Leasing agents – how to cut your losses at tax time

If you were lured into working at a Chicago rental service last year by the promise of a “lucrative career” and “steady earnings” the odds are you washed out of the business after grossing only a few thousand – or a few hundred – dollars in commissions.

Chicago rental services typically treat their new recruits as “independent contractors” and don’t withhold state and federal taxes, pay Social Security or Medicare taxes, comply with minimum wage laws, or pay state and federal unemployment taxes or workers’ compensation insurance.

If the rental service you worked with paid you more than $600 in 2014 and complied with federal law (and I emphasize the IF), it recently sent you IRS Form 1099-MISC.

Independent contractor leasing agents are required to pay federal Self-Employment Tax, i.e. Social Security and Medicare taxes, on income subject to the tax at a rate of 15.3%, in addition to any other state and federal income taxes. A leasing agent who grossed $3,000 during the year, for example, would be liable to pay $459 in self-employment tax.

Rental services often simply assume that calling their new hires “independent contractors” is enough to resolve the issue. It isn’t.

Whether leasing agents should be classified as independent contractors or employees is a complex issue, and one that turns on facts that will vary from one rental service to another. Based on what I know of the manner in which rental services operate, especially with regard to new hires that are not yet licensed, many leasing agents should be classified as employees rather than independent contractors.

If you worked for a Chicago rental service and received a Form 1099-MISC, you can file IRS Form SS-8 and request a determination of whether you were legitimately classified as an independent contractor rather than an employee. You might be pleasantly surprised to learn that you may be able to reduce your self-employment tax liability by taking a few minutes to file a form, and your former employer may be hearing from the IRS.

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