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.