agency

independent contractor

An independent contractor is a licensee who works for a broker under a written agreement but controls how the work is done, sets their own hours, and is paid by commission rather than salary. Under IRS rules, a qualified real estate agent can be treated as a statutory nonemployee if they are licensed, paid based on sales output, and have a written contract stating they will not be treated as an employee for tax purposes. The broker does not withhold taxes.

Exam tip: Remember the three IRS tests: licensed, paid on production not hours, and a written contract. The broker remains responsible for supervision even with independent contractors.
Example: A salesperson signs an independent contractor agreement, pays her own estimated taxes, and receives only commission splits from closed deals.

1. A broker wants to treat salespeople as independent contractors for federal tax purposes. Under the IRC §3508 statutory nonemployee rules, which combination is required?

Answer & explanation

Answer: C. IRC §3508 treats licensed real estate agents as statutory nonemployees when they are licensed, paid substantially on output, and have a written contract disclaiming employee treatment. Office space and expense arrangements matter for common-law tests but are not the statutory three-part test.

Related terms & state variants

commission split employee salesperson sponsoring broker

Sources

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Last verified: 2026-10-23