Most real estate professionals operate their business as a sole proprietorship. This means that you are not someone's employee, you haven't formed a partnership with anyone, and you have not incorporated your business.

Statutory Non-employees

Licensed real estate agents are statutory non-employees and are treated as self-employed for all Federal tax purposes, including income and employment taxes, if:

• Substantially all payments for their services as real estate agents are directly related to sales or other output, rather than to the number of hours worked

• Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes

This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output.