Outside Brokers are real estate companies to whom you will pay commissions to as part of the transaction, typically in the form of an outside referral or transfer of company dollar. A Form 1099/T4A is sent to all Outside Brokers entered here if you receive or make commission payments to an Outside Broker (example: outside referral) and properly enter the Outside Broker amount in the posted DA Part 2.
The IRS will assess a fine per 1099/T4A error if this information is not entered accurately! The best way to control accuracy is to require all co-brokers who you pay commission (and outside brokers) to complete an IRS Form W-9 Request for Taxpayer Identification Number and Certification. Sovos subscribers can use the TIN verification within Sovos. The IRS also provides a free TIN verification tool online.
- Click Enter and then select Outside Brokers.
- The Outside Broker Entry screen will appear.
- Enter a key in the Id field for this outside broker. It is recommended that the key used for people or companies is generated by taking the first three alpha characters of the name followed by a two- or three-digit sequence number (with no spaces) for the key. Example: FIR01 or KEL010. However, you are welcome to devise your own system. You can also choose to use the outside broker’s TIN for the Id field. NOTE: This key may not exceed 16 characters.
- Complete the fields. Be sure to enter the SSN/SIN or EIN/BN (without dashes!). The default is SSN/SIN. The W 9 collected will reflect the status of the SSN/SIN or EIN/BN.
- Select the appropriate checkbox (Incorporated and/or Employer ID) for this outside broker.
- Carefully review your entries. To edit an existing outside broker record, click the Read button to view a Lookup window and select the record you want to edit.
- Click the Save button to save this record.