Epic Real Estate Investing - Acquisition Managers - W2 or 1099? | 379

Episode Date: April 24, 2018

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio 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. Welcome to the Epic Real Estate Investing show. It is Tax Hacker Tuesday with my attorney and friend Tim Barry. Hello, Tim. Hey, Matt. How are you doing, sir? 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. So if you have a question for Tim, you can go to taxhacker.com slash questions and post it there. And Tim. Can you ask you a quick question? Oh, sure. Go ahead.

So whatever Mondays? Is it making money Mondays then? I like that. Yes. That's what we're done. Cool. Yeah, making money Mondays. I like it.

Yeah, so yeah, Mondays, Tim, you've been around. We were running this show eight years before you and I cross paths. And that's just our traditional day where we've 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.

You know, I've got a big family. You do, yeah. I thought that was odd. I just didn't think. I know people, like, they're interested in hearing about tax strategy and asset protection stuff, and they're so,

they love to talk about it, but so few of them actually follow through and actually do it, I think. But they sure like listen to it. The stats are there. They need something to go to sleep by. Right. Yes.

It's all that opioid controversy. This is the substitute. All right. So 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, is it W-2 or 1099 or something else?

Would the answer be the same if they were virtual assistance or virtual acquisition managers? I see what he's saying. Okay, so let me school you on real estate here real quick, Tim. 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? Got it. Got it, got it, got it, got it. And that's a toughie. I mean, I'd love to give a simple answer or what have you, but hey, I'm an attorney. I got a bill by the word, you know? So I'm going to ramble for a bit. Yeah, I've seen the invoices. That's for comments. 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 withhold their taxes. So the IRS gets paid. So the IRS, their knee-jerk reaction is everybody is an employee. And so 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 make their own decisions, 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 an 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 those stupid little forms up on the wall in the break room and all that other stuff. So 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'd 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 that 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 to say that person's an employee. So how is that a convoluted attorney answer? No, that's pretty good. It's pretty good. It's really just how risk adverse are you to IRS audits? 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. Got it. Here's a third possibility. What if there was like a partnership in place on the actual investments or the properties that they're going out to try and secure? Oh, that would be a good idea, too. They could go out and they could be in a 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 is a wrong thing? 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. So it gets a little bit tricker, but could you do that? Yeah, potentially you could do that, so long as you guys have good

trust in each other, you know, just another thing to think about, sure. Now, that was a good attorney answer because I wasn't even thinking about liabilities. See, attorneys, that's what 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 we can be sued. So that's why any time you talk to an attorney, they're terrified at giving you a correct answer because there's liability for giving correct answers. Right. Yeah. It's kind of like how the home inspections go. Like they just, they have to note everything because if they get in the, the courtroom and found out that they didn't note something and now they're liable because they didn't say anything. Yeah.

All right. So the 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? Well, you know, 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 dial 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. Got it. Okay. Perfect. Cool. Well, thanks, Gary. Thanks for the question. And if you have a question for Tim, you can go to taxhacker.com for questions and post it

there. We'll read here live. And if you'd like a copy of Tim's free book, how to take advantage of five loopholes and Trump's new tax plan, the mainstream media, is not sharing with you. And could cost you a small or large fortune. go to 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 to 10 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? No, just I'm a super cool dude. That's it. Confirmed. All right. So 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. 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. This podcast is a part of the C-suite Radio Network.

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