Buyer commission rebate and tax reporting

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Nancy

New member
Hi,

I acted as a buyer's agent for relatives when they purchased a house and I rebated them the commission outside escrow. How do I indicate this on my schedule C so I do not have to send my relatives a 1099? I know IRS rules that rebates are not considered commission but my CPA told me she doesn't know how to document this so I don't pay taxes on it.

Anyone know how to do this? Thanks in advance.
 
Nancy said:
Hi,

I acted as a buyer's agent for relatives when they purchased a house and I rebated them the commission outside escrow. How do I indicate this on my schedule C so I do not have to send my relatives a 1099? I know IRS rules that rebates are not considered commission but my CPA told me she doesn't know how to document this so I don't pay taxes on it.

Anyone know how to do this? Thanks in advance.
Click to expand...

Deduct from line 2 on Schedule C and fire your accountant.
 
WTTCHMN said:
Nancy said:
Hi,

I acted as a buyer's agent for relatives when they purchased a house and I rebated them the commission outside escrow. How do I indicate this on my schedule C so I do not have to send my relatives a 1099? I know IRS rules that rebates are not considered commission but my CPA told me she doesn't know how to document this so I don't pay taxes on it.

Anyone know how to do this? Thanks in advance.
Click to expand...

Deduct from line 2 on Schedule C and fire your accountant.
Click to expand...

^ THIS!
 
I'm afraid that there may be a lot that's left on the table based on the post, not maximizing deductions and such. 
 
My accountant says Schedule C Line 2 is for sales of goods only, not commission. I looked and it refers to customer rebates but doesn't specify goods. I'm not wrong to correct her then?

I spent an hour on the phone with the IRS and they told me to hire another CPA as well. However they said they could not give me tax advice.
 
Nancy said:
My accountant says Schedule C Line 2 is for sales of goods only, not commission. I looked and it refers to customer rebates but doesn't specify goods. I'm not wrong to correct her then?

I spent an hour on the phone with the IRS and they told me to hire another CPA as well. However they said they could not give me tax advice.
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You deduct cost of golds sold on Line 4.  I don't think it matters where you put it whether it be on Line 2 or on Line 4 or even some other expense line as the end result will be the same.  I put my commission rebates on Line 2. 
 
Thank you for all the great info. I was just curious, in the end if the rebate affects the cost basis for the property, how is that factored in? Does the owner have to remember the rebate when they're selling the property?
 
Nancy said:
Thank you for all the great info. I was just curious, in the end if the rebate affects the cost basis for the property, how is that factored in? Does the owner have to remember the rebate when they're selling the property?
Click to expand...

Yes!  You really do need to fire your accountant.
 
quick n dirty
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Nancy said:
Thank you for all the great info. I was just curious, in the end if the rebate affects the cost basis for the property, how is that factored in? Does the owner have to remember the rebate when they're selling the property?
Click to expand...

high billing rate (tax guy) + multiple easy questions = fire your tax person
 
So I talked to my accountant and even gave her the IRS ruling and she didn't believe me about the rebate adjustment on Schedule C. She said I didn't hear it from the IRS so it isn't true. She said I was griping about a few more dollars in tax!  >:(
 
Nancy said:
So I talked to my accountant and even gave her the IRS ruling and she didn't believe me about the rebate adjustment on Schedule C. She said I didn't hear it from the IRS so it isn't true. She said I was griping about a few more dollars in tax!  >:(
Click to expand...

Wow is all I have to say....get yourself another tax CPA.
 
I recently closed on a home that a relative acted as Buyer's agent for me.  I've read some conflicting advice online about having my relative "rebate" me their commission.  But if I'm reading this thread correctly, it sounds like they can send me everything they get (after their brokerage takes a peice), and write it off on line 2 of Schedule C, as has been mentioned a few times.  Sound correct?  Is there any "agreement" that needs to be in writing or that escrow / the mortgage broker has to have been aware of in order to do this?  Thanks in advance!
 
Kings said:
I recently closed on a home that a relative acted as Buyer's agent for me.  I've read some conflicting advice online about having my relative "rebate" me their commission.  But if I'm reading this thread correctly, it sounds like they can send me everything they get (after their brokerage takes a peice), and write it off on line 2 of Schedule C, as has been mentioned a few times.  Sound correct?  Is there any "agreement" that needs to be in writing or that escrow / the mortgage broker has to have been aware of in order to do this?  Thanks in advance!
Click to expand...

No agreement has to be in place.  The important thing for the agent is that the name on the check for the rebate needs to match the name on the Final HUD-1 Closing Statement and then save the cancelled check copy along with the HUD as proof in case of an IRS audit. 
 
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