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Proving Income: Real Estate Agent Working Under Table

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troubleinaz

Junior Member
What is the name of your state (only U.S. law)? Order is in AZ. Ex lives in CA

My ex told me a few months ago that he was terminated from his timeshare sales job and was going to sell real estate. He filed for unemployment & He said he had a Broker friend that would give him several home listings and would not report him as working there until he made money so he could collect unemployment. I have verified that he is working with his friend now but says he is being "trained" by another agent. This is since October 08. (Seems like a very long "training") He sits open houses for the broker and works via another agent we will call "Raul".

Our children were visiting their father over summer and overheard him talking to Raul about 2 homes of his that sold. I think Raul is paying him under the table somehow. He does not have a bank account to protect himself. He gives his unemployment checks to his girlfriend who deposits them and pays the bills via her account.

We have 4 children. I can't make ends meet & am constantly at the point of utility shut off on just my income. His girlfriend sends $200 every two weeks in child support, but he is ordered to pay $1200 + $385 in arrearages/month. ($49k in arrears). Support enforcement tells me I should just be happy he sends something, but I highly suspect he is being paid much more than unemployment. They will do nothing to help, just give me the runaround.

How do I prove his income? Do I need to hire a PI? (no way I can afford one). The broker will not verify that my ex works for him. What do I do?
 


nextwife

Senior Member
If he has only had two sales since October, it is unlikely, if there are only two sales or so under his belt, that he has covered more than his start up costs. Licensing, Board membership (to get on MLS), MLS fees, auto expenses, signage, co-broke splits, transaction fees, etc. In the current market, I don't know many RE rookies who are ahead, when I know so many RE pros that are losing money this year. He probably won't even know until he finishes the year , adds up his expenses, and deducts them from his 1099 income, whether he is ahead or behind in this endeavor.
 

LdiJ

Senior Member
If he has only had two sales since October, it is unlikely, if there are only two sales or so under his belt, that he has covered more than his start up costs. Licensing, Board membership (to get on MLS), MLS fees, auto expenses, signage, co-broke splits, transaction fees, etc. In the current market, I don't know many RE rookies who are ahead, when I know so many RE pros that are losing money this year. He probably won't even know until he finishes the year , adds up his expenses, and deducts them from his 1099 income, whether he is ahead or behind in this endeavor.
I agree...but I would also like to point out that being self employed is NOT working "under the table". It simply means that the person will get a 1099 at the end of the year rather than a W2. There is no way that someone working in reality could be paid "under the table".
 

troubleinaz

Junior Member
I agree...but I would also like to point out that being self employed is NOT working "under the table". It simply means that the person will get a 1099 at the end of the year rather than a W2. There is no way that someone working in reality could be paid "under the table".
He is not listed under the Broker's license. He is paid from the other guy, Raul, I believe. Broker denies he works there, so it won't be reported on a 1099. I checked the website for CA DRE & it showed his license hanging there, but as soon as I notified DSCE and CA Unemployment his license was mysteriously removed from Broker's listed agents.

I wouldn't say "there is no way to work under the table" in RE. Many people do it by being paid a referral fee or a paper fee that is not reported and paid in cash. I have had my RE license in both CA and AZ, so I know it's not legal, but it is still done.

He already had his RE license to sell timeshare. No fees there. If he's not listed as working for a broker, I doubt that he would join MLS. Even if he did have expenses, child support is supposed to be taken out before deductions.

He knew the market was bad, but CHOSE to take this job rather than going back into timeshare where he has 25 yrs experience.
 

Mass_Shyster

Senior Member
There is no way that someone working in reality could be paid "under the table".
It's actually quite common for a new agent to be paid "under the table". If they have the cooperation of a more experienced agent with better splits, they can put the listing in the experienced agent's name. At large franchise agencies, a new agent may get 50% of the net, while an experienced agent can get up to 90%.

the experienced agent collects 90%, and gives the newbie 40% in cash. Experienced agent pays tax on the 90%, but collected 50% for no work.
 

troubleinaz

Junior Member
It's actually quite common for a new agent to be paid "under the table". If they have the cooperation of a more experienced agent with better splits, they can put the listing in the experienced agent's name. At large franchise agencies, a new agent may get 50% of the net, while an experienced agent can get up to 90%.

the experienced agent collects 90%, and gives the newbie 40% in cash. Experienced agent pays tax on the 90%, but collected 50% for no work.
Thank you.

Now, is there any way to prove what's going on?
 

