Today on Tax Hacker Tuesday with Epic Real Estate, Tim Berry and Matt Theriault explain how to deal with acquisition managers and taxes. Learn what your options for defining acquisition managers on your taxes, what to do differently if your acquisition manager is a partner or remote, how to avoid risk in your decision, and more.
What You Will Learn About Acquisition Managers – W2 or 1099?
- How to structure the employment of an acquisition manager
- What the IRS wants to default everyone as (and why it’s bad news for you)
- What to do if you’re risk adverse
- How to create the best tax situation for both you and your acquisition manager
- What to do differently if you’re in a partnership with your acquisition manager
- What makes a virtual acquisition manager different
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- Also, check these out:
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Speaker 1: This is Theriault Media.
Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%?
Now, you can. Tim Berry, attorney-at-law, shares here each and every week current tactics and strategies that anyone can implement to hack the tax code. Protect your assets and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday.
Matt Theriault: Welcome to the Epic Real Estate Investing show. It is Tax Hacker Tuesday with my attorney and friend, Tim Berry. Hello, Tim.
Tim Berry: Hey Matt. How are you doing, sir?
Matt: Doing well. Thank you, sir. Yeah, on Mondays here at Epic we show you new and creative ways, as well as time honored ways of making money using real estate. And then on Tuesdays, we show you how to keep it. If you have a question for Tim, you can go to taxhacker.com/questions and post it there. And, Tim-
Tim: Matt, can I ask you a quick question?
Matt: Oh, sure. Go ahead.
Tim: What are Mondays? Is it Make it Monday … Making Money Mondays then?
Matt: I like that. Yes. That’s what we’re … done.
Matt: Yeah. Making Money Mondays. I like it. Yeah, Mondays, Tim, you’ve been around … We were running the show eight years before you and I crossed paths and that’s just our traditional day where we ran our traditional episodes and now we are adding new days here and there and we’re up to four days a week. And I have to say, I was looking at the stats the other day, Tim, and you are amongst the top of the downloads each and every week.
Tim: You know, I’ve got a big family.
Matt: You do. Yeah. I thought that was odd. I just didn’t think that I know people like they’re interested in hearing about tax strategy and asset protection stuff and they love to talk about it but so few of them actually follow through and actually do it I think. But they sure like listening to it. The stats are there.
Tim: You’re there … They need something to go to sleep by.
Matt: Right. Yes. It’s all that opiod controversy. This is the substitute. Alright, today’s question comes from Mr. Gary Ludwig. He’s out of Chicago Real Estate Investment Properties. Gary asks, “How should we employ our acquisition managers? W-2 or 1099 or something else? Would the answer be the same if they were virtual assistants or virtual acquisition managers?” I see what he’s saying. Okay, let me school you on real estate here real quick, Tim.
Matt: Let me put the context of this question because I don’t know if you’re hip. I’m imagining Gary is running a marketing campaign. He’s fielding those phone calls and he’s sorting the motivated sellers from the non-motivated sellers. He’s setting up appointments for somebody else, his acquisition manager, to go out there and probably have that meeting with the seller. And he’s wondering, I guess, should that be an employee or an independent contractor or is there some better way to structure it.
Tim: Got it. Got it, got it, got it. And that’s a toughy. I’d love to give a simple answer what have you but hey, I’m an attorney and I’ve got to go by the words, you know? I’m going to ramble for a bit.
Matt: Yeah, I’ve seen the invoices.
Tim: That is for comments. But here’s the thing. Under the tax code, the IRS wants to default that as many people as possible are employees. And the reason they want as many people as possible to be employees is that the employer has to pay a lot of their taxes and withholder taxes, so the IRS gets paid. The IRS, their knee jerk reaction is everybody is an employee. And if you’re risk adverse, I would book that person as an employee. Now, if you give this person plenty of room to run and they can do all sorts of stuff. They made their own decision. They’re using their own vehicle. They’re using their own phone. They’re not using your equipment. Yeah, you can book them as an independent contractor. And booking them as independent contractor is probably a lot better for you because you don’t have to withhold their taxes. You don’t have to comply with all the OSHA stuff. You don’t have to have the stupid little forms up on the wall in the break room and all that other stuff.
