Commissions reported on 1099 NEC

[sfhus]

When a REALTOR® works as an independent contractor rather than an employee of a brokerage company, the brokerage companies may issue an annual Form 1099 to the REALTOR to report amounts paid to the broker. When the REALTOR® agrees to return part of a commission to the buyer or the seller, and this has been structured as a reduced commission or as a credit on the closing statement, the 1099-MISC issued by the brokerage company should reflect only the net amounts paid to the REALTOR® and this amount will be reported as gross income. If however, the REALTOR® received the gross commission and actually returned some to the seller or buyer, the gross amount is reported and the REALTOR® should be entitled to a corresponding deduction.

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[sfhus]

IS THIS TRUE??

[sfhus]

@JoannaB2

[Irene2805]

Yes -- If the gross amount of commission was reported to the Realtor, then the Realtor can deduct the amount of commission rebate as a business expense.

[marypost13]

For real estate agents who are salaried employees (on payroll) that receive commissions on top of their salary (not through payroll), which form 1099 should be used to report the commissions paid to the agent, 1099-MISC or 1099-NEC?

[Vanessa A]

If you are reporting commissions to an employee they should be included on their W-2 along with their regular wages in box 1. 

[marypost13]

So just add the commission amount to gross wages? Would we withhold taxes on the W2 or not?

[DianeW777]

Yes, you would include the commissions with their regular wages on the W-2.

Yes, you would take federal and state withholding, as well as social security and medicare tax from the gross commissions they are paid. You should use their W-4 and possibly specific rules for certain types of pay.

• How you withhold on supplemental wages (includes commissions) depends on whether the supplemental payment is identified as a separate payment from regular wages. The Internal Revenue Bulletin (IRB) below will explain the necessary withholding on commissions. Use Ctrl + F to search for 'supplemental wages'. They provide various examples so you can see which one fits your situation.
  • IRB: 2008-24

  • CFR § 31.3402(g)-1 - Supplemental wage payments (scroll to optional flat rate withholding)

[marypost13]

Most helpful, thank you!

[Snowscout]

Do non-employee real estate agent commission's get filed under "direct sales on box 2" or in the most common box "box 1" on the 1099-NEC?

[Vanessa A]

Real Estate Agent commissions would be reported in Box 1.  Box 2 is for consumer resale.

"Box 2. If checked, consumer products totaling $5,000 or more were sold to you for resale, on a buy-sell, a deposit-commission, or other basis. Generally, report any income from your sale of these products on Schedule C (Form 1040)."