Is a real estate salesperson an independent contractor or an employee?

Tax-wise, the difference is significant.

From Cyquest Business Solutions Inc.

Always on the lookout to protect employees and the US and State’s pocketbooks at the same time, New Jersey often attempts to treat workers generally considered to be independent contractors as employees. Classifying an employee as an independent contractor with no reasonable basis for doing so makes employers liable for employment taxes.

 New Jersey has adopted, with exceptions, the so-called ABC Test to determine if a worker is an independent contractor or an employee.  

Per New Jersey Unemployment Compensation Law, a worker should be considered an employee unless all the following circumstances apply:

 A.    The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and

B.     The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and

C.     The individual is customarily engaged in an independently established trade, occupation, profession or business.

 A recent New Jersey Appellate Court decision sides with a real estate salesperson who was seeking classification as an employee.  Let’s sale the real estate industry in New Jersey is in a bind.  Here’s an article taken, in full, because it is behind a paywall at the New Jersey Law Journal.

Ruling Could Portend Shake-Up for Independent Contractor Status of Real Estate Salespeople

 The case "does have national implications" because real estate salespeople across the country work under conditions similar to New Jersey's, said Darren Barreiro of Greenbaum, Rowe, Smith & Davis in Woodbridge, representing the New Jersey Association of Realtors. He said the ruling could lead to an end of 50 years of real estate salespeople in New Jersey having independent contractor status.

 July 02, 2021 at 02:53 PM

 By Charles Toutant

 A New Jersey appeals court ruling could open the door to a finding that commissioned real estate salespeople are employees and not independent contractors.

 The appeals court said the so-called ABC Test for deciding a worker’s employment status applies to a dispute between real estate salespeople and Weichert Realty over payroll deductions. The ruling said an Essex County Superior Court judge correctly denied Weichert’s bid to dismiss a class action over the company’s deductions for insurance, marketing and other expenses from the salespeople’s earnings.

 Plaintiff James Kennedy II claimed that the deductions violate New Jersey’s Wage Payment Law, but Weichert and amicus New Jersey Realtors argued that the Wage Payment Law does not cover fully commissioned real estate salespeople. Weichert moved to dismiss the suit on that basis but the trial judge denied the motion, declaring that the real estate salespeople’s status is determined by the ABC Test. That judge cited the Supreme Court’s 2015 decision in Hargrove v. Sleepy’s, which held that the ABC Test governs whether a plaintiff is an employee or independent contractor for purposes of resolving a wage payment or wage-and-hour claim.

 Under the ABC Test, a worker is presumed to be an employee unless the employer can show that A, the employer neither exercised control over the worker nor had the ability to exercise control over how the work is completed; B, the services provided by the worker were either outside the usual course of business or provided outside all the places of business of the enterprise; and C, the individual is customarily engaged in an independently established trade, occupation, profession or business.

 On appeal, Weichert claimed that the ABC Test does not apply to real estate salespeople because the state’s Unemployment Compensation Law expressly excludes them from coverage. But the appeals court panel of Judges Carmen Messano, Mitchel Ostrer and Ronald Susswein rejected that claim, adding that Weichert wrongly held that the Hargrove ruling applies only to truck drivers.

 “We conclude that the UCL’s special treatment of commissioned real estate salespersons does not render the ABC test inappropriate to determine a real estate salesperson’s independent-contractor status under the Wage Payment Law,” Ostrer wrote for the panel.

 The appeals court said the ABC Test applies to the period before enactment of the Brokers Act, a 2018 statute.

 The appeals court said it lacked sufficient information from the record of the case to decide the outcome of an ABC Test focusing on the period before the Brokers Act was enacted, and it could not decide based on the information before it whether the ABC Test applied to the period after enactment of the Brokers Act. The case was sent back to the trial court for those issues to be addressed after the record is augmented.

 Kennedy and the putative class were represented by Ravi Sattiraju of Sattiraju & Tharney in East Windsor. Sattiraju said the ruling could result in a finding that realtors are employees, rather than independent contractors, but he said he would “take it a step at a time.” Sattiraju added that he was “pleased with the ruling. We’re going to continue to litigate the case.”

 Weichert was represented by John Birmingham and Jennifer Keas of Foley & Lardner, with Thomas Ryan of Laddey, Clark & Ryan in Sparta as local counsel. They did not respond to calls about the ruling.

 Darren Barreiro of Greenbaum, Rowe, Smith & Davis in Woodbridge, representing the New Jersey Association of Realtors, said the ruling could lead to the end of 50 years of real estate salespeople in New Jersey having independent contractor status. Most of the sales agents want to maintain their independent contractor status, he said.

