Accountant for New Westminster realtors

Commission arrives in lumps, tax does not

A realtor can close three deals in a month and none in the next two. Tax is owed on the year’s total, and once net tax owing passes $3,000 in the current year and either of the two previous years, the CRA expects instalments on March 15, June 15, September 15 and December 15. Missing them adds interest, even if the final balance is paid on time.

The working answer is a separate account. A fixed share of every commission cheque goes into it for income tax and GST, before anything else is spent. The instalment calculator shows what each quarter should be.

Working through a personal real estate corporation

BC permits realtors to earn commissions through a PREC. The brokerage pays the corporation, the corporation pays tax at the small business rate on what it keeps, and the realtor takes salary or dividends as needed. Like any incorporation, it saves tax only on income left in the company.

A PREC also adds work: a T2 each year, a separate bank account, a minute book, and a BC annual report. It makes most sense once commission income runs well beyond your personal spending. The first year needs care with the transfer date, the brokerage paperwork and the GST account. See PREC accounting in BC and corporate tax in New Westminster.

Expenses realtors under-claim or over-claim

Vehicle costs are the largest item for most agents and the most reviewed. A log of business kilometres supports the claim; without one it is hard to defend. Marketing, listing photography, staging, signs, board dues, licensing and errors-and-omissions insurance are all deductible business costs.

Meals and entertainment are generally limited to half. Client gifts have their own limits. Home office costs count only if the home is your main place of business or used regularly for meetings, which a desk at the brokerage can undermine. Brokerage fees and desk fees are deductible in full. Keep receipts; they are the first thing asked for in a review. See the vehicle log and the meals and entertainment rule.

Some brokerages report commissions on a T4A, others only on a statement. Either way, the brokerage figures are the starting point, and our job is to match every deposit to them. Referral fees paid to other agents are deductible when they are documented. Assistants paid by the realtor bring payroll with them, or a contractor relationship that needs to be genuine.

GST on commissions

Real estate commissions are generally subject to GST, so a new agent passes the $30,000 registration test quickly. Once registered, you charge GST on commissions and recover it on your own costs as input tax credits. A PREC registers in its own name; a personal GST account does not carry across.

BC PST does not apply to the commission itself. It does apply to some goods and software you buy. Most realtors file GST annually, which makes setting it aside from each cheque essential. See the GST registration guide.

A condo-heavy market and the files it creates

New Westminster’s housing is dense: towers and mid-rise strata buildings form a large share of what trades hands. Many realtors here own a unit or two themselves, as a rental or a future home. That brings form T776 for the rent, and careful records of cost, improvements and any change in use.

Selling a property you held only briefly, or assigning a presale contract, raises the question of whether the gain is business income rather than a capital gain. Realtors face that question more directly than most, because buying and selling property is close to their trade. Talk it through before the sale, not after. See selling a rental property and change-in-use rules.

Your first year in a PREC, month by month

In the first month, the corporation is formed, the brokerage is notified, and a business bank account and GST account are opened. Commissions then flow to the company. Each month the books record commissions, brokerage deductions and expenses. Before year-end, salary or dividends are set for the year. Six months after year-end the T2 is filed, with the balance paid earlier. See bookkeeping in New Westminster.

Two habits make the first year smooth. Every commission goes to the corporation’s account, never to a personal one. And personal spending stays off the company card, so the shareholder loan account does not grow by accident. A balance owed to the company that is not repaid within one year after year-end is generally taxed as income. The loan-balance tracker keeps it visible.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• Commission income matched to brokerage statements
• GST registration and the annual return
• Vehicle, marketing and home office claims supported
• PREC set-up, bookkeeping and the year-end T2
• Salary or dividends, and the owner’s T1
• Instalments planned around commission timing

A realtor’s self-employed T1 with schedules is commonly $250–$450. A PREC is quoted after a free consultation. See pricing.

Remote accounting for realtors from Abbotsford

EverStone is a one-CPA firm based in Abbotsford, serving New Westminster realtors entirely online. There is no New Westminster office and no local staff. Meetings are held by video, brokerage statements and receipts come in through a secure upload link, returns are signed by e-signature, and no visit is required at any point.