By Randell Martin, CPA and Tax Advisor at IRSProb.com
As a real estate agent, you know the thrill of closing a deal, cashing a commission, and helping clients find their dream homes. But come tax season, the only thing under contract might be your bank account—by the IRS.
Unlike W-2 employees, most realtors operate as independent contractors. That means you’re responsible for paying your own income taxes, self-employment taxes, and estimated quarterly payments. And if you don’t? Penalties and interest can pile up faster than offers in a bidding war.
Per IRC §6651(a)(1), the Failure to File penalty can reach 25% of the unpaid tax. Add the Failure to Pay penalty (IRC §6651(a)(2)) and daily compounding interest (IRC §6601), and the debt can spiral into five figures before you’ve even scheduled your next showing.
Paying Off the Entire Debt
The fastest and cleanest way to resolve your IRS issue is to pay in full. This halts all penalties and interest and helps you avoid liens, levies, and the dreaded Notice of Federal Tax Lien.
But many agents don’t have that kind of cash on hand—especially if they’ve gone through a slow season or missed several quarters of estimated payments.
Installment Agreements (IA)
Partial Payment Installment Agreement (PPIA)
When you owe a large amount and truly can’t pay it all—even over time—a Partial Payment Installment Agreement (PPIA) may be the answer.
Pros:
- Lower monthly payments based on your financial capacity.
- Stops collection actions.
- Lets you settle your IRS debt for less over time.
Cons:
- Requires full financial disclosure.
- IRS can re-evaluate at any time.
- Changes in your situation may void the agreement.
Currently Not Collectible (CNC)
If you’re experiencing serious financial hardship, the IRS may declare your account Currently Not Collectible (CNC).
But CNC status is not mercy—it’s math. You must submit a detailed, signed financial disclosure including every bank account, source of income, asset, and debt. Errors or omissions can lead to trouble.
A seasoned tax professional is essential to navigate what to include and how to document it correctly. CNC status is temporary and reviewed periodically.
Offer in Compromise (OIC)
The OIC is the IRS’s version of ‘let’s make a deal.’ If you qualify, you can settle your entire tax debt for less.
But it’s complex. Like CNC, it requires a full financial disclosure signed under penalty of perjury. Missing details can lead to rejection—or worse.
The IRS reviews your income, assets, equity, and reasonable collection potential. If accepted, you must remain in compliance for five years or the deal is void.
Only attempt this with professional guidance.
Trust the Experts
Whether you’re behind on filings, facing a lien, or buried in penalties, working with a tax pro who understands real estate can make all the difference.
With the right plan—and the right guidance—you can move forward confidently.
About the Author
Randell Martin, CPA, is the founder of IRSProb.com, a national tax resolution firm that helps real estate agents, business owners, and independent professionals resolve IRS problems. With 25+ years of experience, Randell specializes in high-stakes tax strategy and IRS negotiation.
When not wrangling tax code, Randell cheers for Texas football and reminds agents that ‘home office’ means just that.
