property Redfin is saying to the buyer; you just paid 2/3's of 3% more for this home than the actual value of that property. If the home is actually worth 2/3 of 3% less, then why not just pay that much less for the home, lower your closing costs, cut out everyone's playing around with unearned money and avoid the risk of owing tax on the inflated home value? Why is failing to pay tax on unearned income received represented as a positive thing? Is there any chance that the IRS may come back on these individual buyers with a determination of tax owed for money received from agents/brokers after closing? Nation wide this must be millions of unpaid tax dollars, usually the IRS does not give up that kind of money, why is this any different? Why not just pay the real and fair price for the house and everyone just pays the tax they owe and be done with it? Commission is paid to agents at the closing of a home, they recieve the money which is then tax due income to the agent/broker; 2/3 of the received money is then refunded to the buyer after closing; (it has to be refunded after closing because as it is not available to agents/brokers until the home closes meaning funds are transfered from buyer to seller) if received after closing the money is not available to buyer’s for closing costs. If money is sent to buyers after closing that money is income/gain to buyers and should be taxed like any other income. If the money is from the broker’s account then the broker has received the money and owes tax. If the buyer receives money from the broker, the buyer owes taxes. By giving the buyer 2/3′s of 3% of the purchase price of a property Redfin is saying to the buyer; you just paid 2/3′s of 3% more for this home than the actual value of that property. If the home is actually worth 2/3 of 3% less, then why not just pay that much less for the home, lower your closing costs, cut out everyone’s playing around with unearned money and avoid the risk of owing tax on the inflated home value? Why is failing to pay tax on unearned income received represented as a positive thing? Is there any chance that the IRS may come back on these individual buyers with a determination of tax owed for money received from agents/brokers after closing? Nation wide this must be millions of unpaid tax dollars, usually the IRS does not give up that kind of money, why is this any different? Why not just pay the real and fair price for the house and everyone just pays the tax they owe and be done with it?

]]> By: Tax Man http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html/comment-page-1#comment-1713 Tax Man Thu, 27 Sep 2007 23:44:57 +0000 http://devblog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html#comment-1713 I am very wary about this whole situation, how do know the attorney they paid for the petition didn't cook something up. The supposed ruling looks like somethign done on a typewriter. For starters, the format is not in line with what the IRS sends out, yes it looks similar, but there variations. It is also lacking a barcode to track the ruling notice, and most alarming of all, it does not have the IRS logo, and it came from Washington D.C. any seasoned tax pro knows that the IRS does not have a service center in D.C. Oh forgot to mention the disclaimer, according to that, this only applies to Redfin, why people would try to use this as tax advice has me bewildered. Consult directly with the IRS, you don't need to pay an attorney to write a pettition contact your local IRS office and ask for written clarifaction concerning a matter, saves you a truckload of money and then you can get your correspondance from the IRS. If you happen to get audited, provide a copy of your correspondance to you or your company and watch how easy the audit is. I am very wary about this whole situation, how do know the attorney they paid for the petition didn’t cook something up. The supposed ruling looks like somethign done on a typewriter. For starters, the format is not in line with what the IRS sends out, yes it looks similar, but there variations. It is also lacking a barcode to track the ruling notice, and most alarming of all, it does not have the IRS logo, and it came from Washington D.C. any seasoned tax pro knows that the IRS does not have a service center in D.C.

Oh forgot to mention the disclaimer, according to that, this only applies to Redfin, why people would try to use this as tax advice has me bewildered. Consult directly with the IRS, you don’t need to pay an attorney to write a pettition contact your local IRS office and ask for written clarifaction concerning a matter, saves you a truckload of money and then you can get your correspondance from the IRS. If you happen to get audited, provide a copy of your correspondance to you or your company and watch how easy the audit is.

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