JUST BECAUSE NEW 1099 RULES WERE DELAYED A YEAR, DON’T CONTINUE TO DROWN IN MANUAL FILING AND REPORTING. CHANGE IS COMING, GET EVERYTHING IN ORDER NOW TO MAKE NEXT YEAR SMOOTH SAILING.
The beginning of the year is a busy time for real estate leaders. There are so many business decisions to make ahead of the market’s peak transaction months, end-of-year awards, and reporting to finalize, not to mention getting the business’ taxes in order and agent 1099s.
Do you feel like you’re drowning in an ocean of data, stored away in separate places and a pain in the butt to calculate and sync? Don’t put off having a better back office system until next year. Why kick yourself for 12 more months of paperwork purgatory and manual madness? It’s time to make a change now as next year is bringing a new round of disruptions with the recent change to reporting rules on 1099s.
Here’s the skinny on those changes, straight from the IRS (warning may be a little dry)— Understanding Your Form 1099-K.
Don’t shrug this off. The most dangerous wave is the one you don’t see coming.
Does the following story sound like your company?
Every week, your back-office staff are cranking away at finalizing closings, sending out disbursements, and getting your agents paid. It’s a full-time gig typically accompanied by plenty of frenzied agents with a last-minute change, a unique commission plan, or worse — hard-to-track-down escrowed funds.
Then comes tax season — roaring in like a speed boat disregarding the No Wake sign. Your same back-office heroes are now pulling data from all of your separate systems to form annual reporting, awards and commission cap statements, and financials for forecasting. Not to mention, the last bitter day in January is breathing down their necks with the impending demand to file all necessary 1099s.
Let’s say it takes about 90 minutes to manually reconcile and complete a 1099-K form — double-checking sales volume, commission paid, did E&O get paid separately or was it rolled in, and how many sides did they participate in? Typically, your back office rockstars only had to work on this for agents who made over $20k and had multiple transactions.
But the game has changed. The new lower threshold will mean at least 98% of all REALTORS will qualify for a 1099.
- Break the math down with me…
- You’ve got 200 agents at your brokerage, or even thinking about just a single office for some of the larger brands.
- We can assume that at least 60% of your agent population will close at least 1 transaction. With the average home sale price in the $300,000s across most of the U.S. — all it will take is one transaction at a typical split to surpass the threshold.
- So you’ve got 120 agents who you can guarantee are going to need a 1099
90 minutes multiplied by 120 agents = 180 extra hours of work in January alone (barring interruptions, bad data, missing paperwork, employee sickness, or snow days…).
Hopefully, you’d have zero errors that needed to be corrected. If there’s something everyone can agree on – it’s that manually prepping taxes is always zero-errors.
So what’s your answer come January? Overtime? Contract Work? Hire extra staff? Cross your fingers? You need a real solution to reduce stress on your back office — especially around tax season.
Tips for a stress-free 2023 tax season
If you’re still fighting for air, manually preparing for this year’s taxes — we know it can be time-consuming and very prone to errors. Here are some tips to help conquer this year’s tax season and get your head above water in 2024:
- Keep accurate and up-to-date records of all financial transactions, such as commission income and expenses, in a cloud-based system like QuickBooks.
- Provide clear instructions and guidelines to agents for tracking and reporting their own tax information. Even if your tax service is a benefit of brokerage membership — reminding agents of the importance of keeping their own records can save everyone from a headache.
- Review and double-check all financial data before filing taxes to ensure accuracy and compliance with relevant laws and regulations. No reason to have to go back and refile over and over because one more document cropped up.
- Keep track of any expenses you managed for agents, not just their transactions. Thanks to the PATH Act, real estate agents can claim a number of expenses including marketing https://turbotax.intuit.com/tax-tips/self-employment-taxes/tax-tips-for-real-estate-agents-and-brokers/L6JBCu3uH and they’ll want to know those breakdowns if they paid directly to the brokerage for marketing services.
We can’t turn back the clock to make this year’s taxes less painful — we really wish we could. But looking toward 2024, it’s time to consider automating your back office and bring calm to that chaos saving you from rough waters when tax season comes back around.
Now, here at MoxiWorks, we aren’t accountants or certified financial advisors, but we do know a thing or two about solid, automated tech for brokerages. Here are some best practices for getting the most out of you’re a back-office automation and management tool to help make filing your taxes next year more of a breeze:
- Keep all processes synced in the same platform — even 1099 creation, review, and e-filing to the IRS.
- Reduce the number of systems where you’re re-entering or importing the same information over and over. Regularly monitor data in automated reports to identify errors and areas of improvement ahead of typical reporting times. You can’t manage what you don’t measure.
- Utilize reports and analytics provided by the system to make better decisions like where to invest, opportunities for expansion, or even get a better sense of places to tighten the belt when times are uncertain.
At MoxiWorks, we’ve brought many brokerages calm to their back office chaos with MoxiBalance — managing money flowing in and out of your business. All of the tips above align with the way we’ve built our product to automate, report, and scale with your company. And, while it is possible to manage financial operations and file taxes without using a system like MoxiBalance, doing so can be way more time-consuming, more expensive, and prone to errors, especially with the changes coming next year. With MoxiBalance, brokerages can streamline their financial operations and tax filing process, and make it more efficient, accurate, and really allow your back office processes to thrive and serve you best.
To learn more about MoxiBalance visit https://moxiworks.com/solutions/back-office