Every January, the same thing happens.
A 1099 shows up, you look at the number, and your stomach drops.
“There is no way I made that much.”
And you are right. You probably did not keep anywhere near that number. But your 1099 is not lying. It is answering a different question than the one in your head.
What a 1099 actually reports
A 1099 reports your gross income: the total paid to you before anything came out.
For a real estate agent, that usually means your gross commissions for the year. All of them. Added up.
It does not subtract your broker split. It does not subtract referral fees. It does not subtract a single dollar you spent running your business.
Your 1099 shows what came in, not what you kept.
Why the number feels too high
Think about a single closing.
The commission might be $12,000. But by the time it became real money, it looked more like this:
- Gross commission$12,000
- Broker split- $3,600
- Referral fee- $1,000
- Marketing and deal costs- $900
- What you kept$6,500
Your 1099 counts the $12,000. Not the $6,500.
Now multiply that gap across every deal you closed all year, and you can see why the total feels enormous.
The good news
You do not pay taxes on the gross number.
You pay taxes on your net: the income left after your legitimate business expenses.
That is the whole point of tracking expenses. Every real write-off lowers the income you actually get taxed on.
Things that reduce your taxable income include:
- Broker splits and fees
- Referral fees you paid out
- Marketing, signs, photos, and ads
- Mileage and vehicle costs
- Software, dues, and licensing
- Office and desk fees
If you do not track these, you hand the IRS a bigger number than the truth. You overpay.
What to hand your CPA
Your CPA cannot guess your expenses. They work with what you give them.
Hand over only the 1099, and that is the number you get taxed on. Hand over the 1099 plus clean records of every business expense, and you get taxed on your real income.
The difference between those two outcomes can be thousands of dollars.
How Kapytl helps
Kapytl tracks your commission income and your business expenses in one place all year long.
So when your 1099 shows up, you are not panicking. You already know the gap between what came in and what you kept, and you have the records to prove it.
Your 1099 stops being a scary number. It becomes one line in a story you can explain.