It’d be a best case scenario for you to book them as an independent contractor. But in order for them to be a true independent contractor, they have got to be under their own control. They can make their own hours. They can do what they want when they want to. And they don’t use your equipment. That would be the best case scenario, independent contractor for them. And by the way, it would be best for their tax situation too for them to be an independent contractor. But I’m just warning you, if you do book them as an independent contractor, our good buddies at the IRS aren’t going to like it. And if they can show that this person’s using your equipment, your lists, your leads, and is under your control, they’re going say, “That person’s an employee.”
How was that convoluted attorney answer?
Matt: No, that was pretty good. It was pretty good. It was really just how risk adverse are you to IRS audits.
Tim: That’s what it comes down to. And if you are risk adverse, just give them as much room as possible to do things on their own without your control and it’s going to be tougher for the IRS to bust you on something.
Matt: Got it. Here’s a third way, a third possibility. What if there was a partnership in place on the actual investments or the properties that they’re going out to try and secure?
Tim: That would be a good idea too. They could go out … They could be in the partnership but the challenge is partnerships, it’s a great idea for saving the employee issue. But now there’s liabilities. What if they do something wrong? What if they say this wrong thing and they offend somebody? And now if they’re an independent contractor, the liability stays on them. But if they’re now in a partnership with you, all the assets of that partnership, of that joint venture if you will, are up for grabs. It gets a little bit trickier, but could you do that? Yeah, potentially you could do that, as long as you guys have good trust in each other. Just another thing to think about. Sure.
Matt: Now that was a good attorney answer because I wasn’t even thinking about liabilities.
Tim: Well, see attorneys, that’s all we did in law school was read these case books about there’s liability for walking across the road, we’re probably violating five laws and they can be sued. That’s why any time you talk to an attorney, they’re terrified of giving you a correct answer because there’s liability for giving correct answers.
Matt: Right. Yeah. It’s kind of like how the home inspections go. They just … They have to know everything because if they get in the courtroom and found out that they didn’t note something and now they’re liable because they didn’t say anything.
Matt: Alright. Second part of the question, I think we probably already have an answer to it but we’ll just confirm, would the answer be the same if they were virtual acquisition managers?
Tim: Well, that gets pretty darn interesting right there because a virtual person, they’ve got a lot more leeway so I think it’s less likely that a virtual person’s going to be considered an employee. You’re pretty much giving them the leeway to work on their own hours and make the dollar for dollars however they want to and I’m making the assumption it’s all by phone, fax, email at that point as opposed to in-person, but I think virtual would be a safer bet.
Matt: Got it. Okay. Perfect. Cool. Well, thanks Gary. Thanks for the question. And it you have a question for Tim, you can go to taxhacker.com/questions and post it there. We’ll be here live. And if you’d like a copy of Tim’s free book, How to Take Advantage of Five Loopholes in Trump’s New Tax Plan the Mainstream Media is Not Sharing with You and Could Cost You a Small or Large Fortune, got taxhacker.com. You can download the book there and then after you’ve done that, you’ll have the opportunity to schedule some time with Tim even. And either he or one of his team members will get on the phone with you for a short five or ten minute call to assess your situation, see if there is a good fit. Then they’ll take the next step and schedule a tax action plan. And if there’s not a good fit, they’ll go ahead and share some alternative resources to where a better fit for you can be made. Either way Tim and his team are committed that you are better off after the call than you were before. That’s just Tim. That’s just what he does. He’s a super cool dude. Tim, any last bit of advice?
Tim: No, just I’m a super cool dude. That’s it.
Matt: Confirmed. Alright. That’s it for Tim and myself. We’ll see you next week for another episode of Tax Hacker Tuesday on the Epic Real Estate Investing Show. Bye.
Speaker 1: That’s it for today as we dream of a tax system that works just for you. But until then, you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday.