Realtor accountant in Coquitlam

For a one-realtor PREC, the bundle of monthly bookkeeping, payroll and the year-end T2 with statements usually runs $450 to $650 a month. An unincorporated realtor’s self-employed T1 with a T2125 is commonly $250 to $450. The work covers the T2 with Schedule 50 and the small business deduction, the T1, GST returns with input tax credits, CCA on the vehicle, and T4 or T5 slips for what the PREC pays you.

The hub for realtors, PRECs and brokers explains what makes commission income different and links to every related guide.

Commission income arrives unevenly

The Tri-Cities market moves in waves: presale launches near the stations, a busy spring for detached homes, quieter months in between. Commission follows those waves, but tax does not wait for a slow month. Nothing is withheld from commission, so tax on a strong spring is owed in full the following April. Once your net tax owing passes $3,000 in the current year and either of the two previous years, the CRA expects quarterly instalments as well. The simplest protection is to move a fixed share of every commission into a separate tax account the day it lands. That includes the GST portion, which was never yours to spend.

Working through a personal real estate corporation

BC permits realtors to earn through a personal real estate corporation, or PREC. The brokerage pays commission to the corporation instead of to you personally. The PREC pays tax at the small business rate on what it keeps, and you pay personal tax only on what it pays you, as salary on a T4 or dividends on a T5. The value is in what stays inside. A realtor who spends every dollar earned gains little and adds a T2, a corporate bank account and annual filings. A realtor who earns more than they need to live on can defer tax on the difference. The PREC accountant page covers the set-up.

GST on every commission

Commission is a taxable supply for GST. Once your commission income passes $30,000 in four consecutive calendar quarters, registration is mandatory, and most full-time realtors pass that quickly. The brokerage usually collects the GST on your behalf and pays it to you or your PREC along with the commission. You then remit it on your own return, less input tax credits for GST paid on business costs like marketing, a vehicle and phone. Many realtors file annually. A realtor who switches from personal to PREC needs the GST registration to follow the income, or the returns stop matching the brokerage statements. See GST registration.

The expenses realtors most often get wrong

Vehicle costs are the largest and the most reviewed. Driving between showings in Port Moody, Westwood Plateau and Port Coquitlam is business; driving from home to the brokerage each day usually is not. A log is what proves the split. Marketing, signage, photography, staging and listing fees are deductible. Client gifts and meals are deductible only within limits. A home office qualifies only if it meets the tests, and a desk at the brokerage can work against it. Brokerage desk fees and board dues are straightforward. The vehicle deduction guide and the vehicle log page cover the car.

Presales, assignments and your own property

Coquitlam’s tower and townhouse projects mean many realtors handle presale contracts and assignments for clients. When you buy a presale yourself, the tax picture changes. A realtor who buys and resells property can be treated as trading in real estate, with any gain taxed as business income rather than a capital gain. An assignment of a new home can also carry GST. The facts decide each case, and they are far easier to plan before you sign than after you assign. A rental condo you hold for the long term is a different matter, reported on a T776; accounting for real estate investors covers that side.

Books that match the brokerage statements

Every commission arrives with a brokerage statement showing the gross commission, the split, any fees and the GST. The ledger should record each of those lines, not just the net deposit. Recorded that way, the GST return ties to the statements, the income on the T2 or T2125 ties to the brokerage’s year-end summary, and a CRA review takes an afternoon rather than a month.

Money you take from a PREC beyond your agreed salary or dividends is a shareholder loan, and a loan left unpaid one year after the company’s year-end is generally taxed as your income. The shareholder loan guide explains the rule, and the instalment calculator sizes what to set aside. For a one-off question, a 45-minute Advice Call is a flat fee of $200 + GST.

Your first year in a PREC

• Incorporate the PREC and notify the brokerage and the regulator as required.
• Open a corporate bank account and move commission deposits there from day one.
• Register the PREC for GST and set up a payroll account if it will pay you a salary.
• Decide a year-end that suits your market rhythm, not just December by default.
• Agree a monthly draw, and record anything else taken out as a shareholder loan.
• Plan the first T2 and the salary or dividend mix before year-end, not after.

Personal returns for the year of change carry both the personal and the PREC income. See personal tax in Coquitlam.

Remote accounting for realtors from Abbotsford

EverStone is a one-CPA firm based in Abbotsford, serving Coquitlam realtors entirely online. There is no Coquitlam office and no local staff. Brokerage statements, receipts and the vehicle log come in through a secure upload link, and returns are signed electronically. That suits a working day spent between showings rather than at a desk.