LdiJ

Senior Member
It's actually quite common for a new agent to be paid "under the table". If they have the cooperation of a more experienced agent with better splits, they can put the listing in the experienced agent's name. At large franchise agencies, a new agent may get 50% of the net, while an experienced agent can get up to 90%.

the experienced agent collects 90%, and gives the newbie 40% in cash. Experienced agent pays tax on the 90%, but collected 50% for no work.
That makes absolutely no sense whatsoever. Self employment taxes plus regular taxes could easily top 40% of the gross. That means that the agent would be doing all of that for 10%, and upping their marginal tax rate in the process....when all they would have to do is 1099 the "employee" and not have to pay tax on the 40%.
 

troubleinaz

Junior Member
That makes absolutely no sense whatsoever. Self employment taxes plus regular taxes could easily top 40% of the gross. That means that the agent would be doing all of that for 10%, and upping their marginal tax rate in the process....when all they would have to do is 1099 the "employee" and not have to pay tax on the 40%.
You are assuming that this money is being reported on taxes. He doesn't file taxes because he owes. You are also assuming that he is not trying to hide money. That in itself will motivate a person to take hits a normal ethical person would think is ridiculous.

If the more experienced agent is collecting 90% of a 6% house commission on a $100k home sale where he is both selling & listing agent, that is $5400 commission. He pays "trainee" 40% or $2160, leaving the net profit of $3240 to the experienced agent for doing nothing. Even with taxes taken out, it's not going to equal the entire amount. And if the knows anything about taxes he is writing off a good deal of his expenses.

He is getting paid somehow. My original and only question is still, HOW do I prove it?
 

LdiJ

Senior Member
You are assuming that this money is being reported on taxes. He doesn't file taxes because he owes. You are also assuming that he is not trying to hide money. That in itself will motivate a person to take hits a normal ethical person would think is ridiculous.

If the more experienced agent is collecting 90% of a 6% house commission on a $100k home sale where he is both selling & listing agent, that is $5400 commission. He pays "trainee" 40% or $2160, leaving the net profit of $3240 to the experienced agent for doing nothing. Even with taxes taken out, it's not going to equal the entire amount. And if the knows anything about taxes he is writing off a good deal of his expenses.

He is getting paid somehow. My original and only question is still, HOW do I prove it?
Ok...self employment taxes on 5400.00 is 810.00, if his marginal tax bracket is 25% (an average bracket) that's 1350.00. I believe that CA taxes are around 8% so that's another 432.00 for a total of 2592.00 so that means the listing agent is doing it for 648.00 and absorbing all of the expenses to boot.

No way that is happening unless the listing agent is an idiot. I can guarantee you that the listing agent is going to issue an "employee" a 1099 for their 40%. They would be a fool not to.

In addition, there is no way for the listing agent to avoid reporting the income on their taxes. They automatically get a 1099.
 

CourtClerk

Senior Member
My original and only question is still, HOW do I prove it?
You're going to have to hire a PI on your dime because CSSD is not going to expend the money to go on your fishing expedition. In fact, I'm surprised someone hasn't told him to file for a downward modification to get his court ordered payments down towards that $200 every 2 weeks you're getting as it stands. It's more prudent for him, although they won't file for contempt so long as he's sending something. As long as they can prove he's receiving unemployment, they aren't going to be bothered.
 

nextwife

Senior Member
Ok...self employment taxes on 5400.00 is 810.00, if his marginal tax bracket is 25% (an average bracket) that's 1350.00. I believe that CA taxes are around 8% so that's another 432.00 for a total of 2592.00 so that means the listing agent is doing it for 648.00 and absorbing all of the expenses to boot.

No way that is happening unless the listing agent is an idiot. I can guarantee you that the listing agent is going to issue an "employee" a 1099 for their 40%. They would be a fool not to.

In addition, there is no way for the listing agent to avoid reporting the income on their taxes. They automatically get a 1099.
I agree. It's NOT "common" for a Broker to pay under the table. The transactions are reported, and the brokers know they must account for the commissions. Brokers are NOT going to themselves owe taxes for income they provided to someone else!
 

justalayman

Senior Member
so, it's time to play his game.


a friend, unknown to your ex, needs to visit a house ex is attending for an open house, or even better, just to show them a listing.

If they play it well, he will expose himself as acting as an RE agent and then he can be reported to the state licensing agency. Dang, if they are convincing, he might be dumb enough to give them a business card.

If he happens to be a Realtor, they would be interested in an unethical agent as well that flies under their colors.
 

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