Term
| true or false: A sales associate may engage in only those activities assigned by the broker. And the sales associate may receive compensation for performed activities ONLY from the employing broker. |
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Definition
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Term
true or false:Federal tax laws allow real estate licensees to be classified as independent contractors. In order to qualify, the IRS requires what's called the safe harbor test to establish that a person is indeed an independent contractor.
The three conditions of the safe harbor test are:
The person must be a properly licensed real estate licensee.
Gross income, including that which results from sales and all other output (including the performance of services), must be based on production and not on hours worked.
A written agreement must exist between the independent contractor and the broker which outlines the services to be performed by the contractor and states that the contractor will not be treated as an employee for income tax purposes. |
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Definition
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Term
| Because brokers could be held responsible for any wrongful acts performed by a sales associate they employ, many brokers require that licensees carry: |
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Definition
Automobile liability insurance in high amounts, naming the broker as an insured on the policy
Errors and omissions insurance, covering the broker and sales associates for negligent acts (but not intentional acts) |
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Term
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Definition
| If a licensee working for a broker is a property manager having access to the money of others, the broker may get a fidelity bond to protect himself or herself from any embezzlement by such a licensee. |
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Term
| What is the main difference between an employee and an independent contractor? |
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Definition
| The main difference between the two is an issue of control, as established by income tax laws. |
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Term
| What are the three common-law categories that determine the level of control an employer has? |
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Definition
Behavioral
Financial
Type of relationship |
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Term
| What are the conditions of the IRS safe harbor test? |
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Definition
The person must be a properly licensed real estate licensee.
Gross income from all output must be based on production and not on hours worked.
A written agreement must exist between the independent contractor and the broker stating that the contractor will not be treated as an employee for income tax purposes |
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Term
| When deciding what firm would work best, licenses should ask these types of questions: |
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Definition
What are the start-up costs?, who pays the expenses and what are the sales associate requirements?
what training and support is provided?
what is the commission schedule?
who answers the phone?
What are miscellaneous benefits? |
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Term
| true or false: the broker must file yearly the IRS Form 1099-MISC for any independent contractor licensee who earns more than $600. |
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Definition
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Term
| true or false: Regardless of a licensee's status as employee or independent contractor, the broker must enter into a written agreement with each affiliated licensee. |
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Definition
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Term
| true or false: Regardless of a licensee's status as employee or independent contractor, the broker must enter into a written agreement with each affiliated licensee |
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Definition
true;
This agreement must be dated and signed by the parties. It must include, at the minimum, the employment or independent contractor relationship terms, including but not limited to:
Supervision
Duties
Compensation
Duration (this term, as used here, is not meant to indicate a specific termination date, but to allow the parties to negotiate the term of the agreement, whether "at will" or a specific length of time)
Termination (how the agreement is renewed or terminated, and that these provisions be included in the agreement)
The employing broker must give a copy of the employment agreement, including any modifications, to every employee and independent contractor. |
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Term
| a licensee should keep two types of records: |
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Definition
Tax records and expense records
Transaction records |
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Term
| What are the consequences to the broker if an IRS audit reveals that a contractor is actually an employee? |
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Definition
| The broker will be liable for state and federal unemployment insurance premiums, worker's compensation and disability insurance. The broker will also have to withhold federal and state taxes, including Social Security taxes. In addition, the broker could incur stiff tax penalties as a result of the incorrect classification. |
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Term
| What five items must be included in every written agreement with an employee or independent contractor? |
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Definition
Supervision
Duties
Compensation
Duration
Termination |
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Term
| Why should an independent contractor keep expense records? |
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Definition
| These records are particularly important as documentation for the licensee's tax return. Also, depending on the written agreement the licensee has with the broker, he or she may need specific expense records and receipts for reimbursement of some of those expenses. |
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Term
| what is the purpose of the policy and procedures manual? |
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Definition
| o make sure that all members of the brokerage company understand the broker's philosophy. |
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Term
| What kind of training do new sales associates need? |
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Definition
| Training in the management systems and philosophy of the brokerage company |
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Term
| What kind of training is best for small firms? |
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Definition
| One-on-one, on-the-job training |
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Term
| What types of information might the policy manual contain about advertising? |
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Definition
| Who writes the ads? Who places ads? Who pays for ads? What media is authorized for use in the brokerage? Is there training on telemarketing solicitation? |
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Term
| What types of information might the policy manual contain about open houses? |
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Definition
| What are the procedures for licensees holding open houses? What are the rules regarding open house signs and directional signs? What are the safety policies regarding how to keep the licensees safe and how to protect the homeowners' possessions during an open house? |
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Term
| How can a broker choose to pay his or her licensees? |
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Definition
| The broker can choose to pay the sales associate a salary or a percentage share of the commission from the transaction. |
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Term
| What is a 100 percent commission plan? |
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Definition
| The licensee pays a monthly fee to the company to cover the costs of things like office space, telephones, office equipment and supervision. In return, the licensee receives 100% of the commission from any sales he or she negotiates. |
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Term
| What is the compensation for a licensee who sells one of his or her own listings? |
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Definition
| If a licensee lists and sells a property, he or she will receive a share of both the listing and selling side commissions. |
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