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What You Should Know about Independent Contractors for the Real Estate License Exam

Most real estate salespeople work as independent contractors for brokers. This relationship sometimes creates issues you need to understand for the Real Estate License Exam. This typical working relationship between a salesperson and a broker affects everything from taxes to daily work.

The best way to understand work status as an independent contractor is to contrast it with a regular employee. A real estate salesperson can work as an employee for a broker, but doing so is not the norm. Although he is the boss, the broker doesn’t have the same detailed authority over an independent contractor as with a regular employee. The two main differences are

  • Employees must work the hours the employer tells them to work. The employer also must take out taxes from the employees’ pay and pay Social Security on behalf of the employees.

  • Independent contractors are responsible for paying their own taxes and Social Security. They can deduct certain business expenses from their pretax pay that an employee can’t deduct. Independent contractors can work their own hours and basically do the job in their own way. An employer cannot force an independent contractor to work certain hours or attend certain meetings, because that can jeopardize the independent contractor status of the salesperson.

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