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How brokers can avoid potential problems with the IRS

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12/11/2014 | Author: Editorial Staff

How can I help make clear to the IRS that my agents are independent contractors, not employees?

One way you can do this is by using the Independent Contractor Agreement for Sales Associate (TAR 2301) and the Statement of Understanding (TAR 2302). The independent contractor agreement formally defines the obligations and rights of a broker and an agent and outlines provisions that make it clear the agent is not an employee.

The Statement of Understanding contains statements, agreed to by the agent, which would help confirm the existence of an independent contractor relationship under the law. It should be completed annually to reaffirm the relationship that exists between you and your agents.

Brokers who carefully maintain independent contractor relationships and follow the terms of the agreement can reduce their risk of the IRS, the Texas Workforce Commission, or other government agencies asserting that there are employer-employee laws applicable to the relationship. While a written independent contractor agreement and statement of understanding are not required by law to establish and maintain an independent contractor relationship, it’s a good idea for brokers to use both. Records that include the independent contractor agreement and annual statements of understanding would provide persuasive evidence about the nature of the relationship between the parties.

Read more legal questions and answers on texasrealestate.com.

Categories: Legal
Tags: legal faq, independent contractor, brokers

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Legal disclaimer

The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on texasrealestate.com. Any legal or other information found here, on texasrealestate.com, or at other sites to which we link, should be verified before it is relied upon.

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