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Charles Markham
Charles Markham, Enrolled Agent
Category: Tax
Satisfied Customers: 653
Experience:  IRS Enrolled Agent, US Tax Court Practitioner
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I am filing schedule C as a real estate agent. I paid

Customer Question

I am filing schedule C as a real estate agent. I paid commissions for help to land selling properties as well as finding prospective buyers. Is there a limitation to the amount I can claim as an expense (line 10 schedule C)? I believe the threshold use to be $5K a few years ago. I went through IRS publications and can't locate this information. can you help?
Submitted: 8 months ago.
Category: Tax
Expert:  emc011075 replied 8 months ago.

Hi. My name is ***** ***** I will be happy to help you.

There's no and never have been a threshold for claiming legitimate expenses. As long as you can prove it you can claim it.

Customer: replied 8 months ago.
Was there a threshold for commission received as contractor?
Expert:  emc011075 replied 8 months ago.

The expenses must be reasonable (not extravagant) and necessary (helpful, customer in your trade or business). If 15% commission is normal and pay it, you can deduct it. IRS do not put thresholds on income or expenses. Certain deductions may be limited, for instance you can only deduct 50% of your meals and entertainment expenses but you are not limited how many clients you can take out in one month.

Customer: replied 8 months ago.
If i received commission from a broker to facilitate the sale, any threshold there?
Expert:  emc011075 replied 8 months ago.

No, IRS do not put any thresholds or limits on amount of income you can receive.

Expert:  emc011075 replied 8 months ago.

Any questions? Is there anything else I can help you with today?

Customer: replied 8 months ago.
Eva, there was some threshold on the amount you pay to one contractor, or something like that and it was limited to $5k
Expert:  emc011075 replied 8 months ago.

It may have been but it wasn't IRS threshold.

Customer: replied 8 months ago.
Odd i remember reading it in Irs publications.
Expert:  emc011075 replied 8 months ago.

Well, I never heard about IRS limiting how much you can receive or spend on commission. RE agent's main source of income are commissions, some of my clients make living from commissions, why IRS would limit it? I will opt out and give another expert a chance.

Customer: replied 8 months ago.
Ok
Customer: replied 8 months ago.
Thank you for your help.
Expert:  Charles Markham replied 8 months ago.

Hello, I think you are referring to IRS Form C-EZ. In order to use Schedule C-EZ (instead of Schedule C), your total expenses must be limited to $5,000. This is an optional schedule and you can use it to report self-employment income and expenses. There is no limit to the amount of income you may receive, only the amount of expenses you may report. The benefit of using this form is that you do not have to itemize the expenses.

Customer: replied 8 months ago.
Thank you! !!!!
Expert:  Charles Markham replied 8 months ago.

If you have more than $5,000 in expenses, or want to report an office in home, or want to depreciate something, you need to use Schedule C. In all cases, you are responsible to only take legitimate business deductions, but I think this is what you are thinking of. If this answers your question could please accept.

Customer: replied 8 months ago.
I need to go back to my old tax return to see how it was claimed. I believe i filed schedule c, and the expense was related to commission only.
Expert:  Charles Markham replied 8 months ago.

Okay, but this is definitely the only area where the number 5,000 occurs in regards ***** ***** reporting. You are receiving a 1099-MISC not a W2 with the statutory employee box checked, right?

Customer: replied 8 months ago.
I did receive 1099 for $33k but i paid $500 commissions to several people for leads that i paid in cash.
Expert:  Charles Markham replied 8 months ago.

Hmmm...maybe you are thinking of the $600 rule. You can pay someone up to $600. If you pay more than $600 you have file a 1099-MISC. So you can deduct the $500 paid to the three people without filing the 1099-MISC. Maybe that's the dollar limit you are thinking of.