Rat out a Chicago rental service to the IRS and make big bucks

by Joe Zekas on 2/15/13

It’s common for Chicago rental services to report their leasing agents as independent contractors for tax purposes, but control their day-to-day activities to the extent that they should have been classified as employees. The rental service recruiting ad, above, only hints at the high degree of control that rental services often exercise over how leasing agents perform their duties. The firm’s name has been redacted.

The Internal Revenue Service offered this simplified explanation of the issue in a warning about questionable employment tax practices, which include misclassifying employees as independent contractors and failing to withhold taxes and pay Social Security, Medicare and unemployment taxes:

Sometimes employers incorrectly treat employees as independent contractors to avoid paying employment taxes. Generally if the payer has the right to control what work will be done and how it will be done, the worker is an employee.

The IRS has identified questionable employment tax practices as one of the areas in which it will engage in stepped-up enforcement, including criminal prosecutions.

If you have solid information that your current or former rental service misclassified leasing agents as independent contractors, you might reap a very substantial reward by reporting it to the IRS Whistleblower Office.

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

A single whistleblower collected a $104 million award last year.

Your current or former rental service is unlikely to appreciate the irony of seeing the lucrative career it promised but failed to deliver realized in this fashion, but you will. As a bonus, you might get to see your current or former employer hauled away in handcuffs.

If you need help in preparing or documenting your whistleblower submission, it ought to be easy to find a hungry young attorney or CPA who will assist you on a contingent fee basis in exchange for a piece of your action.

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{ 11 comments… read them below or add one }

Megan February 15, 2013 at 12:18 PM

Aren’t agents classified as statutory non-employees?

Reply

Joe Zekas February 15, 2013 at 12:41 PM

Megan,

Licensed agents are – but the rental services rely heavily on pre-licensed staff with 120-day permits who are not statutory non-employees.

And, the statutory exemption does not apply if licensed agents are in fact controlled and directed like employees, which is often the case at rental services.

Reply

Leasing Agent February 15, 2013 at 2:52 PM

As a leasing agent myself, I strongly disagree with this statement. I am never required to hold any office hours and can work as little or as much as I wish.

It really is disgusting how much time and energy you are devoting to bashing various agencies, that at times provide valuable services to people on a time crunch or have busy schedules.

Your comments are not at all appreciated about my career choice, where I make quite good money.

Reply

Joe Zekas February 15, 2013 at 3:04 PM

News flash: lawbreakers don’t provide valuable services.

Some day you may be fortunate enough to have a career that you can promote with a public identity or at least a real email address. In the meantime, I view you as just another rental service smoke-blower.

Reply

Leasing Agent February 15, 2013 at 3:10 PM

Under what grounds are you accusing me of breaking the law? Just because you are trying to get everybody to use YoRents does not mean all rental agencies are breaking the law, Mr. Zekas.

Looks like Ari Elliott at Chicago Apartment Finders does just as well as a Licensed Leasing Agent.

http://www.chicagomag.com/Chicago-Magazine/April-2007/Money-in-Chicago-2007/Who-Makes-What-Salaries-List/

As I have stated in a previous post that never passed your moderation because I proved you wrong, if these services are so illegal and horrible and filthy and disgusting, why are they still around after so many years, and why do so many buildings, management companies, and landlords continue to use these services?

Reply

Joe Zekas February 15, 2013 at 6:27 PM

Leasing Agent,

It’s tiresome to respond to people who don’t read well.

You talked about “various agencies” and that’s who I was describing as lawbreakers. I said nothing about you because I know nothing about you – by your choice.

I don’t know what previous post you’re referring to – probably because you use a different screen name and email address each time you post. That’s not how honest people operate.

A lot of bad businesses survive for a long time, and survival proves nothing.

The rental services’ illegal and wholesale trashing of advertising outlets is one of the major reasons that some landlords feel they have to use the services. Other landlords don’t want to hire their own staff to show units. Still other landlords use the services only to move theiir dog units. And a number of major landlords won’t cooperate at all with rental services, and some do so only out of fear of the vicious lies that rental services spread about buildings that don’t cooperate.

For the record, the notion that we’re “trying to get everybody to use YoRents” is just plain laughable. What we are trying to do is 1) document rental service non-compliance with the law in a way that leads to license revocations and 2) connect more renters directly with landlords by educating them that the rental service lies about how difficult it is to find an apartment in Chicago are just that – lies.

ADDED: I just checked your IP address, and previous comments from that IP address were sent to our trash bin based on name-calling, lies about my ARDC record and using a variety of obscene email names. All future comments from you will go into the trash bin, where they belong.

Reply

Small Potatoes February 16, 2013 at 1:32 PM

Leasing Agent: In fairness the article cited is from 2007 before the crash and also the owner of CAF’s name is ‘Elliot’ so this is probably his brother or cousin or something. Add to it, he’s not even there anymore so if it was so great, why did he leave? All the top guys there leave quickly because there is no upside. Anyway, go be a real Realtor not a leasing agent. A Realtor is a career, not a ‘gig’. SP

Reply

Joe Zekas February 16, 2013 at 1:55 PM

Small Potatoes,

The IDFPR database shows Ari Elliott’s leasing agent license at Apartment Finders, which is the corporate name of CAF.

Reply

Small Potatoes February 16, 2013 at 2:32 PM

Except he isn’t there anymore – and he was family. So the $80,000 comp “Leasing Agent” sent is both dated (2007) and if it was such a hot career track, why did he go back to school? Think about it. The large umbrella leasing organization leases ~1000 apartments a year through its agents paying them 50% or less, call it $1,000 average. If you have 50 agents, that is 20 apartments per agent or $20,000 per agent and $1,000,000 to the broker. Run the numbers any way you like. Unless you sell homes or run with your own Managing Broker license, there is no upside to being a leasing agent. To earn $80,000 it means you leased +/- 80 apartments. 6-7 a month. Every month. If you can do that, you hardly need a managing broker – you should just get a MB license and make the $160,000 and hire agents teaching them how you do it. Even though these guys say the average guy takes $40,000 or 3-4 leases per month, I say no way. Maybe 1 in 20 have the discipline to even do that. The average LA is seasonal. A far better career path for the same skill set is logistics. You can make big money and build a career. But that’s just my take. SP

Reply

Joe Zekas February 16, 2013 at 3:30 PM

Small Potatoes,

We are in complete agreement about the futility of becoming a leasing agent and the lack of financial rewards for doing so – other than perhaps to the company owner.

The kids who sign on to becoming leasing agents really have no idea what they’re getting into, and how poorly it generally pays.

Reply

Small Potatoes February 17, 2013 at 9:16 AM

Let’s examine why all these agents continue to post here in support of their various leasing agencies. I propose that the various brokers making many hundreds of thousands or millions of dollars in leasing fees on the backs of these young people are leveraging the ‘group-think’ nature of this younger generation. These young people do not seem to be thinking critically about the job of leasing agent, their costs, the potential upside and the future. They seem to think about this week and this month and the notion that they could earn “$2,000 today”. In the past, this kind of short sightedness would be dangerous because at the age of 26, people were starting a family, had a mortgage and really needed to think critically about their ability to earn a living. Today, many young people have been fooled into a belief system of eternal youth, immediate gratification and an inability to think critically about what is being offered to them vs their needs. Maybe we can re-frame the conversation from the negative “leasing agents are degenerates” to the positive “real estate is one of the greatest careers anyone could hope to have or even imagine and how can you position yourself for the long term”.

Joe, why not interview some of the better real estate professionals in the Chicago area and have them present how they got started in the business. Who were their mentors. What tools and strategies did they use and do they use in the business to earn a living and build their businesses.

With this perspective, your readers can learn and grow vs. feel they are being spoken down to and reported for license infractions. After all, they are at a job where they are told, ‘post 100 ads a day on Craig’s List’. This may be their only frame of reference. They simply do not YET posses the perspective that is plainly obvious to the rest of us in the business. But all is not lost – they can learn and grow.

Reply

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