Although the beginning of a new year brings a lot of wonderful things, like the end of winter, warmer weather, and blooming gardens, it also means it’s a time of year that many Americans dread: Tax season. No one enjoys filing their taxes, and there are certain professions that make filing your taxes more complicated than others. One of these careers is Real Estate. Especially if you’ve only just recently entered the world of Real Estate, the idea of filing your taxes can be intimidating.
Sole Proprietorship
Most real estate agents operate their businesses as sole proprietorships. This means that they aren’t anyone’s employee, and you have no partnerships with any businesses. If this is the case, you are effectively filing your taxes as a self-employed individual. This is how you’ll file your taxes if the majority of your income comes from individual sales, rather than hours worked.
When to pay taxes
You have a few different options when it comes to paying your taxes as a real estate agent. When you receive your commission checks, none of your taxes will be taken out. You either have to pay your taxes at the end of the year, due in April, or you can pay your taxes as you go. The easiest option for paying your taxes is to pay them quarterly. This way, you don’t have an enormous sum of money to pay at the start of every year. It also helps you save your money and make plans with it throughout the year. If you know that you’ll be paying taxes every quarter, you’ll get a better idea of how much money is going to be coming out of your account every three months, which means it will come as much less of a surprise when you actually have to pay taxes.
How to pay your taxes
This is probably the trickiest part of filing your taxes as a sole proprietorship. You won’t necessarily get tax documents in the mail every January like a lot of other people, you have to do it yourself. Getting someone with experience to help you file your taxes is a really good idea, especially when you’re first starting out. A lot of people want to do everything themselves, but if you really don’t know what you’re doing, it could cause costly mistakes down the road. Make sure you keep track of all of your deductible business expenses throughout the year as well, as this will help make your tax process easier if you don’t have to go searching for things to deduct.