 Barreiro said his group was hoping to see an appeal of the ruling before the Supreme Court in conjunction with another case already pending there, Walfish v. Northwestern Mutual Life Insurance, which raises similar issues as they pertain to insurance salespeople.

 “We think the Appellate Division was hamstrung by Hargrove. We’re urging the Supreme Court to clarify the ruling in Hargrove so the exemption will apply,” Barreiro said. He added that the case “does have national implications” because real estate salespeople across the country work under conditions similar to New Jersey’s.

 [End]

 We in the title insurance industry will be keeping an eye on this case as the New Jersey attempts to tax our independent contractors - title searchers - as employees.

Disclaimer:

The information included is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state, or federal regulations. Vested Land Services LLC and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided.

 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Home interest deduction - my head is spinning

The home mortgage interest deduction has become a whipping boy or girl for much of what ails the American economy. Some see it as a drag on the nation's finances, others as an engine. In any event, this blog post, The Sacrosanct Mortgage Interest Deduction appearing the Economix blog of the New York Times, will turn your head in two directions at the same time.

When people talk about “sacred cows” in the tax code, the deduction for mortgage interest is usually at the top of the list. But it is just one of many tax expenditures benefiting homeowners. Other important ones include the deduction for property taxes and low taxes on the gains from sales of primary residences.

Contrary to popular belief, the mortgage interest deduction wasn’t adopted to encourage home ownership. The original income tax enacted in 1913 allowed a deduction for all interest on the theory that it was largely business-oriented. According to Dennis Ventry of the University of California, Davis, School of Law, only a third of homeowners carried a mortgage in 1910.

OK, so now the writer, Bruce Bartlett, starts with the stats, comparing America with Canada and other countries.  So I am going to stop here and have you read the full article and the comments that follow.  That's where the most interesting ideas will be found!

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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How the tax man helps after a storm.

If you live in the northeast and were pummeled by the October snow storm, Realty Times has a, well, timely, article dealing with the disaster loss tax deduction. Headlined, “How to Write Off a Disaster Loss For Property Damage” by Broderick Perkins, it’s on point.

“Next year, 2012, is supposed to be the year we lose it all, but 2011 came close. It's shaping up to one of the worst years ever for disaster losses.

“Thanks to tax relief, it's not the end of the world.

“The Internal Revenue Service (IRS) allows you a tax deduction for casualty losses, including losses due to property damage or destruction.”

Casualty losses are treated similarly to mortgage interest and property taxes, i.e., casualty loss is an itemized deduction included on Schedule A that are subtracted from your adjusted gross income, which reduces your taxes by reducing the amount of your income that is actually taxed.

Some rules,

“First, the deduction is only available to the extent that insurance or other forms of compensation don't cover the cost of damage or destruction.

 “Second, if the disaster carries a presidential declaration, you can immediately, after the disaster has the presidential declaration, amend your last tax return to deduct the loss. Otherwise, you must wait to file for the deduction with your next tax return.

“Third, state tax laws vary on casualty loss deduction and because the deduction can involve large amounts and complex calculations, you should seek the help of an enrolled agent, certified public accountant or other tax professional to help you complete you state and federal tax returns.”

 Read the full article here to learn more about casualty losses and your income taxes.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti AT vested.com - www.vested.com

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Loss of state support may end horse racing in New Jersey

New Jersey property owners are already hit hard by the state of New Jersey’s economy.  Taxes, taxes, and taxes head the list of complaints.  Now, a double-edged sword is being raised at one of N.J.’s homegrown businesses—horse racing.

According to a special report in the Asbury Park Press,

“Those in the New Jersey equine industry say the horse-racing business generates $780 million annually for the state's economy, responsible for more than 6,500 jobs.

“But with Gov. Chris Christie's proposal to shift the state's focus from horse racing to the casinos in Atlantic City, local horse farmers and other business owners worry the equine industry would lose its vitality or dissipate altogether.

"’People in the sport are going to go where horse racing is viable,'' said Tim Clevenger, 26, who tends to standardbreds every morning at a Manalapan farm.”If not here, they're going to race someplace else or get out of the game.’''

OK, so just how does this affect the quality of life in New Jersey?  Well, some will say that the 176,000 acres of real estate now being used for horse farms and related purposes will be, here comes the dirty word, developed into housing. 

In addition,

“In a study headed by Karyn Malinowski, director of Rutgers' Equine Science Center, the state's equine industry was valued at $4 billion, much of it related to racing. It generates $1.1 billion ($780 million from racing) annually in positive impact on the state economy, the study said, and is responsible for 13,000 jobs, more than half of which are generated by racing-related interests, such as race tracks, and horse breeding and training facilities.”

Read the full story.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow

Vested Title Inc.

648 Newark Avenue, P.O. Box 6453,

Jersey City, NJ 07306

Tel 201-656-9220 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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